TIDMCRST
RNS Number : 9044C
Crest Nicholson Holdings PLC
24 June 2021
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it
forms part of domestic law by virtue of the European Union
(Withdrawal) Act 2018.
Crest Nicholson Holdings plc
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 APRIL 2021
STRONG HY21 TRADING PERFORMANCE
STRATEGY ON TRACK TO ACCELERATE GROWTH
FY21 EARNINGS GUIDANCE UPGRADED
Crest Nicholson Holdings plc ('Crest Nicholson', the 'Company'
or the 'Group') today announces its unaudited interim results for
the six months ended 30 April 2021:
Financial highlights
-- Revenue in the period increased to GBP324.5m (HY20:
GBP240.0m), with home completions increasing to 1,017(1) (HY20:
775)
-- Strong HY21 trading performance with sales per outlet week (SPOW) rate at 0.69 (HY20: 0.46)
-- Forward sales of 2,771 units and Gross Development Value
(GDV) of GBP691.8m as at 18 June 2021 (19 June 2020: 2,715 units
and GBP575.1m GDV):
o Robust forward order book with approximately 93% of FY21
revenue covered
-- Adjusted profit before tax(2) (APBT) for HY21 of GBP36.1m (HY20: GBP4.5m)
-- Profit before tax for HY21 of GBP36.3m (HY20: GBP51.2m loss before tax)
-- Exceptional inventory impairment provision release of GBP7.6m
(HY20: GBP43.2m exceptional charge), reflecting confidence in
market conditions
-- Net exceptional charge for combustible materials provision of
GBP7.9m (HY20: GBPnil) with HY21 provision now at GBP23.2m (HY20:
GBP12.5m)
-- Transformational progress in strengthening the balance sheet:
o Net cash(3) at GBP130.4m (HY20: net debt GBP93.3m) - operated
with net cash position throughout HY21. FY21 closing net cash
expected to be around GBP170.0m
o Land creditors at GBP178.5m (HY20: GBP223.9m)
-- Interim dividend declared of 4.1 pence per share, in line
with dividend policy and reflect ing confidence in outlook
-- FY21 APBT now expected to be at least GBP100.0m, including
the Longcross Film Studio profit contribution
(1) HY21 includes joint venture units at full unit count (HY20:
Group's share of joint venture units). HY21 is also on an
equivalent unit basis which allocates a proportion of the unit
count for a deal to the land sale element where the deal contains a
land sale (HY20: no equivalent unit allocation to land sale
element). This approach reflects the Group's actual production
output and also removes the distortive impact on average selling
prices (ASP) of land sales.
(2) Adjusted items represent the HY21 and HY20 statutory figures
adjusted for exceptional items as disclosed in note 5 to the
condensed consolidated financial statements. Adjusted performance
metrics are as disclosed in note 20. These alternative
(non-statutory) performance measures have been disclosed as the
Directors believe this assists in better understanding the
performance of the Group.
(3) Net cash is defined as cash and cash equivalents less bank
loans, senior loan notes and other loans. See note 16 to the
condensed consolidated financial statements for a
reconciliation.
Strategic highlights
The Group continued to make good progress against all its
strategic priorities in the half:
-- Retained Home Builders Federation (HBF) five-star rating for
customer satisfaction for a further year
-- Investment in land for growth with 2,682 plots approved for
purchase at an average gross margin of 26.5%, after sales and
marketing costs
-- New house type range rollout on track, with over 6,700 future
units in our short-term land portfolio now replanned with the new
range:
o 425 new house type completions expected in FY21
o 80% of our private open market houses will be delivered using
this range in 2022
-- Several PRS deals exchanged or completed in HY21:
o G rowing PRS interest in single family homes
-- New initiatives implemented to support delivery of sustainability targets:
o Enhanced suite of reporting to monitor site processes and
activities
o B iodiesel trial underway
Further, the sale in May 2021 of 50% equitable interest in
Longcross Film Studio is expected to deliver GBP45.0m cash
consideration in the second half of FY21 and the profit
contribution is expected to be in excess of GBP10.0m.
Key financial metrics
GBPm (unless otherwise stated) HY21 HY20 % Change
Home completions(1) 1,017 775 31.2
Revenue 324.5 240.0 35.2
Adjusted gross profit(2) 63.3 35.9 76.3
Adjusted gross profit margin(2) 19.5% 15.0% 450bps
Adjusted administrative expenses(2) (23.1) (24.8) (6.9)
Net impairment losses on financial
assets (0.2) -
Adjusted operating profit(2) 40.0 11.1 260.4
Adjusted operating profit margin(2) 12.3% 4.6% 770bps
Adjusted net finance expense(2) (4.8) (5.5) (12.7)
Share of joint venture results 0.9 (1.1) (181.8)
Adjusted profit before tax(2) 36.1 4.5 702.2
Adjusted income tax(2) (7.3) (0.9) 711.1
Adjusted profit after tax(2) 28.8 3.6 700.0
------- --------
Exceptional items net of income
tax 0.2 (44.1) (100.5)
Gross profit/(loss) 63.0 (7.3) (963.0)
Gross profit/(loss) margin 19.4% (3.0)% 2240bps
Operating profit/(loss) 39.7 (44.0) (190.2)
Operating profit/(loss) margin 12.2% (18.3)% 3050bps
Profit/(loss) before tax 36.3 (51.2) (170.9)
Profit/(loss) after tax 29.0 (40.5) (171.6)
Adjusted basic earnings per share
(p)(2) 11.2 1.4 700.0
Basic earnings/(loss) per share
(p) 11.2 (15.8) (170.9)
Dividend per share (p) 4.1 -
(1) HY21 includes joint venture units at full unit count (HY20:
Group's share of joint venture units). HY21 is also on an
equivalent unit basis which allocates a proportion of the unit
count for a deal to the land sale element where the deal contains a
land sale (HY20: no equivalent unit allocation to land sale
element). This approach reflects the Group's actual production
output and also removes the distortive impact on ASPs of land
sales.
(2) Adjusted items represent the HY21 and HY20 statutory figures
adjusted for exceptional items as disclosed in note 5 to the
condensed consolidated financial statements. Adjusted performance
metrics are as disclosed in note 20. These alternative
(non-statutory) performance measures have been disclosed as the
Directors believe this assists in better understanding the
performance of the Group.
Current trading and outlook
Our trading performance in the first half has been strong,
reflected in our HY21 SPOW rate of 0.69 and our forward order book
being approximately 93% covered as at 18 June 2021. Based on demand
for homes which will complete after the 30 September 2021 stamp
duty deadline, we are confident that the housing market will remain
robust, and this transition can be managed smoothly. We are also
continuing to make good progress in all five of our strategic
priorities and are increasingly confident about our future growth
prospects.
Given our strong trading performance and confidence in outlook,
including the Longcross Film Studio contribution, we now expect
FY21 APBT to be at least GBP100.0m.
The Group intends to hold a Capital Markets Day in October 2021
to outline its future growth plans and long-term financial
targets.
Peter Truscott, Chief Executive, said:
"I am very pleased with the strong trading performance the Group
has delivered in the first half. This has been achieved against the
backdrop of the ongoing pandemic and I would like to thank all
Crest Nicholson employees and our partners for their dedication and
commitment during this time.
We are making good progress in all five of our strategic
priorities. Our balance sheet has been transformed and positions us
strongly to grow in the future. Having completed the first part of
our turnaround strategy, and implemented our operational efficiency
programme, our focus now moves to rebuilding operating margins and
delivering sustainable growth. We are evaluating options to enter
new geographical markets and look forward to outlining these future
growth plans and our long-term financial targets later this
year."
Analyst and investor conference call and webcast
There will be an analyst and investor presentation via webcast,
hosted by Peter Truscott, Chief Executive and Duncan Cooper, Group
Finance Director, at 9.00 a.m. today. To join the presentation,
please use the following link:
https://www.investis-live.com/crest-nicholson/60af6ae98b32171000bc8d75/fghj
There is also a facility to join the presentation and Q&A
session via a conference call. Participants should dial +44 (0) 20
3936 2999 and use confirmation code 408563. A playback facility
will be available shortly after the presentation has finished. For
further information, please contact:
Crest Nicholson
Jenny Matthews, Head of Investor Relations +44 (0) 7557 842720
Tulchan Communications
James Macey White / Giles Kernick +44 (0) 20 7353 4200
The person responsible for arranging the release of this
announcement on behalf of the Company is Kevin Maguire, General
Counsel and Company Secretary.
Cautionary statement regarding forward-looking statements
This release may include statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'believes', 'estimates', 'plans',
'projects', 'anticipates', 'expects', 'intends', 'may', 'will' or
'should' or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These
forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
release and include, but are not limited to, statements regarding
the Group's intentions, beliefs or current expectations concerning,
among other things, the Group's results of operations, financial
position, liquidity, prospects, growth, strategies and expectations
of the industry.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the development of the markets and the industry in which the
Group operates may differ materially from those described in, or
suggested by, any forward-looking statements contained in this
release. In addition, even if the development of the markets and
the industry in which the Group operates are consistent with the
forward-looking statements contained in this release, those
developments may not be indicative of developments in subsequent
periods. A number of factors could cause developments to differ
materially from those expressed or implied by the forward-looking
statements including, without limitation, general economic and
business conditions, industry trends, competition, commodity
prices, changes in law or regulation, changes in its business
strategy, political and economic uncertainty. Save as required by
the Listing and Disclosure Guidance and Transparency Rules, the
Company is under no obligation to update the information contained
in this release. Past performance cannot be relied on as a guide to
future performance.
Chief Executive's Review
Business overview
We are delighted to report a strong set of results for HY21. Our
strategy continues to deliver positive results across all areas of
the business which is reflected in our performance. We have
exceeded our own first half profit expectations and continue to
make excellent progress in strengthening the balance sheet, closing
the period with GBP130.4m of net cash versus GBP93.3m of net debt
this time last year. Our land creditors have also reduced compared
to the prior period and we operated throughout the first half with
a net cash position. Finally, we have been active in the land
market in the half, securing new opportunities that will help
deliver our future growth ambitions.
Market conditions have been favourable and consistent, supported
by the Government's decision to suspend stamp duty and to allow the
sector to remain open during periods of COVID-19 restrictions.
Consumer confidence in the stability of the housing market, coupled
with changing working patterns and lifestyle choices, have
underpinned demand, and meant both sales rates and prices have
exceeded the pre-pandemic level. Since January 2021 demand has
steadily increased with sales rates at their strongest in March and
April. Reassuringly, we are seeing strong demand for homes
scheduled to complete beyond the 30 September 2021 stamp duty
deadline which gives us confidence that the transition from this
Government support can be managed smoothly. Finally, our SPOW rate
has improved compared to the prior period, and we have continued to
sell homes in bulk where we have concluded that the characteristics
and risk profile of the scheme are worth trading some profit for
certainty of outcome and cash.
During the first half, there have been some labour and material
shortages that have impacted build times. However, our operational
efficiency programme has largely minimised any disruption. The
additional costs attached to sourcing some materials have generally
been offset by savings brought about by the standardisation of our
product and specifications across the business.
As previously announced, and in line with our strategy, we
continue to seek opportunities to maximise the value of our land
portfolio and reinvest the proceeds into future developments. This
is particularly relevant where the asset is not deemed core to our
ongoing business operations. Therefore, we were delighted to
announce on 14 May 2021 that we had disposed of our 50% equitable
interest in Longcross Film Studio to our joint venture partner on
that development, Aviva. This transaction is expected to complete
in late summer 2021 and will result in a profit contribution in
excess of GBP10.0m in FY21, and approximately a GBP45.0m cash
inflow.
The transformational progress we have made strengthening our
balance sheet, coupled with line of sight to the Longcross Film
Studio disposal, has enabled us to act decisively in the land
market. We have approved 2,682 plots for purchase, more than we
utilised in the period, and at better gross margins than the new
land purchased in FY20. This will be a key driver to our ongoing
margin recovery ambition, which alongside volume growth will be our
focus over the next few years.
Delivering outstanding customer service is one of our five
strategic priorities. Everyone at Crest Nicholson has worked hard
over the past year to make improvements to the customer journey.
Accordingly, we were delighted to have retained our five-star
customer satisfaction rating by the HBF for a further year.
Finally, I would like to acknowledge and thank the incredible
efforts of all our colleagues throughout the first half. We
recognise that the sector has been fortunate compared to many in
its continued ability to trade and operate throughout the pandemic.
However, this disruption has undoubtedly been felt in the personal
lives of our people and I continue to be impressed by their
commitment to build and deliver great homes for our customers and
communities.
Excellent progress in operational efficiency
During the first half, the Group has continued to deliver
efficiency improvements in all aspects of our operations. Overheads
have remained tightly controlled and at sustainable levels, as we
have increased build rates in response to the strong market demand.
The new house type range has been central to these improvements.
Rollout and adoption of the range is on track, and we expect 425
houses will be completed in FY21 using the range. Approximately
6,700 units have now been replanned and we expect 80% of our
private open market houses will be delivered using this range in
2022.
The new house type range is the platform for consistent
execution of many processes across our business. It enables us to
deliver a high quality specification from a trusted selection of
strategic suppliers. Build times are being reduced and site
management activities are made simpler and more efficient.
Consistent and repeatable construction processes are also the
foundations of an effective health and safety environment on site,
which will always be our number one priority.
We continue to seek opportunities to replan our sites. This is
an ongoing process to maintain flexibility in our product offerings
and to optimise the value of the developments. Replans and
replotting will continue to bring positive benefits in coverage
while also enhancing the returns from these investments.
During the period, we commenced the implementation of COINS
(Construction Industry Solutions) to become our core operating
system. Leveraging the latest industry-specific technology will
provide some immediate benefits. It will increase our visibility
and control of costs and provide greater insights and reporting
tools to all levels of management. It is also the most utilised
platform in the sector and is anticipated to be quickly adopted by
our workforce. We expect to start transitioning onto COINS in late
2021.
Exceptional inventory impairment
As the business came out of the first lockdown in May 2020, the
overwhelming consensus amongst market commentators was that house
prices would fall sharply given the expected economic consequences
of the pandemic. At this time, Crest Nicholson had some zero or low
margin sites which would require impairing if this scenario were to
be realised. This was the context for the exceptional net
realisable value (NRV) provision that we made at HY20, as we
applied an assumed 7.5% reduction in residential selling prices and
a 32.0% reduction in commercial values across our whole
portfolio.
In the short term these forecasts have proven to be pessimistic.
The general economic backdrop has remained stable due to the
significant and early interventions from the Government. The
housing market has performed strongly, benefiting from remaining
open throughout the pandemic, the suspension of stamp duty and
changing working habits. All these factors have encouraged people
to move home and resulted in house price inflation.
Accordingly, we have taken the decision to reassess the NRV
provision without a forecast 7.5% residential sales price fall for
all but one scheme. We have retained the 7.5% residential sales
price fall assumption for the expected credit loss on the amounts
loaned to the joint venture that holds the London Chest Hospital
development, given its complexity and location. We have also
retained the 32.0% commercial sales price fall assumption relating
to commercial property, where market conditions remain
challenging.
Although a large proportion of this provision has, or will be
utilised to trade out of complex, mostly apartment-based legacy
schemes, releasing the remaining balance has created an exceptional
credit to the income statement of GBP7.6m.
Build costs and supply chain
Towards the end of the first half, we started to experience
inevitable delays and shortages in labour and materials due to the
fractured supply chains arising from the pandemic and lockdown
restrictions. In most instances we managed this impact at a local
level without any consequent disruption to operations.
At the start of the second half this disruption started to
become more acute and we are now seeing increases in lead times for
product deliveries to site and a limited number of significant
price increases in certain product categories where there is
greatest scarcity of supply. We expect these pressures to normalise
in the medium term. However, it is possible that in the short term
we will see further supply pressures start to emerge. Our move to a
new standardised house type range and specification, coupled with
the site replans, is delivering significant sourcing benefits to
help offset these increases and we would also expect the current
environment of house price inflation to help mitigate any impact to
earnings.
Land investment
In order to realise our ambition to grow volumes across the
business, it is important that we remain active in the land market.
For Crest Nicholson this takes two forms. Firstly, drawing down
land from our strategic portfolio into production, and secondly,
being active and selective in the wider market for short term land.
Overall, from these sources we have approved the purchase of 2,682
plots in the period at an average gross margin of 26.5%, after
sales and marketing costs. This amount is above what we depleted in
the half. Our new house type range and specification has enabled us
to deliver efficient designs and build faster, which is allowing
the Group to be more competitive than before in the land bidding
process, while also delivering higher hurdle rates at the same
time.
Although the market for short-term land in the best areas is
more competitive than it has been for some time, as all developers
look to rebuild their capacity and outlet numbers, we believe that
the situation will moderate over time as the supply of sites
increases. Behaviour amongst most buyers of land remains
disciplined, and we have been able to acquire the amount that we
need without compromising on margins or on the robust assumptions
that underpin our bids.
Combustible materials provision
We recognise the review of building materials related to fire
risks continues to evolve with changes to Building Regulations and
Fire Safety Regulations, Government guidance and the way they are
interpreted.
Upon joining the Group in 2019, the new Executive Leadership
Team immediately conducted a detailed review of all current and
legacy buildings to identify where there may be remediation
requirements for combustible materials. This resulted in an
exceptional charge to the income statement of GBP18.4m in FY19.
This charge covered those buildings that we legally own or where a
legal or constructive obligation to remedy the building was deemed
to exist.
The Group continues to conduct a detailed periodic review of all
ongoing remediation works including the assessment of costs to
complete. As the year has progressed, within this changing and
complex environment, we have reassessed the estimates of costs and
likely duration of works. This has resulted in a GBP7.9m net
exceptional charge to the income statement.
We continue to assess and engage with the HBF on the impact of
the proposed construction levy tax for combustible materials.
Regulatory change
The industry is facing an unprecedented level of change over the
coming years. The UK's plans to decarbonise the economy will
inevitably change the specification and technical designs of what
we build. The proposed changes to the UK's planning system are also
transformational and will change the way we interact with several
stakeholders.
Our industry has an important role to play in reducing carbon
emissions and we welcome ambitious regulations to mitigate our
sector's impact on the climate. The Future Homes Standard will see
new homes delivered that are zero carbon ready. This will require
us to make changes to how we design and build our homes and we are
actively looking at opportunities to improve fabric efficiency and
researching new fossil fuel-free heating technologies. We believe
that these challenges can be successfully overcome by working
closely with our suppliers and Government to effectively manage the
timeline and risks of transition, and to ensure that our customers
benefit from these changes.
Sustainability update
We recognise our role as a responsible builder and are committed
to playing our part in achieving a net zero carbon economy.
Sustainability is effectively embedded into our business strategy
as one of its four foundations. We continue to integrate
sustainability throughout the business to deliver value for our
stakeholders. Alongside our focus on placemaking, we remain
committed to delivering high quality, sustainable communities.
As announced in our FY20 results, we launched targets to reduce
our carbon emissions (scopes 1 and 2) intensity by 25%, waste
intensity by 15% and to purchase 100% renewable electricity, all by
2025. We are actively implementing initiatives to reduce our
environmental impact. This has included developing a new suite of
reports that enable us to monitor processes and activities at a
site level to optimise energy and fuel usage and reduce safety
risks.
We also appreciate that our scope 3 emissions, both from the
homes we deliver to customers and the materials sourced from our
supply chain, are a significant part of our carbon footprint. The
Future Homes Standard will see us delivering zero carbon ready
homes and we are working with our supply chain to collate data to
seek ways of reducing upstream emissions.
We actively engage with the HBF and Future Homes Taskforce and
recently joined the Supply Chain Sustainability School as we
collaborate with industry peers, supply chain, Government and our
partners to deliver social value while protecting our
environment.
Longcross Film Studio divestment
The sale of our 50% equitable interest in Longcross Film Studio
announced on 14 May 2021, supports one of the Group's five
strategic priorities to utilise and maximise the value of its land
portfolio. We expect our proceeds from this transaction to deliver
a contribution in excess of GBP10.0m to APBT for FY21 and the
receipt of GBP45.0m cash consideration by the end of the financial
year.
The Group continues to hold a 50% equitable interest in the
remaining 195 acres of Longcross Garden Village in a joint venture
with Aviva. This prime site is expected to deliver up to 1,700
homes. The scheme is allocated for residential and ancillary
development in the adopted Runnymede Borough Council Local Plan. It
is intended that Crest Nicholson will develop and complete its
share of this site in the future.
Outlook
We have started the year with a strong trading performance and
are now approximately 93% sold against our full year revenue
target. Production levels are being maintained to align with these
rates of sale. As we continue to successfully implement our
strategy, including the Longcross Film Studio contribution, we are
pleased to announce we now expect FY21 APBT to be at least
GBP100.0m.
Having completed the first part of our turnaround strategy,
transforming the balance sheet and implementing our operational
efficiency programme, our focus has now moved to rebuilding
operating margins back to industry-normal levels.
Although we will make significant progress this year, our margin
recovery in FY21 will continue to be impacted by our lower margin
legacy sites. In this specific regard we continue to target bulk
deal opportunities at relevant schemes to add to those already
announced at Old Vinyl, Hayes and Sherborne Wharf, Birmingham at
FY20. As we enter FY22 lower margin schemes will have a less
dilutive impact on margins and the effect of our new land
purchases, delivered predominantly with our new house type range
and associated operational efficiencies, will accelerate the margin
recovery process.
Our five existing regional divisions have capacity to deliver at
least 3,250 homes per year, but in the longer term we wish to grow
volumes beyond this level. Accordingly, we are evaluating options
to enter new geographical markets.
We expect to see a stable market in the next few years with the
demand for our products remaining robust, supply chain pressures
moderating and more land becoming available. As such we are
confident about the medium-term prospects of Crest Nicholson.
We look forward to setting out more detail of our strategy,
including our future growth plans and long-term financial targets,
at our Capital Markets Day in October 2021.
Financial Review
Completions and revenue
Open market (private) completions increased 82.6% to 701 (HY20:
384). Prior half year completions were significantly impacted by
the first COVID-19 lockdown and the initial uncertainty surrounding
the housing market. The Group recorded a lower level of affordable
completions down to 198(1) (HY20: 208), and a lower level of bulk
completions down to 118(1) (HY20: 183), reflecting the strong
comparator for bulk completions in the first half of last year.
Overall completions increased 31.2% to 1,017(1) (HY20: 775).
Open market (private) ASP was down 6.1% to GBP398k(2) (HY20:
GBP424k) as we continue to trade out of our legacy London sites and
our Midlands division continues to grow within the overall mix.
Affordable ASP was up 26.6% to GBP176k(2) (HY20: GBP139k)
principally due to the change to the equivalent unit approach, not
reflected in the comparative. Group revenue, excluding joint
venture revenue, of GBP13.1m (HY20: GBP2.4m), increased 35.2% to
GBP324.5m (HY20: GBP240.0m) in the first half.
Sales
Sales rates as measured by SPOW, were 0.69 for the period
compared to 0.46 for the prior half. The improvement reflects the
strong housing market trading conditions experienced in the first
half compared to the first COVID-19 lockdown and initial
uncertainty in the comparable period.
Sales outlets were 57 (HY20: 64) in the period. The pandemic
continues to cause delays to the acquisition process and planning
and technical approvals of developments for all housebuilders. Over
the medium term the Group expects to deliver volume growth and
increase its number of outlets.
Forward sales as at 18 June 2021 were 2,771 units (at 19 June
2020 : 2,715) and GBP691.8m gross development value (GDV) (at 19
June 2020: GBP575.1m).
Operating profit and margin
Adjusted operating profit increased to GBP40.0m (HY20:
GBP11.1m), with adjusted operating profit margin also increasing to
12.3% (HY20: 4.6%). The key driver of this strong improvement was
delivered through the recovery in adjusted gross margin rate, up
450bps on prior year to 19.5% (HY20: 15.0%). The Group has
recognised a comparatively lower number of legacy sites with weaker
margins and is starting to benefit from the effects of the
operational efficiency programme. These include the specification
savings, the incremental margin from site replans as well as lower
sales and marketing costs. For FY21 the Group expects the gross
margin rate to be around 19.0%, reflecting the recognition of two
weaker schemes in the second half, offset by the contribution from
the Longcross Film Studio. For FY22 the Group expects the gross
margin rate to increase to at least 21.0%.
Operating profit after exceptional items for the first half was
GBP39.7m (HY20: GBP44.0m operating loss) reflecting the improved
gross margin, operational efficiencies and lower exceptional items
than HY20.
The Group also maintained a strong focus on overheads, with
administrative expenses in the period down to GBP23.1m (HY20:
adjusted administrative expenses GBP24.8m), which includes the
repayment in full of the GBP2.5m Government Job Retention Scheme
grant in December 2020. The reduction in administrative expenses
demonstrates continuing progress in reducing the underlying
overhead position.
(1) HY21 includes joint venture units at full unit count (HY20:
Group's share of joint venture units). HY21 is also on an
equivalent unit basis which allocates a proportion of the unit
count for a deal to the land sale element where the deal contains a
land sale (HY20: no equivalent unit allocation to land sale
element). This approach reflects the Group's actual production
output and also removes the distortive impact on ASPs of land
sales.
(2) HY21 is on an equivalent unit basis which allocates a
proportion of the unit count for a deal to the land sale element
where the deal contains a land sale (HY20: no equivalent unit
allocation to land sale element). HY21 ASP calculation includes
joint venture units and sales prices at full unit value (HY20:
Group's share of joint venture units).
Exceptional items
During the period the Group recorded a net exceptional credit
before tax of GBP0.2m (HY20: GBP55.7m exceptional charge).
This credit comprised three elements: a net combustible
materials charge of GBP7.9m (HY20: GBPnil), an inventory impairment
credit of GBP7.6m (HY20: GBP43.2m charge) and a credit to finance
expense of GBP0.5m (HY20: GBP0.6m charge). Detailed explanations
for each of these items can be found in note 5. In the prior half
year the Group also recorded restructuring costs of GBP4.5m and net
impairment losses on financial assets of GBP7.4m.
In the year ended 31 October 2019 the Group considered the
latest Government guidance notes in respect of combustible
materials, fire risk and protection and regulatory compliance on
completed developments. Following a detailed review of current and
legacy buildings the Group recorded an exceptional charge of
GBP18.4m where it believed a legal or constructive obligation to
remedy the buildings existed. In the year ended 31 October 2020 the
Group added to this provision by recording an exceptional net
charge of GBP0.6m.
Against a complex and continually evolving backdrop the Group
continues to carefully assess and update its anticipated
obligations in this area. During the period the Group has recorded
an exceptional charge of GBP10.3m to cover further expected
remediation costs. Approximately half of this charge relates to
revisions of forecasts on the previously identified programme of
works and the other half relates to the inclusion of newly
identified buildings now in scope. This has been offset by a
GBP2.4m exceptional credit, relating to contractual recoveries from
subcontractors and architects, resulting in a net combustible
materials charge of GBP7.9m.
At the outset of the COVID-19 pandemic the Group considered the
consensus of market commentary predicting significant contractions
in house price volumes and prices. Accordingly, at 30 April 2020
the Group recorded a GBP33.9m net realisable value (NRV) charge and
GBP9.3m of abortive work-in-progress. The NRV charge was based on
an assumed 7.5% sales price reduction for residential properties in
the portfolio and 32.0% for commercial units. Site specific
provisions were also applied to schemes where the Group anticipated
that further price action would be needed in a challenging market.
These schemes share common characteristics of being complex,
urban-located and predominantly comprise apartment
accommodation.
Since establishing this provision, the housing market has
performed strongly, through a combination of Government support and
home movers responding to the COVID-19 impact on their lifestyles
and ways of working. The Group has therefore decided to release the
remaining, unrequired balance of the 7.5% sales price provision on
all schemes apart from the London Chest Hospital. The Group has
previously recorded an expected credit loss on the amounts loaned
to the joint venture that holds the London Chest Hospital
development and considers that this scheme still represents the
characteristics of a complex, legacy scheme outlined above.
Releasing the balance of this 7.5% provision has resulted in a
GBP7.6m (HY20: GBP43.2m charge) exceptional credit in the period.
The Group has not released the element of unutilised provision
associated with commercial units due to continued uncertainty in
this segment of the market.
The GBP0.5m credit (HY20: GBP0.6m charge) to finance expense
relates to the Group's shared equity loan portfolio. The prior
period charge reflects the application of the 7.5% sales price
reduction outlined above, and in line with the removal of this
assumption, this now results in an exceptional credit in the
period.
Tax on exceptional items is GBPnil (HY20: GBP11.6m tax
credit).
Financing and net debt
At 30 April 2021 the Group had net cash of GBP130.4m (HY20:
GBP93.3m net debt). Net debt and land creditors were GBP48.1m
(HY20: GBP317.2m). This significant improvement in the Group's
liquidity position reflects the continued progress in closely
managing work-in-progress, remaining disciplined in land
acquisition, and trading out of complex legacy schemes, where it is
economically sensible to do so. At 30 April 2021 the Group's
GBP250.0m Revolving Credit Facility is undrawn (HY20: GBP250.0m
drawn) and has remained so throughout the half.
Average net cash during the period was GBP80.5m (HY20: GBP125.0m
net debt) and the Group is ungeared (HY20: 10.4% geared). Given the
expected cash inflow from the sale of the Longcross Film Studio in
the second half, and assuming the housing market remains stable in
the pandemic environment, the Group expects the FY21 closing net
cash position to be around GBP170.0m (FY20: GBP142.2m net
cash).
Taxation
The effective tax rate applied to adjusted profit for the period
was 20.2% (HY20: 20.9% tax rate on adjusted loss). This reflects
the anticipated full year effective rate and is higher than the
statutory rate of 19.0%.
Earnings per share
Adjusted basic earnings per share was 11.2 pence (HY20: 1.4
pence), reflecting the improved trading performance year-on-year.
Earnings per share was 11.2 pence (HY20: loss per share 15.8
pence).
Dividend
The Board has declared an interim dividend of 4.1 pence per
share, payable on 14 October 2021 to shareholders on the register
on 24 September 2021. The dividend represents approximately one
third of the dividend expected to be paid in respect of the
financial year ending 31 October 2021.
Land and planning
The land market has become increasingly competitive during the
first half against a backdrop of strong demand for new homes and
developers looking to rebuild their capacity. Within this context
the Group has remained selective and disciplined in its approach to
new land acquisition but has also been able to take advantage of
its significantly enhanced liquidity position.
Accordingly, in the period the Group approved the purchase of
2,682 plots at an average gross margin of 26.5%, after sales and
marketing costs.
At 30 April 2021 the short-term land portfolio includes
15,138(1) (HY20: 16,263) plots. 760 (HY20: 422) plots were added in
the period across three sites (HY20: three sites). The strategic
portfolio now contains 22,176 (HY20: 21,383) plots with no plots
added in the period. The combined assessed GDV of both portfolios
is GBP11.9bn (HY20: GBP11.3bn). The increase compared to prior
period is principally driven by the release of the remaining
residential 7.5% NRV provision and the impact the assumption has on
the GDV valuation. See note 5 for more details.
(1) HY21 includes joint venture units at full unit count (HY20:
Group's share of joint venture units). HY21 is also on an
equivalent unit basis which allocates a proportion of the unit
count for a deal to the land sale element where the deal contains a
land sale (HY20: no equivalent unit allocation to land sale
element). This approach reflects the Group's actual production
output and also removes the distortive impact on ASPs of land
sales.
Principal Risks and Uncertainties
The Group's financial and operational performance as well as
reputation are subject to several potential risks and
uncertainties. These risks could, either separately or in
combination, have a material impact on the Group's performance and
shareholder returns.
Our divisional boards consider their individual risk registers
on a half-yearly basis. The outcome of the divisional risk reviews
and the Group's principal risks are carefully considered by the
Executive Leadership Team. The Audit and Risk Committee and the
Board have oversight of the Group's emerging and principal
risks.
Emerging risks
Emerging risks are identified through horizon scanning by the
Executive Leadership Team and the Board focusing on industry and
macro-economic trends, complemented by the divisional boards
reporting on potential significant impacts to future
performance.
Production delays
There has been longer than anticipated delays and shortages in
labour and materials principally because of the COVID-19 pandemic
and Brexit disruption. This has coincided with strong levels of
construction output with housebuilders and infrastructure projects
(such as HS2) all benefiting from Government support to stay open
and keep building. This has led to increased costs for certain
materials and labour. We have mitigated these increased costs by
gains achieved through standardisation sourcing benefits across the
business. While we are currently delivering our planned levels of
production, we expect these challenges to continue throughout the
rest of the year before normalising next year.
Climate change
Climate change has short, medium and long-term implications for
the business. The risks associated with climate change comprise
transitional risk, such as emerging policy and the increasing cost
of energy, and physical risks, including flooding, overheating and
water shortages.
Regulatory change
We anticipate this risk will continue to evolve due to changes
in regulations concerning energy efficiency and sustainability
alongside legacy matters, such as combustible materials.
Reputational impact
Several legacy issues have impacted the perception of the
housebuilding sector. If these issues continue to have negative
impact on former customers and other stakeholders, there is a
potential that this could become a principal risk.
Principal risks
Our principal risks are unchanged from those set out on pages 60
to 64 of the Group's Annual Integrated Report for the year ended 31
October 2020.
Risk Risk description
Epidemic or pandemic An epidemic or pandemic of an infectious disease
from infectious diseases may lead to the imposition of Government controls
on the movement of people, including social
distancing, with the cessation of large parts
of the economy for a significant period of time.
This could lead to:
* Short to medium-term impact to consumer confidence
* Lack of liquidity and/or mortgage availability in the
mortgage market
* Disruption to our ability to deliver services to
customers in the event of supply shortages and/or
widespread loss of key people (both employees and
subcontractors), with adverse impacts on customer
volumes and experience.
A prolonged economic downturn could materially
increase our pension deficit and associated
contributions.
Adverse impacts to the economy could also affect
our cash position and ability to fund investment
projects and ongoing operations.
------------------------------------------------------------------
Demand for housing A decline in macro-economic conditions in the
UK, which negatively impacts the UK residential
property market and reduces the ability for
people to be able to buy homes, either through
unemployment or low employment, constraints
on mortgage availability, or higher costs of
mortgage funding.
Changes to regulations and taxes, for example
stamp duty, taxes on additional home purchases
and the impact of government schemes like Help
to Buy.
Decreased sales volumes occurring from a drop
in housing demand, could see an increasing number
of units held as unreserved stock and part-exchange
stock with potential cash loss on final sales.
An over-reliance on Help to Buy and other Government-backed
ownership schemes to boost sales volumes and
rates.
------------------------------------------------------------------
Safety, health & A significant health and safety event could
environment (SHE) result in fatality, serious injury or a dangerous
situation to an individual.
Significant environmental damage could be caused
by operations on site or in our offices (for
example, water contamination from pollution).
Lack of recognition of the importance of the
wellbeing of employees.
These incidents or situations could have an
impact to the personal lives of our stakeholders,
adverse effect on our reputation and ability
to secure public contracts or, if illegal, prosecution,
or significant financial losses.
In addition, a SHE failure could lead to production
delays and impact our ability to achieve financial
forecasts and targets.
------------------------------------------------------------------
Access to site labour Rising production levels across the industry
and materials put pressure on our materials supply chain.
The industry is struggling to attract the next
generation of talent into skilled trade professions.
There is also a potential of a reduction of
labour availability from the EU market. Increased
use of more modern methods of construction could
result in a labour market unwilling and unable
to meet the skills and knowledge required and
a materials supply chain lacking the scope and
capacity.
Given the current UK economic climate and uncertainty
there is an enhanced likelihood of suppliers
and subcontractors facing insolvency.
------------------------------------------------------------------
Customer service Customer service and/or build quality falls
and quality below our required standards resulting in reduction
of reputation and trust, which could impact
sales rates and volumes.
Unforeseen product safety or quality issues
or latent defects emerge due to new construction
methods.
Failure to effectively implement new regulations
on build quality and respond to emerging technologies.
Government guidance and mortgage lending policy
for apartments with cladding has changed following
the Grenfell tragedy.
------------------------------------------------------------------
Information security Cyber security risks such as data breaches and
and business continuity hacking leading to the loss of operational systems,
market-sensitive/competitive information or
other critical data which risks non-compliance
with data privacy requirements and a failure
of our IT systems.
This in turn could result in a higher risk of
fraud and, as a result, financial penalties
and an impact to reputation.
------------------------------------------------------------------
Laws, policies and This risk relates to both new regulations and
regulations legacy matters.
Upcoming regulations and guidance
Ongoing uncertainty surrounding the requirements
of future regulatory changes could impact our
ability to make medium and longer-term decisions.
The planning environment continues to evolve.
The interpretation of the National Planning
Policy Framework continues to develop in an
environment where local authorities and public
sector resources are constrained.
Failure to effectively implement new environmental
regulations including the Future Homes Standard
and net biodiversity gain.
Legacy matters
Failure to plan and implement the guidance notes
issued by the Government in respect of combustible
materials and fire safety.
The changes to the guidance are becoming more
stringent and impacting a number of our former
developments and customers.
------------------------------------------------------------------
Build cost management Build cost inflation and unforeseen cost increases
driven by demands in the supply chain or failure
to implement adequate cost control systems.
Lack of awareness and understanding of external
factors that may impact build costs including
complex planning permissions and emerging sustainability
and environmental regulations.
------------------------------------------------------------------
Attracting and retaining An increasing skills gap in the industry at
our skilled people all levels resulting in difficulty with recruiting
the right and diverse mix of people for vacant
positions.
Employee turnover and inducting and embedding
new employees, alongside the cost of wages increasing
because of inflated offers in the market.
Loss of knowledge within the Group which could
result in inefficiencies, productivity loss,
delays to business operations, increasing costs,
and an overuse or reliance on consultants and
the supply chain.
------------------------------------------------------------------
Solvency and liquidity Cash generation for the Group is a key part
of our updated strategy, and our cash headroom
could be affected by economic pressures that
result in delayed receipts and potentially lower
sales in the short to medium-term.
Commitments to significant land and build obligations
that are made ahead of revenue certainty.
Fall in sales during economic slowdown and lack
of available debt finance.
Reductions in margins as average selling price
falls, inability to restructure appropriately
and unsustainable levels of work-in-progress.
------------------------------------------------------------------
Statement of Directors' Responsibilities
The Directors confirm that these condensed consolidated half
year financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related party transactions
described in the last Annual Integrated Report.
The current Directors of Crest Nicholson Holdings plc are listed
in the Annual Integrated Report for the year ended 31 October
2020.
A list of Directors is maintained on the Crest Nicholson
website: www.crestnicholson.com . As previously notified, Sharon
Flood will be stepping down as a Director on 30 June 2021.
By order of the Board
Peter Truscott
Chief Executive
24 June 2021
Registered number 6800600
CREST NICHOLSON HOLDINGS PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 APRIL 2021
CONDENSED CONSOLIDATED INCOME STATEMENT
Note Half Half year Half Half Half year Half Full Full year Full
year ended year year ended year year ended year
ended ended ended ended ended ended
30 April 30 April 30 April 30 April 30 April 30 April 31 October 31 October 31
October
2021 2021 2021 2020 2020 2020 2020 2020 2020
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
Exceptional Exceptional Pre-exceptional Exceptional
items items item item (note
Pre-exceptional (note Pre-exceptional (note 5)
items 5) Total items 5) Total Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4 324.5 - 324.5 240.0 - 240.0 677.9 - 677.9
Cost of sales (261.2) (0.3) (261.5) (204.1) (43.2) (247.3) (570.2) (43.8) (614.0)
---------------- ------------ ---------- ---------------- ------------ ---------- ---------------- ------------ --------
Gross
profit/(loss) 63.3 (0.3) 63.0 35.9 (43.2) (7.3) 107.7 (43.8) 63.9
Administrative
expenses (23.1) - (23.1) (24.8) (4.5) (29.3) (50.3) (7.5) (57.8)
Net impairment
losses on
financial
assets (0.2) - (0.2) - (7.4) (7.4) (0.3) (7.6) (7.9)
---------------- ------------ ---------- ---------------- ------------ ---------- ---------------- ------------ --------
Operating
profit/(loss) 6 40.0 (0.3) 39.7 11.1 (55.1) (44.0) 57.1 (58.9) (1.8)
Finance income 1.5 - 1.5 1.7 - 1.7 3.4 - 3.4
Finance expense (6.3) 0.5 (5.8) (7.2) (0.6) (7.8) (14.1) (0.5) (14.6)
---------------- ------------ ---------- ---------------- ------------ ---------- ---------------- ------------ --------
Net finance
(expense)/income (4.8) 0.5 (4.3) (5.5) (0.6) (6.1) (10.7) (0.5) (11.2)
Share of
post-tax
profits/(losses)
of joint
ventures
using the
equity method 10 0.9 - 0.9 (1.1) - (1.1) (0.5) - (0.5)
---------------- ------------ ---------- ---------------- ------------ ---------- ---------------- ------------ --------
Profit/(loss)
before tax 36.1 0.2 36.3 4.5 (55.7) (51.2) 45.9 (59.4) (13.5)
Income tax
(expense)/credit 7 (7.3) - (7.3) (0.9) 11.6 10.7 (8.5) 11.3 2.8
Profit/(loss)
for the period
attributable
to equity
shareholders 28.8 0.2 29.0 3.6 (44.1) (40.5) 37.4 (48.1) (10.7)
---------------- ------------ ---------- ---------------- ------------ ---------- ---------------- ------------ --------
Earnings/(loss)
per ordinary
share
Basic 8 11.2p 11.3p 1.4p (15.8)p 14.6p (4.2)p
Diluted 8 11.2p 11.3p 1.4p (15.8)p 14.5p (4.2)p
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 Unaudited 2020 Unaudited 2020
Audited
GBPm GBPm GBPm
Profit/(loss) for the period attributable
to equity shareholders 29.0 (40.5) (10.7)
Other comprehensive income/(expense):
Items that will not be reclassified
to the consolidated income statement:
Actuarial gains/(losses) of defined
benefit schemes 11 17.2 (5.7) (13.8)
Change in deferred tax on actuarial
gains/(losses) of defined benefit schemes (3.3) 1.1 2.7
--------------- --------------- -----------
Other comprehensive income/(expense)
for the period net of income tax 13.9 (4.6) (11.1)
--------------- --------------- -----------
Total comprehensive income/(expense)
for the period attributable to equity
shareholders 42.9 (45.1) (21.8)
--------------- --------------- -----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Note Share Share Retained Total
capital premium earnings
account
GBPm GBPm GBPm GBPm
Half year ended 30 April 2021 (Unaudited)
Balance at 1 November 2020 - originally
reported 12.8 74.2 744.2 831.2
Change in accounting policy - land
options 19 - - (5.9) (5.9)
--------- --------- ---------- -------
Balance at 1 November 2020 - Restated(1) 12.8 74.2 738.3 825.3
Profit for the period attributable
to equity shareholders - - 29.0 29.0
Actuarial gains of defined benefit
schemes 11 - - 17.2 17.2
Change in deferred tax on actuarial
gains of defined benefit schemes - - (3.3) (3.3)
--------- --------- ---------- -------
Total comprehensive income for the
period - - 42.9 42.9
Transactions with shareholders:
Equity-settled share-based payments - - 0.7 0.7
Deferred tax on equity-settled share-based
payments - - 0.2 0.2
--------- --------- ---------- -------
Balance at 30 April 2021 12.8 74.2 782.1 869.1
--------- --------- ---------- -------
(1) Restated to reflect the change in accounting policy on land options.
See note 19.
Half year ended 30 April 2020 (Unaudited)
Balance at 1 November 2019 - originally
reported 12.8 74.2 766.9 853.9
Change in accounting policy - land
options 19 - - (5.9) (5.9)
--------- --------- ---------- -------
Balance at 1 November 2019 - Restated(1) 12.8 74.2 761.0 848.0
Loss for the period attributable
to equity shareholders - - (40.5) (40.5)
Actuarial losses of defined benefit
schemes 11 - - (5.7) (5.7)
Change in deferred tax on actuarial
losses of defined benefit schemes - - 1.1 1.1
--------- --------- ---------- -------
Total comprehensive expense for
the period - - (45.1) (45.1)
Transactions with shareholders:
Equity-settled share-based payments - - 0.3 0.3
Purchase of own shares - - (1.5) (1.5)
Transfers in respect of share options - - 0.4 0.4
--------- --------- ---------- -------
Balance at 30 April 2020 12.8 74.2 715.1 802.1
--------- --------- ---------- -------
(1) Restated to reflect the change in accounting policy on land options.
See note 19.
Year ended 31 October 2020 (Audited)
Balance at 1 November 2019 - originally
reported 12.8 74.2 766.9 853.9
Change in accounting policy - land
options 19 - - (5.9) (5.9)
--------- --------- ---------- -------
Balance at 1 November 2019 - Restated(1) 12.8 74.2 761.0 848.0
Loss for the year attributable to
equity shareholders - - (10.7) (10.7)
Actuarial losses of defined benefit
schemes 11 - - (13.8) (13.8)
Change in deferred tax on actuarial
losses of defined benefit schemes - - 2.7 2.7
--------- --------- ---------- -------
Total comprehensive expense for
the year - - (21.8) (21.8)
Transactions with shareholders:
Equity-settled share-based payments - - 0.5 0.5
Purchase of own shares - - (1.8) (1.8)
Transfers in respect of share options - - 0.4 0.4
--------- --------- ---------- -------
Balance at 31 October 2020 12.8 74.2 738.3 825.3
--------- --------- ---------- -------
(1) Restated to reflect the change in accounting policy on land
options. See note 19.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated(1) Restated(1)
Note As at As at As at
30 April 30 April 31 October
2021 2020 2020
Unaudited Unaudited Audited
ASSETS GBPm GBPm GBPm
Non-current assets
Intangible assets 29.0 29.0 29.0
Property, plant and equipment 1.7 2.5 2.0
Right-of-use assets 4.7 7.2 6.0
Investments in joint ventures 10 5.3 2.1 3.7
Financial assets at fair value
through profit and loss 3.5 4.1 4.6
Deferred tax assets 7.0 7.2 9.8
Retirement benefit surplus 11 8.6 - -
Trade and other receivables 59.6 56.8 55.6
---------- ------------ ------------
119.4 108.9 110.7
---------- ------------ ------------
Current assets
Inventories 12 1,038.1 1,161.0 1,017.7
Financial assets at fair value
through profit and loss 1.7 1.6 0.8
Trade and other receivables 78.7 106.1 95.2
Current income tax receivable 4.9 17.3 3.4
Cash and cash equivalents 13 228.0 255.5 239.4
---------- ------------ ------------
1,351.4 1,541.5 1,356.5
---------- ------------ ------------
Total assets 1,470.8 1,650.4 1,467.2
---------- ------------ ------------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 13 (97.6) (346.9) (97.2)
Trade and other payables (126.0) (129.8) (151.7)
Lease liabilities (3.6) (5.6) (4.7)
Deferred tax liabilities 11 (1.6) - -
Retirement benefit obligations 11 - (8.4) (13.8)
Provisions 14 (8.1) (5.1) (3.4)
---------- ------------ ------------
(236.9) (495.8) (270.8)
---------- ------------ ------------
Current liabilities
Interest-bearing loans and borrowings 13 - (1.9) -
Trade and other payables (347.2) (339.8) (357.0)
Lease liabilities (2.1) (2.6) (2.3)
Provisions 14 (15.5) (8.2) (11.8)
---------- ------------ ------------
(364.8) (352.5) (371.1)
---------- ------------ ------------
Total liabilities (601.7) (848.3) (641.9)
---------- ------------ ------------
Net assets 869.1 802.1 825.3
---------- ------------ ------------
EQUITY
Share capital 17 12.8 12.8 12.8
Share premium account 17 74.2 74.2 74.2
Retained earnings 782.1 715.1 738.3
---------- ------------ ------------
Total equity 869.1 802.1 825.3
---------- ------------ ------------
(1) Restated to reflect the change in accounting policy on land
options. See note 19.
Crest Nicholson Holdings plc Registered number 6800600. These
condensed consolidated half year financial statements were approved
by the Board of Directors on 24 June 2021.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Restated(1)
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Unaudited Unaudited Audited
GBPm GBPm GBPm
Cash flows from operating activities
Profit/(loss) for the period attributable
to equity shareholders 29.0 (40.5) (10.7)
Adjustments for:
Depreciation on property, plant and
equipment 0.6 3.8 4.4
Depreciation on right-of-use assets 1.2 1.4 2.7
Net finance expense 4.3 6.1 11.2
Share-based payment expense 0.7 0.3 0.5
Share of post-tax result of joint
ventures using the equity method (0.9) 1.1 0.5
Movement of inventories impairment (12.4) 43.2 29.3
Net impairment of financial assets 0.2 7.4 7.9
Income tax expense/(credit) 7.3 (10.7) (2.8)
---------- ------------ -----------
Operating profit before changes in working
capital and provisions 30.0 12.1 43.0
Decrease in trade and other receivables 14.2 32.7 45.8
(Increase)/decrease in inventories (8.0) (60.4) 96.8
Decrease in trade and other payables (28.6) (92.4) (52.9)
Contribution to retirement benefit
obligations (5.6) (3.7) (6.7)
---------- ------------ -----------
Cash generated from/(used by) operations 2.0 (111.7) 126.0
Finance expense paid (3.5) (4.4) (8.7)
Income tax paid (7.4) (8.1) (3.1)
Net cash (used by)/generated from operating
activities (8.9) (124.2) 114.2
---------- ------------ -----------
Cash flows from investing activities
Purchases of property, plant and equipment (0.3) (0.2) (0.3)
Disposal of financial assets at fair
value through profit and loss 0.6 1.0 1.3
Funding to joint ventures(1) (7.5) (13.3) (15.6)
Repayment of funding from joint ventures(1) 5.9 9.0 10.1
Finance income received 0.1 0.2 0.3
---------- ------------ -----------
Net cash outflow from investing activities (1.2) (3.3) (4.2)
---------- ------------ -----------
Cash flows from financing activities
Repayment of bank and other borrowings - - (36.9)
Proceeds from borrowings - 215.0 -
Principal elements of lease payments (1.3) (1.5) (2.9)
Purchase of own shares - (1.5) (1.8)
Transfer in respect of share options - 0.4 0.4
---------- ------------ -----------
Net cash (outflow)/inflow from financing
activities (1.3) 212.4 (41.2)
---------- ------------ -----------
Net (decrease)/increase in cash and cash
equivalents (11.4) 84.9 68.8
Cash and cash equivalents at the beginning
of the year 239.4 170.6 170.6
Cash and cash equivalents at end of the period 228.0 255.5 239.4
========== ============ ===========
(1) 30 April 2020: funding to joint ventures and repayment of
funding from joint ventures was shown as net funding to joint
ventures of (GBP4.3m). The balance has been restated to gross up
the cash flows as required by IAS 7. 31 October 2020 was previously
restated (see the Group's Annual Integrated Report for the year
ended 31 October 2020) .
CREST NICHOLSON HOLDINGS PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 APRIL 2021
NOTES TO THE CONDENSED CONSOLIDATED HALF YEAR FINANCIAL
STATEMENTS (unaudited)
1 BASIS OF PREPARATION
The Company is a public limited company incorporated, listed and
domiciled in the UK. The address of the registered office is Crest
House, Pyrcroft Road, Chertsey, Surrey KT16 9GN. The condensed
consolidated half year financial statements consolidate the results
of the Company and its subsidiaries (together referred to as the
Group) and include the Group's interest in jointly controlled
entities.
These condensed consolidated half year financial statements for
the six months ended 30 April 2021 have been prepared in accordance
with the Disclosure Guidance and Transparency Rules of the UK
Financial Conduct Authority and with International Accounting
Standard 34, 'Interim financial reporting', as adopted by the
European Union. These condensed consolidated half year financial
statements do not include all of the information required for full
annual consolidated financial statements and should be read in
conjunction with the Group's Annual Integrated Report for the year
ended 31 October 2020, which have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, and international financial
reporting standards (IFRS) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
These condensed consolidated half year financial statements do
not comprise statutory financial statements within the meaning of
Section 434 of the Companies Act 2006. Statutory financial
statements for the year ended 31 October 2020 were approved by the
Board of Directors on 26 January 2021 and delivered to the
Registrar of Companies. The report of the auditor on those accounts
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
These condensed consolidated half year financial statements are
unaudited but have been subject to a review in accordance with
International Standard on Review Engagements 2410 'Review of
Interim Financial Information performed by the Independent Auditor
of the Entity', issued by the Auditing Practices Board. The
auditor's review report for the period to 30 April 2021 is set out
below.
Going Concern
The Group has a GBP250.0m Revolving Credit Facility (RCF)
provided by its four syndicate banks which expires in June 2024. At
30 April 2021 this facility was undrawn and had remained so
throughout the reporting period. Net cash at 30 April 2021 was
GBP130.4m.
The Group also has placed GBP100.0m of senior loan notes at
fixed interest rates which mature from 2024 to 2029. Both the RCF
and senior loan notes include covenants in respect of gearing,
tangible net worth and interest cover. At the outset of the
COVID-19 pandemic, and throughout the subsequent disruption, the
Group has acted decisively to ensure a healthy liquidity position
is always maintained. As such the Group has operated within the
prevailing covenants during the period and no amendments to the
terms of its covenants have been made because of the pandemic's
impacts.
The Group maintains detailed long-term financial forecasts which
are regularly scrutinised by the Board. Forecast cash flows and
profitability contained in these forecasts have had various
downside test scenarios applied against them to understand whether
a theoretical covenant breach could occur. The Group's principal
risks and uncertainties are the basis for determining which
downside tests should be applied and these are described in detail
above.
The Group's management forecasts through to the end of October
2023 formed the base case model. This took into account the
Directors' views on expected volumes and prices as well as build
costs and production levels. In deriving the most severe, but
plausible scenario and its impact on the Group's financial
performance and position, the Group has modelled the following
assumptions which were overlaid on the base case:
-- An immediate 15.0% sales volume reduction on all unexchanged
open market and affordable units
-- An immediate 10.0% sales price reduction on all unexchanged
open market units and 5.0% on affordable units
The Group has then reasonably assumed that the following
mitigating actions could be taken to manage this scenario, and has
modelled:
-- Sales and marketing costs are flexed down in line with the reduced sales volume
-- Overhead reductions across the Group
-- Build costs and associated cash outflows fall by 5.0%,
starting 6 months after the sales price reduction, as
subcontractors and suppliers reduce their prices in a lower demand
environment
-- Land spend is reduced to reflect the lower demand environment
-- A dividend policy of 2.5 times (earnings) cover means that
any dividend payment reduces if profitability is lower.
The Directors have carefully considered this severe, but
plausible scenario and consider that the Group will continue to
comply with all its borrowing covenants for the forecast horizon.
There are further mitigating actions which the Directors could also
consider which have not been modelled. The Directors consider that
the Group will have adequate resources in place, for at least 12
months from the date of these results, to remain liquid and
operational, and have therefore adopted the going concern basis of
accounting in preparing the half year financial statements.
Critical accounting estimates and judgements
The preparation of the condensed consolidated half year
financial statements under IFRS requires the Directors to make
estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and expenses
and related disclosures. In applying the Group's accounting
policies, the key judgements taken that have a significant impact
on the financial statements, include those involving estimates,
which are listed below, the judgement to present certain items as
exceptional (see note 5), certain revenue policies relating to
recognition over time and part exchange sales (see revenue and
profit recognition accounting policy within the Group's Annual
Integrated Report for the year ended 31 October 2020), and the
recognition of the defined benefit pension scheme surplus (see note
11).
Estimates and associated assumptions affecting the financial
statements are based on historical experience and various other
factors that are believed to be reasonable under the circumstances.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Changes in accounting estimates may be necessary if there
are changes in the circumstances on which the estimate was based or
as a result of new information.
Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that
period, or in the period of revision and future period if the
revision affects both current and future periods.
The Directors have made estimates and assumptions in reviewing
the going concern assumption as detailed above. The Directors
consider the key sources of estimation uncertainty that have a risk
of causing a material adjustment to the carrying value of assets
and liabilities are the carrying value of inventories, estimation
of project profitability (both detailed within the Group's Annual
Integrated Report for the year ended 31 October 2020), and, the
carrying value of inventories (see note 5 and 12) and the valuation
of the pension scheme assets and liabilities (see note 11).
Other areas of accounting estimates and judgements
Combustible materials
The combustible materials provision requires assumptions to be
made in the calculation of the costs of interrogation, replacement
materials, works to complete and disruption to customers, along
with the timing of forecast expenditure. During the period the
combustible materials provision has been increased following
further review. If forecast remediation costs are 10.0% higher than
provided, the exceptional items charge in the condensed
consolidated income statement would be GBP2.2m higher. See note 5
and 14 for additional details.
Accounting policies
The principal accounting policies adopted in the condensed
consolidated half year financial statements are consistent with
those applied by the Group in its Annual Integrated Report for the
year ended 31 October 2020 except in respect of taxation which is
based on the expected effective tax rate that would be applicable
to expected annual earnings, and, the impact on inventories of
options purchased in respect of land and project management fee
income, as detailed below.
Inventories
Options purchased in respect of land are recognised initially as
a prepayment within inventories and written down on a straight-line
basis over the life of the option. If planning permission is
granted and the option exercised, the option is not written down
during that period and its carrying value is included within the
cost of land purchased. In prior periods the Group policy has been
to test the carrying values of options for impairment rather than
amortise on a straight-line basis. When options were exercised,
previous impairments were reversed and included as part of the
inventory cost. The difference in accounting treatment is GBP5.9m
after tax, which has been treated as a prior year restatement (see
note 19).
Adoption of new and revised standards
The following new standards, amendments to standards and
interpretations are applicable to the Group and are mandatory for
the first time for the financial year beginning 1 November
2020:
-- Amendments to IFRS 3 'Business combinations'
-- Amendments to IAS 1 and IAS 8: Definition of material
-- Amendments to IFRS 9, IAS 39 and IFRS 7: Interest rate benchmark reform
-- Amendment to IFRS 16 Leases COVID-19: Related rent concessions
The adoption of the amendments in the period did not have a
material impact on the financial statements.
Impact of standards and interpretations in issue but not yet
effective
There are a number of standards, amendments and interpretations
that have been published that are not mandatory for the 31 October
2021 reporting period and have not been adopted early by the Group.
The Group does not expect that the adoption of these standards,
amendments and interpretations will have a material impact on the
financial statements of the Group in future periods.
Alternative performance measures
The Group has adopted various Alternative Performance Measures
(APMs), as presented within note 20. These measures are not defined
by IFRS and therefore may not be directly comparable with other
companies' APMs, and should be considered in addition to, and are
not intended to be a substitute for, or superior to, IFRS
measurements.
2 SEGMENTAL REPORTING
The Executive Leadership Team, as disclosed in the Group's
Annual Integrated Report for the year ended 31 October 2020 on page
76, which is accountable to the Board, has been identified as the
chief operating decision-maker for the purposes of determining the
Group's operating segments. The Executive Leadership Team approves
investment decisions, allocates Group resources and performs
divisional performance reviews. The Group operating segments are
considered to be its divisions, each of which has its own
management board. All divisions are engaged in residential-led,
mixed use developments in the United Kingdom and therefore, having
regard to the aggregation criteria in IFRS 8, the Group has one
reportable operating segment.
3 SEASONALITY
In common with the rest of the UK housebuilding industry,
activity occurs throughout the year, with peaks in sales
completions in spring and autumn. This creates seasonality in the
Group's trading results and working capital. I n addition to this,
the current and prior financial period results have been impacted
by the COVID-19 pandemic and the related Government imposed
lockdown measures, which have caused further fluctuations in the
trading performance and working capital cycle.
4 REVENUE
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Revenue type GBPm GBPm GBPm
Open market housing including specification
upgrades 287.4 196.0 581.8
Affordable housing 31.3 28.6 76.6
---------- ---------- -----------
Total housing 318.7 224.6 658.4
Land and commercial sales 3.4 14.3 17.8
Freehold reversions 2.4 1.1 1.7
---------- ---------- -----------
Total revenue 324.5 240.0 677.9
---------- ---------- -----------
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Timing of revenue recognition GBPm GBPm GBPm
Revenue recognised at a point in time 284.9 187.2 551.2
Revenue recognised over time 39.6 52.8 126.7
---------- ---------- -----------
Total revenue 324.5 240.0 677.9
---------- ---------- -----------
Proceeds received on the disposal of part exchange properties,
which is not included in revenue, were GBP23.6m (30 April 2020:
GBP22.0m, 31 October 2020: GBP40.6m). These have been included
within cost of sales.
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Assets and liabilities related to contracts
with customers GBPm GBPm GBPm
Contract assets 46.3 56.4 53.6
Contract liabilities (32.1) (35.8) (32.8)
Contract assets have decreased to GBP46.3m from GBP53.6m since
31 October 2020, reflecting a lower amount of unbilled
work-in-progress on affordable housing and other open market bulk
sales at the period end.
Contract liabilities have reduced to GBP32.1m from GBP32.8m
since 31 October 2020, reflecting a lower amount of payments on
account received from customers in excess of billable
work-in-progress on affordable housing and other open market bulk
sales on contracts on which revenue is recognised over time.
Based on current forecasts for building and billing, management
expects a significant proportion of the contract liabilities total
to be recognised as revenue over the next 12 months.
5 EXCEPTIONAL ITEMS
Exceptional items are those which, in the opinion of the
Directors, are material by size and/or non-recurring in nature and
therefore require separate disclosure within the condensed
consolidated income statement in order to assist the users of the
financial statements in understanding what the Directors consider
to be the underlying business performance of the Group. Any
material reversal of these amounts will be reflected through
exceptional items.
Exceptional items for the half year ended 30 April 2021 relate
to the same category of items booked in previous financial
periods.
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Cost of sales GBPm GBPm GBPm
Combustible materials charge 10.3 - 2.6
Combustible materials credit (2.4) - (2.0)
--------- --------- ----------
Net combustible materials charge 7.9 - 0.6
Inventory impairment (credit)/charge (7.6) 43.2 43.2
--------- --------- ----------
Total cost of sales exceptional charge 0.3 43.2 43.8
Administrative expenses
Restructuring costs - 4.5 7.5
Net impairment losses on financial assets - 7.4 7.6
Net finance expense
Finance expense (credit)/charge (0.5) 0.6 0.5
Total exceptional (credit)/charge (0.2) 55.7 59.4
Tax credit on exceptional (credit)/charge - (11.6) (11.3)
--------- --------- ----------
Total exceptional (credit)/charge after
tax credit (0.2) 44.1 48.1
--------- --------- ----------
Net combustible materials charge
In the year ended 31 October 2019, following the latest
Government guidance notes in respect of combustible materials, fire
risk and protection, and regulatory compliance on completed
developments, the Group recorded an exceptional charge of
GBP18.4m.
In the year ended 31 October 2020, the Group reassessed the
adequacy of the provision held, resulting in a net combustible
materials charge of GBP0.6m, comprising a charge of GBP2.6m and a
credit of GBP2.0m from settlement of claims against architects and
subcontractors for incorrect building design or workmanship. These
costs were previously included within the combustible materials
exceptional expense. As the recognition of the initial charge
related to the settlement received was an exceptional expense, the
settlement is therefore recognised as an exceptional income.
In the half year ended 30 April 2021, the Group again reassessed
the adequacy of the provision held, resulting in a net charge of
GBP7.9m, comprising a charge of GBP10.3m and a credit of GBP2.4m
from settlements of claims against architects and subcontractors.
See note 14 for additional information.
Inventory impairment
Reflecting the anticipated deterioration to the housing sector
and future economic uncertainty caused by COVID-19, the Group
recorded a GBP43.2m exceptional inventory impairment charge in the
half year to 30 April 2020, comprising GBP33.9m net realisable
value (NRV) charge on current operational developments and GBP9.3m
on abortive work-in-progress. This provision was reviewed at 31
October 2020 and the overall balance remained unchanged. The
GBP33.9m NRV charge was based on a consensus of external market
commentary estimates from which the Directors derived key
assumptions.
Sales price reductions of 7.5% and 32.0% for unexchanged
residential and commercial units were applied to the entire
inventory portfolio respectively. In addition, site specific
provisions were also applied to schemes where the Directors
anticipated that further price action would be needed in a
challenging market. These schemes share common characteristics of
being complex, urban-located and predominantly comprise apartment
accommodation. Three of these complex legacy developments comprised
the majority of the write down.
In the half year ended 30 April 2021, the Group has not
experienced the residential sales price reductions previously
forecast. Since recording the NRV charge the Government has acted
decisively to support the housing market, allowing it to remain
open during COVID-19 restrictions, and extending the deadline for
the initial stamp duty holiday to 30 September 2021. The propensity
to move home has also been boosted by expected changes to future
remote working expectations. Accordingly, the Group has considered
whether it remains appropriate to hold the remaining, unutilised
residential 7.5% sales price provision and has concluded it should
be released. Therefore, an exceptional inventory impairment credit
of GBP7.6m has been recognised in the period. The sales price
provision of 32.0% for unexchanged commercial units has been
maintained due to continued uncertainty in this segment of the
market.
The remaining NRV provision of GBP24.7m held by the Group as
presented in note 12, mainly represents site specific provisions on
three complex legacy developments which are unaffected by the
removal of the residential 7.5% sales price reductions.
Administrative expenses and net impairment losses on financial
assets
In the half year ended 30 April 2021 the Group recorded
restructuring costs of GBPnil (30 April 2020: GBP4.5m, 31 October
2020: GBP7.5m) within administrative expenses and net impairment
losses on financial assets of GBPnil (30 April 2020: GBP7.4m, 31
October 2020: GBP7.6m).
Finance expense
Financial assets at fair value through profit and loss comprise
shared equity loans secured by way of a second charge on the
property. The prior period charge reflects the application of the
7.5% sales price reduction, and in line with the removal of this
assumption as noted above, this results in a reduced exceptional
finance expense of GBP0.5m in the current half year.
Taxation
An income tax credit of GBPnil (30 April 2020: GBP11.6m, 31
October 2020: GBP11.3m) has been recognised in relation to the
above exceptional items.
6 OPERATING PROFIT/(LOSS)
Operating profit of GBP39.7m (30 April 2020: GBP44.0m operating
loss, 31 October 2020: GBP1.8m operating loss) from continuing
activities is stated after crediting/(charging):
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Inventories impairment movement (note
12) 12.4 (36.8) (29.3)
Joint venture project management fees
received (note 18) 0.7 0.5 1.4
Government grants (repaid)/received (2.5) 0.6 2.5
Government grants
During the half year ended 30 April 2020 and year ended 31
October 2020 the Group recognised a GBP0.6m and GBP2.5m credit
respectively, within administrative expenses relating to the
Government's Job Retention Scheme (JRS). On 14 December 2020, the
Group voluntarily repaid the JRS grant, representing a charge
within administrative expenses in the current period.
7 TAXATION
The rate of taxation (expense)/credit on profit/(loss) for the
half year ended 30 April 2021 is 20.1% (30 April 2020: 20.9%
credit) and reflects the best estimate of the weighted average
annual effective tax rate which is expected to apply to the Group
for the year ending 31 October 2021. This calculation uses rates
substantively enacted by 30 April 2021 as required by IAS 34
'Interim Financial Reporting'.
On 3 March 2021, the Chancellor of the Exchequer announced that
the standard rate of UK corporation tax would increase from 19.0%
to 25.0% from April 2023. As this change was not substantively
enacted by the condensed consolidated statement of financial
position date, the impact is not reflected in these interim
financial statements. Had the rate change been enacted by the
condensed consolidated financial position date, the net deferred
tax impact would have been an increase in net deferred tax of
GBP1.7m.
8 EARNINGS/(LOSS) PER ORDINARY SHARE
Basic earnings/(loss) per share is calculated by dividing
profit/(loss) attributable to equity shareholders by the weighted
average number of ordinary shares in issue during the period. For
diluted earnings per share, the weighted average number of shares
is increased by the average number of potential ordinary shares
held under option during the period. This reflects the number of
ordinary shares which would be purchased using the difference in
value between the market value of shares and the share option
exercise price. The market value of shares has been calculated
using the average ordinary share price during the period. Only
share options which have met their cumulative performance criteria
have been included in the dilution calculation. The earnings and
weighted average number of shares used in the calculations are set
out below.
Earnings Weighted Per
average share
number
of amount
shares
Half year ended 30 April 2021 - Total GBPm millions pence
Basic earnings per share 29.0 256.8 11.3
Effect of share options - 0.7
--------- --------- -------
Diluted earnings per share 29.0 257.5 11.3
--------- --------- -------
Half year ended 30 April 2021 - Pre-exceptional
Basic earnings per share 28.8 256.8 11.2
Effect of share options - 0.7
-------
Diluted earnings per share 28.8 257.5 11.2
--------- --------- -------
Half year ended 30 April 2020 - Total
Basic loss per share (40.5) 256.8 (15.8)
Effect of share options - -
-------
Diluted loss per share (40.5) 256.8 (15.8)
--------- --------- -------
Half year ended 30 April 2020 - Pre-exceptional
Basic earnings per share 3.6 256.8 1.4
Effect of share options - 0.3
-------
Diluted earnings per share 3.6 257.1 1.4
--------- --------- -------
Full year ended 31 October 2020 - Total
Basic loss per share (10.7) 256.8 (4.2)
Effect of share options - -
-------
Diluted loss per share (10.7) 256.8 (4.2)
--------- --------- -------
Full year ended 31 October 2020 - Pre-exceptional
Basic earnings per share 37.4 256.8 14.6
Effect of share options - 0.3
-------
Diluted earnings per share 37.4 257.1 14.5
--------- --------- -------
9 DIVIDS
Half Half Full year
year year ended
ended ended
30 April 30 April 31 October
2021 2020 2020
Dividends declared as distributions to equity GBPm GBPm GBPm
shareholders in the period:
Proposed interim dividend for the year ending
31 October 2021 of 4.1 pence per share (30
April 2020 and 31 October 2020: nil pence
per share) 10.5 - -
--------- --------- -----------
Due to the impact of COVID-19, and associated business and
economic uncertainty, no dividends were paid during the year ended
31 October 2020. The final 2019 dividend of 21.8 pence per share
was cancelled, which would have been due on 9 April 2020. The
proposed interim dividend was approved by the Board on 24 June 2021
and, in accordance with IAS 10 "Events after the Reporting Period",
has not been included as a liability in this condensed consolidated
half year financial information. The interim dividend will be paid
on 14 October 2021 to all ordinary shareholders on the Register of
Members on 24 September 2021.
10 INVESTMENTS
Investments in joint ventures
The tables below provide financial information for joint
ventures that are material to the Group. All joint ventures have
their place of business in Great Britain, are 50% owned and are
accounted for using the equity method, in line with the prior
period.
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Total investments in joint ventures GBPm GBPm GBPm
Crest Sovereign (Brooklands) LLP(1) - - -
Bonner Road LLP(1) - - -
Crest A2D (Walton Court) LLP 1.7 0.7 1.0
Elmsbrook (Crest A2D) LLP 3.5 1.3 2.6
Other non-material joint ventures 0.1 0.1 0.1
--------- --------- -----------
Total investments in joint ventures 5.3 2.1 3.7
--------- --------- -----------
(1) Net of cumulative losses
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Group's share in joint venture profit/(loss)
for the period GBPm GBPm GBPm
Crest Sovereign (Brooklands) LLP 0.3 (0.5) (0.7)
Bonner Road LLP (0.6) (0.7) (1.2)
Crest A2D (Walton Court) LLP 0.3 (0.1) (0.1)
Elmsbrook (Crest A2D) LLP 0.9 0.2 1.5
Total Group's share in joint venture
profit/(loss) for the period 0.9 (1.1) (0.5)
---------- ---------- -----------
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Amounts due from joint ventures GBPm GBPm GBPm
Crest Sovereign (Brooklands) LLP 21.1 19.3 21.4
Bonner Road LLP(2) 18.8 19.0 18.8
Crest A2D (Walton Court) LLP 15.5 9.4 12.0
Elmsbrook (Crest A2D) LLP 1.2 4.8 2.3
Other non-material joint ventures - 0.9 -
--------- --------- -----------
Total amounts due from joint ventures 56.6 53.4 54.5
--------- --------- -----------
(2) Stated after expected credit loss of GBP11.0m (30 April
2020: GBP10.6m, 31 October 2020: GBP10.8m)
11 RETIREMENT BENEFIT SURPLUS/(OBLIGATIONS)
The retirement benefit surplus/(deficit) recognised on the
defined benefit scheme in the condensed consolidated statement of
financial position represents the surplus/(deficit) of the fair
value of the Crest Nicholson Group Pension and Life Assurance
Scheme's (the Scheme) assets over the present value of Scheme
liabilities. There has been a material improvement in the position
going from a deficit of GBP13.8m at 31 October 2020 to a surplus of
GBP8.6m at 30 April 2021. This was driven by improved asset
performance and a reduction in liabilities due to increasing
interest rates being reflected in the discount rate.
The amounts recognised in the condensed consolidated statement
of financial position on the defined benefit scheme is as
follows:
As at As at As at
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Present value of scheme liabilities (216.0) (212.6) (228.3)
Fair value of scheme assets 224.6 204.2 214.5
--------- --------- ------------------
Retirement benefit surplus/(deficit) recognised
at period end 8.6 (8.4) (13.8)
--------- --------- ------------------
Deferred tax asset recognised at period
end within non-current assets - 1.6 2.6
Deferred tax liability recognised at period
end within non-current liabilities (1.6) - -
The rules of the Scheme provide the Group with an unconditional
right to a refund of surplus assets on the gradual settlement of
the Scheme's liabilities. In the ordinary course of business the
Scheme trustees have no unilateral right to wind the Scheme up.
Based on these rights and in accordance with IFRIC 14, the Group
has made the judgement that the net surplus in the Scheme is
recognised in full.
At the condensed consolidated statement of financial position
date the substantively enacted future corporation tax rate for FY21
and beyond is 19.0%, on which the deferred tax liability on the
retirement benefit surplus has been evaluated.
Amounts recognised in comprehensive income:
The current and past service costs, settlements and
curtailments, together with the net interest expense for the period
are included in the condensed consolidated income statement.
Remeasurements of the retirement benefit asset/(liability) are
included in the condensed consolidated statement of comprehensive
income.
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
Service cost GBPm GBPm GBPm
Administrative expenses (0.3) (0.2) (0.4)
Net interest expense (0.1) - (0.1)
---------- ---------- ------------------
Expense recognised in the condensed consolidated
income statement (0.4) (0.2) (0.5)
---------- ---------- ------------------
Remeasurements of the net asset/(liability)
Return on Scheme assets 6.0 (8.5) 1.3
Gain/(loss) arising from changes in financial
assumptions 7.3 (0.5) (13.8)
Gain/(loss) arising from changes in demographic
assumptions 2.2 2.7 (3.7)
Experience gain 1.7 0.6 2.4
---------- ---------- ------------------
Actuarial gains/(losses) recorded in the
condensed consolidated statement of comprehensive
income 17.2 (5.7) (13.8)
------------------
Total defined benefit scheme gains/(losses) 16.8 (5.9) (14.3)
---------- ---------- ------------------
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
The principal actuarial assumptions used % % %
were:
Liability discount rate 1.90 1.60 1.50
Inflation assumption - RPI 3.35 2.55 3.05
Inflation assumption - CPI 2.65 1.75 2.25
12 INVENTORIES
Restated(1) Restated(1)
As at As at As at
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Work-in-progress 934.1 961.5 889.8
Completed buildings including show homes 85.6 183.5 107.0
Part exchange inventories 18.4 16.0 20.9
--------- ------------ ------------------
1,038.1 1,161.0 1,017.7
--------- ------------ ------------------
(1) Restated to reflect the change in accounting policy on land
options. See note 19.
During the period and as detailed in note 5, the remaining
unutilised residential 7.5% sales price provision has been released
creating an exceptional inventory impairment credit of GBP7.6m (30
April 2020: GBP33.9m exceptional charge, 31 October 2020: GBP33.9m
exceptional charge).
Total inventories are stated net of a net realisable value
provision of GBP24.7m (30 April 2021: GBP44.6m, and, 31 October
2020: GBP37.1m), mainly relating to the impairments as disclosed in
the Group's Annual Integrated Report for the year ended 31 October
2020, net of the residential 7.5% sales price reduction
assumption.
Of the GBP24.7m remaining NRV provision at 30 April 2021 it is
currently forecast that over half will be used in the second half
of 2021 financial year end as some sites subject to NRV are
forecast to be legally completed.
Movements in the NRV provision As at As at As at
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
At beginning of the period 37.1 7.8 7.8
Pre-exceptional NRV (credited)/charged
in the period (0.7) 4.0 2.9
Pre-exceptional NRV used in the period (3.7) (1.1) (2.1)
Exceptional NRV (credited)/charged in
the period (note 5) (7.6) 33.9 33.9
Exceptional NRV used in the period (0.4) - (5.4)
--------- --------- ------------------
Total movement in NRV in the period (12.4) 36.8 29.3
--------- --------- ------------------
At end of the period 24.7 44.6 37.1
--------- --------- ------------------
During half year ended 30 April 2020 and full year ended 31
October 2020 the Group wrote off as an exceptional item GBP9.3m of
work-in-progress and other associated costs on a project where the
scheme is no longer profitable and therefore aborted. The
combination of this and the exceptional NRV provided in the period
of GBP33.9m is GBP43.2m, representing the total exceptional
inventory impairment charge per note 5.
13 CASH AND CASH EQUIVALENTS, INTEREST-BEARING LOANS AND
BORROWINGS
As at As at As at
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Cash and cash equivalents 228.0 255.5 239.4
--------- --------- -----------
Non-current interest-bearing loans and
borrowings
Revolving credit facility - (250.0) -
Senior loan notes - maturing 2024 to
2029 (100.0) (100.0) (100.0)
Revolving credit facility and senior
loan notes issue costs 2.4 3.1 2.8
(97.6) (346.9) (97.2)
--------- --------- -----------
Current interest-bearing loans and borrowings
Other loans - (1.9) -
--------- --------- -----------
At 30 April 2021, the Group had undrawn revolving credit
facilities of GBP250.0m (30 April 2020: GBPnil, 31 October 2020:
GBP250.0m).
14 PROVISIONS
As at As at As at As at As at As at As at As at As at
30 April 30 April 30 30 April 30 April 30 31 October 31 October 31
April April October
2021 2021 2021 2020 2020 2020 2020 2020 2020
Combustible Other Total Combustible Other Total Combustible Other Total
materials provisions materials provisions materials provisions
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At beginning
of the
period 14.8 0.4 15.2 14.6 1.6 16.2 14.6 1.6 16.2
Provided
in the
period 10.3 - 10.3 - - - 2.6 - 2.6
Utilised
in the
period (1.9) - (1.9) (2.1) (0.4) (2.5) (2.4) (0.4) (2.8)
Released
in the
period - - - - (0.4) (0.4) - (0.8) (0.8)
------------ ----------- ------ ------------ ----------- ------ ------------ ----------- --------
At end
of the
period 23.2 0.4 23.6 12.5 0.8 13.3 14.8 0.4 15.2
------------ ----------- ------ ------------ ----------- ------ ------------ ----------- --------
Of which:
Non-current 8.1 - 8.1 5.1 - 5.1 3.4 - 3.4
Current 15.1 0.4 15.5 7.4 0.8 8.2 11.4 0.4 11.8
------------ ----------- ------ ------------ ----------- ------ ------------ ----------- --------
23.2 0.4 23.6 12.5 0.8 13.3 14.8 0.4 15.2
------------ ----------- ------ ------------ ----------- ------ ------------ ----------- --------
Combustible materials
In the year ended 31 October 2019, following the latest
Government guidance notes in respect of combustible materials, fire
risk and protection and regulatory compliance on completed
developments, the Group recorded an exceptional charge of GBP18.4m.
At the time the Group conducted a detailed review of all current
and legacy buildings to identify those that were impacted and
estimated remediation costs where a legal or constructive
obligation to remediate the buildings existed. The charge is a
complex calculation considering many different inputs including the
height and square footage of the impacted buildings, costs of
interrogation, estimated costs of replacement materials and labour,
the extent of the works to be complete and potential disruption to
customers.
In the year ended 31 October 2020, the Group reassessed the
adequacy of the provision held, resulting in a net combustible
materials charge of GBP0.6m, comprising a charge of GBP2.6m and a
credit of GBP2.0m in settlements of claims against architects and
subcontractors.
During the half year ended 30 April 2021 the Group continued to
reassess the estimates on costs and timing of works and associated
adequacy of the provision held. This resulted in an increase of
GBP10.3m in the provision. Approximately half of this increase is
due to revisions of forecasts on previously assessed buildings, and
half on newly identified buildings requiring fire-related remedial
works. The Group spent GBP1.9m in the period across a number of
buildings requiring further investigative costs, including balcony
and cladding related works.
The provision of GBP23.2m represents the Group's best estimate
of costs at 30 April 2021. The Group will continue to assess the
magnitude and utilisation of this provision in future financial
reporting periods. The Group recognises that guidance in this area
is evolving over time and that assumptions may require revising,
resulting in changes to the expected cash outflow. The Group
expects to have completed any required remedies within a five-year
period. The Group expects to utilise GBP15.5m of the remaining
provision within one year, and the balance within two to five
years.
The Group is continuing to review the recoverability of costs
incurred from third parties where we have a contractual right of
recourse. In the period GBP2.4m was recovered from third parties,
which has been recorded as an exceptional credit in the
consolidated income statement. See note 5 for income statement
disclosure.
Other provisions
Other provisions are dilapidation provisions on commercial
properties where the Group previously held the head lease. These
leases are now terminated and the provision represents forecast
costs to be incurred in bringing the buildings back to their
original condition.
15 FINANCIAL ASSETS AND LIABILITIES
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Financial assets GBPm GBPm GBPm
Sterling cash deposits 228.0 255.5 239.4
Trade receivables 28.7 41.2 32.7
Amounts due from joint ventures 56.6 53.4 54.5
Contract assets 46.3 56.4 53.6
Other receivables 4.0 7.8 7.9
--------- --------- -----------
Total cash equivalents and trade and
other receivables 363.6 414.3 388.1
Financial assets at fair value through
profit and loss 5.2 5.7 5.4
--------- --------- -----------
Total financial assets 368.8 420.0 393.5
--------- --------- -----------
Financial assets at fair value through profit and loss are held
at fair value and categorised as level three within the
hierarchical classification of IFRS 13 Revised. The carrying value
of cash and cash equivalents, trade and other receivables, amounts
due from joint ventures and contract assets is a reasonable
approximation of fair value which would be measured under a level 3
hierarchy.
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Financial liabilities GBPm GBPm GBPm
Revolving credit facility - 250.0 -
Senior loan notes 100.0 100.0 100.0
Other loans - 1.9 -
Land payables on contractual terms
carrying interest 65.0 72.0 101.9
Land payables on contractual terms
carrying no interest 113.5 151.9 103.8
Amounts due to joint ventures 0.1 0.1 0.1
Lease liabilities 5.7 8.2 7.0
Other trade payables 35.7 36.0 36.2
Other payables 9.2 9.7 8.6
Accruals 214.5 159.6 222.9
--------- --------- -----------
Total financial liabilities at amortised
cost 543.7 789.4 580.5
--------- --------- -----------
The carrying value of the Group's financial liabilities is a
reasonable approximation to their fair value.
16 NET DEBT AND LAND CREDITORS
As at As at As at
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Cash and cash equivalents 228.0 255.5 239.4
Non-current interest-bearing loans
and borrowings (97.6) (346.9) (97.2)
Current interest-bearing loans and - (1.9) -
borrowings
--------- --------- -----------
Net cash/(debt) 130.4 (93.3) 142.2
Land payables on contractual terms
carrying interest (65.0) (72.0) (101.9)
Land payables on contractual terms
carrying no interest (113.5) (151.9) (103.8)
--------- --------- -----------
Net debt and land creditors (48.1) (317.2) (63.5)
--------- --------- -----------
17 SHARE CAPITAL
Shares Nominal Share Share
issued value capital premium
account
number pence GBPm GBPm
As at 30 April 2021, 30 April 2020
and 31 October 2020 256,920,539 5 12.8 74.2
------------ -------- --------
18 RELATED PARTY TRANSACTIONS
Related parties are consistent with those disclosed in the
Group's Annual Integrated Report for the year ended 31 October
2020.
The Group had the following transactions with its joint ventures
in the period:
Half year Half year Full year
ended ended ended
30 April 30 April 31 October
2021 2020 2020
GBPm GBPm GBPm
Interest income on joint venture funding 1.4 1.1 2.7
Project management fees received 0.7 0.5 1.4
Amounts due from joint ventures, net
of expected credit losses 56.6 53.4 54.5
Amounts due to joint ventures 0.1 0.1 0.1
Funding to joint ventures (7.5) (13.3) (15.6)
Repayment of funding from joint ventures 5.9 9.0 10.1
19 CHANGE IN ACCOUNTING POLICY
Inventories
In previous financial statements options purchased in respect of
land were initially recognised as a prepayment within inventories
at cost and subject to annual impairment reviews, with provisions
made to reflect loss of value. When a land contract was
subsequently secured from an option subject to impairment, the
previously impaired costs were written back to the income statement
and capitalised within work-in-progress. Upon development of the
land, this capitalised cost is charged to cost of sales as housing
units are sold.
The Group has changed this policy to be more in line with common
industry practice and to provide more reliable and relevant
information, which it believes improves the understanding of the
performance of the business. Land options are now written down on a
straight-line basis over the life of the option, with no subsequent
write back to the consolidated income statement when a land
contract is secured. The updated policy is disclosed within note
1.
This change in policy will result in the derecognition of
GBP7.3m of land options previously written back to the income
statement, and create an associated deferred tax asset of GBP1.4m.
The previous income statement write backs did not occur in the
periods ended 31 October 2019, 30 April 2020 or 31 October 2020,
thus the consolidated income statement for these periods does not
require restatement. The impact on previously reported consolidated
statement of financial position is presented below.
As at As at As at
1 November 30 April 31 October
2019 2020 2020
GBPm GBPm GBPm
Deferred tax assets
As previously reported 6.4 5.8 8.4
Change in accounting policy 1.4 1.4 1.4
----------- --------- -----------
As reported 7.8 7.2 9.8
----------- --------- -----------
Inventories
As previously reported 1,151.1 1,168.3 1,025.0
Change in accounting policy (7.3) (7.3) (7.3)
----------- --------- -----------
As reported 1,143.8 1,161.0 1,017.7
----------- --------- -----------
Total assets
As previously reported 1,576.2 1,656.3 1,473.1
Change in accounting policy (5.9) (5.9) (5.9)
----------- --------- -----------
As reported 1,570.3 1,650.4 1,467.2
----------- --------- -----------
Net assets
As previously reported 853.9 808.0 831.2
Change in accounting policy (5.9) (5.9) (5.9)
----------- --------- -----------
As reported 848.0 802.1 825.3
----------- --------- -----------
Retained earnings
As previously reported 766.9 721.0 744.2
Change in accounting policy (5.9) (5.9) (5.9)
----------- --------- -----------
As reported 761.0 715.1 738.3
----------- --------- -----------
Total equity
As previously reported 853.9 808.0 831.2
Change in accounting policy (5.9) (5.9) (5.9)
----------- --------- -----------
As reported 848.0 802.1 825.3
----------- --------- -----------
20 ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
The Group uses a number of alternative performance measures
(APM) which are not defined within IFRS. The Directors use the
APMs, along with IFRS measures, to assess the operational
performance of the Group as detailed in the Strategic Report on
pages 1 to 65 of the Group's Annual Integrated Report for the year
ended 31 October 2020, and above. Definitions and reconciliations
of the financial APMs used compared to IFRS measures, are included
below:
Adjusted performance metrics
Adjusted performance metrics as shown below comprise statutory
metrics adjusted for the exceptional items as presented in note 5
of the consolidated financial statements. The exceptional items
have a material impact to reported performance and arise from
recent, unforeseen events. As such, the Directors consider these
adjusted performance metrics reflect a more accurate view of its
core operations and underlying business performance.
Exceptional
Half year ended 30 April 2021 Statutory items Adjusted
Gross profit GBPm 63.0 0.3 63.3
Gross profit margin % 19.4 0.1 19.5
Administrative expenses GBPm (23.1) - (23.1)
Administrative expenses/overhead
efficiency % 7.1 - 7.1
Net impairment losses on financial
assets GBPm (0.2) - (0.2)
Operating profit GBPm 39.7 0.3 40.0
Operating profit margin % 12.2 0.1 12.3
Net finance expense GBPm (4.3) (0.5) (4.8)
Profit/(loss) before tax GBPm 36.3 (0.2) 36.1
Income tax (expense)/credit GBPm (7.3) - (7.3)
Profit/(loss) after tax GBPm 29.0 (0.2) 28.8
Basic earnings/(loss) per share Pence 11.3 (0.1) 11.2
Diluted earnings/(loss) per share Pence 11.3 (0.1) 11.2
Exceptional
Half year ended 30 April 2020 Statutory items Adjusted
Gross (loss)/profit GBPm (7.3) 43.2 35.9
Gross (loss)/profit margin % (3.0) 18.0 15.0
Administrative expenses GBPm (29.3) 4.5 (24.8)
Administrative expenses/overhead
efficiency % 12.2 (1.9) 10.3
Net impairment losses on financial
assets GBPm (7.4) 7.4 -
Operating (loss)/profit GBPm (44.0) 55.1 11.1
Operating (loss)/profit margin % (18.3) 22.9 4.6
Net finance expense GBPm (6.1) 0.6 (5.5)
(Loss)/profit before tax GBPm (51.2) 55.7 4.5
Income tax credit/(expense) GBPm 10.7 (11.6) (0.9)
(Loss)/profit after tax GBPm (40.5) 44.1 3.6
Basic (loss)/earnings per share Pence (15.8) 17.2 1.4
Diluted (loss)/earnings per share Pence (15.8) 17.2 1.4
Exceptional
Full year ended 31 October 2020 Statutory items Adjusted
Gross profit GBPm 63.9 43.8 107.7
Gross profit margin % 9.4 6.5 15.9
Administrative expenses GBPm (57.8) 7.5 (50.3)
Administrative expenses/overhead
efficiency % 8.5 (1.1) 7.4
Net impairment losses on financial
assets GBPm (7.9) 7.6 (0.3)
Operating (loss)/profit GBPm (1.8) 58.9 57.1
Operating (loss)/profit margin % (0.3) 8.7 8.4
Net finance expense GBPm (11.2) 0.5 (10.7)
(Loss)/profit before tax GBPm (13.5) 59.4 45.9
Income tax credit/(expense) GBPm 2.8 (11.3) (8.5)
(Loss)/profit after tax GBPm (10.7) 48.1 37.4
Basic (loss)/earnings per share Pence (4.2) 18.8 14.6
Diluted (loss)/earnings per share Pence (4.2) 18.7 14.5
Gearing including land creditors
Gearing including land creditors is total net debt and land
creditors divided by equity shareholders' funds and total net debt
and land creditors.
Restated(1) Restated(1)
As at As at As at
30 April 30 April 31 October
2021 2020 2020
Total net debt and land creditors
(note 16) GBPm 48.1 317.2 63.5
--------- ------------ ------------
Equity shareholders' funds(1) GBPm 870.3 802.1 825.3
Total net debt and land creditors GBPm 48.1 317.2 63.5
GBPm 918.4 1,119.3 888.8
--------- ------------ ------------
Gearing including land creditors % 5.2 28.3 7.1
(1) Restated to reflect the change in accounting policy on land
options. See note 19.
21 CONTINGENT LIABILITIES
There are performance bonds and other engagements, including
those in respect of joint venture partners, undertaken in the
ordinary course of business. It is impractical to quantify the
financial effect of performance bonds and other arrangements. The
Directors consider the possibility of a cash outflow in settlement
of performance bonds and other arrangements to be remote.
In the ordinary course of business the Group enters into certain
land purchase contracts with vendors on a conditional exchange
basis. The conditions must be satisfied for the Group to recognise
the land asset and corresponding provisions within the consolidated
statement of financial position. No land payable in respect of
conditional land acquisitions has been recognised.
The Group provides for all known material legal actions, where
having taken appropriate legal advice as to the likelihood of
success of the actions, it is considered probable that an outflow
of economic resource will be required, and the amount can be
reliably measured. No contingent liability in respect of such
claims has been recognised.
In FY19, the Group created a combustible materials provision,
which was subsequently increased in FY20 and HY21. This provision
is subject to the Directors' estimates on costs and timing, and the
identification of further legacy developments where the Group may
have an obligation to remediate. The Group recognises that guidance
in this area continues to evolve over time and that assumptions may
require revising, resulting in a further cash outflow. The Group is
reviewing the recoverability of costs incurred from third parties
where we have a contractual right of recourse. No contingent assets
have been recognised.
22 EVENTS AFTER THE REPORTING PERIOD
On the 14 May 2021 the Group exchanged contracts for the sale of
our 50% equitable interest in Longcross Film Studios to our joint
venture partner on that development, Aviva. Completion is expected
in late summer 2021, and will result in a profit contribution in
excess of GBP10.0m in FY21, and approximately a GBP45.0m cash
inflow. This event has no impact on these condensed consolidated
financial statements as at 30 April 2021.
Crest Nicholson Holdings plc
Half Year Results for the six months ended 30 April 2021
Independent review report to Crest Nicholson Holdings plc
Report on the condensed consolidated half year financial
statements
Our conclusion
We have reviewed Crest Nicholson Holdings plc's condensed
consolidated interim financial statements (the "interim financial
statements") in the unaudited interim results of Crest Nicholson
Holdings plc for the 6 month period ended 30 April 2021 (the
"period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed Consolidated Statement of Financial Position as at 30 April 2021;
-- the Condensed Consolidated Income Statement and the Condensed
Consolidated Statement of Comprehensive Income for the period then
ended;
-- the Condensed Consolidated Cash Flow Statement for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the unaudited
interim results of Crest Nicholson Holdings plc have been prepared
in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The unaudited interim results, including the interim financial
statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the
unaudited interim results in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the unaudited interim results based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the unaudited
interim results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
24 June 2021
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