Crest Nicholson Regulatory News (CRST)

28th January 2014

Crest Nicholson Holdings plc

Preliminary Results Announcement

for the year ended 31st October 2013

Strong growth and good returns

Crest Nicholson Holdings plc (Crest Nicholson) today announces its final results for the year ended 31st October 2013.

Commenting on today's statement, Stephen Stone, Chief Executive said:

"These are an excellent set of results, which cap an exciting year for Crest Nicholson, in which the business returned to the public markets. Our extensive land bank has enabled us to deliver strong growth in volumes, bringing many more families into home ownership, whilst continuing to drive good returns for our investors. We are pleased to mark our return as a listed company by declaring a final dividend.

Government initiatives to assist purchasers in buying a new home have undoubtedly stimulated activity in the industry and we are playing our part by increasing production where possible. Private home completions were up 35% over the year and we took almost 600 reservations under the 'Help to Buy' scheme. Improving sentiment in the housing market and beyond along with an excellent pipeline of future projects across the southern half of England gives the Board great confidence in the outlook for the business."

Performance highlights - all figures pre-exceptional

Sales

· Housing legal completions up 15% at 2,172 (2012:1,882); open-market legal completions up 35% at 1,806 (2012: 1,342)

· Sales per outlet week up 34% at 0.90 (2012: 0.67)

· Forward sales at mid-January of £329.5m (2012: £218.7m), 51% ahead of prior year with 51% of this year's forecast secured (2012: 45%)

Results

· Turnover at £525.7m, up 29%

· Operating profit margins up to 18.5% (2012: 18.0%)

· Profit before tax up 40%

· Strong balance sheet position; net cash at year end of £42.5m (2012: net debt £30.3m)

· Return on average Capital Employed of 24.1% (2012: 20.7%)

Land bank

· 1,895 plots added to the short-term land bank, across 19 sites; Short-term land bank now 7.5 years

· Continued focus on strategic land, with net 1,700 plots added to the Strategic land bank across 10 sites

· Over 3,000 plots allocated for development in local plans

For further information, please contact:

There will be a presentation to analysts today at 9.00am at RLM Finsbury, 9th Floor, Tenter House, 45 Moorfields, London, EC2Y 9AEhosted by Stephen Stone, Chief Executive, and Patrick Bergin, Finance Director.

An audio playback facility will be available at http://www.crestnicholson.com/investor-relations or by downloading the Crest Nicholson app following the presentation.

A full calendar of financial announcements for the forthcoming period is available via the Company's Investor Relations website at http://www.crestnicholson.com/investor-relations

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 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.

CHAIRMAN'S STATEMENT

I am delighted to be presenting the Preliminary Results for Crest Nicholson Holdings plc at the end of what has been an excellent year for the business and all its stakeholders.

In 2013, the Group celebrated 50 years of trading, almost 40 of which have been on the public markets. In February of last year, after a period in private ownership, Crest Nicholson was once more admitted to trading on the London Stock Exchange following a successful Initial Public Offering.

RESULTS

Business performance in 2013 has been very strong, with 2,172 homes delivered, a 15% increase on the prior year. The financial performance of the business has been similarly impressive, with strong operating margins delivered from projects across the southern half of the UK. The Board intends to propose a final dividend of 6.5p per share which we expect to use as the base for future dividend payments.

STRATEGY

During 2013 we have delivered on our strategic objectives of increasing volumes, driving return on capital employed and maintaining industry-leading margins. It is central to our business mission to deliver well-designed homes within developments that have been conceived to provide not only a high-quality product for our customers, but which also respect our environment and provide an enduring legacy. As we reflect on 50 years of serving the past and present needs of our customers, the Board has also to reflect on how the business model will need to evolve in the future. In our Annual Report, we propose to set out our thoughts in this regard and will describe a number of steps that we are taking to evaluate our competitive position in the market and to address some of the opportunities and challenges that we believe the future will hold.

In making these assessments, we will consider the environmental, economic and social factors that are shaping our society and how we can drive best value in a sustainable way, working within the limits that these influences may exert on our business. This theme of sustainability is integral to many of our considerations and you will see that we have reflected this in our reporting, no longer presenting a separate sustainability section but rather embedding the themes as appropriate.

An enduring business is invariably built on the efforts of a committed workforce and Crest Nicholson is continuing to focus on developing its people. Our apprenticeship and graduate schemes have been strengthened and extended and we are increasing our investment in training, to retain and develop potential directors of the future. I thank all Crest Nicholson's employees for their dedication and support.

BOARD

As part of the Group's development, I am pleased to report an addition to the Board with the appointment of Jim Pettigrew as a Senior Independent Non-Executive Director and chair of the Nomination and Remuneration committees.

I am grateful to the Board for its support over the past year and am confident that we have a team that will continue to be effective in promoting the success of Crest Nicholson for many years to come.

OUTLOOK

We have made a strong start to the 2014 financial year, following what was an excellent 2013 for Crest Nicholson. Our forward sales for current and future years at mid-January were 51% ahead of the prior year, with 51% of this year's forecast secured (2012: 45%).

Average selling prices will show further increases this year, driven significantly by product mix, although sales price gains are also being achieved and are helping to sustain margins in a competitive build cost environment.

The land market continues to yield opportunities and the long land bank that the business enjoys positions us well to select sites for purchase that meet our hurdle rates.

As consumer sentiment and credit availability have improved, constraints on growth are increasingly determined by the supply chain, the shelf-life of mortgage offers and the planning process. Nonetheless, the trading environment is healthy and we look forward to continuing to deliver in 2014.

William RuckerChairman

CHIEF EXECUTIVE'S REVIEW

Crest Nicholson's return to the stock market as a FTSE 250 listed company was a highlight of a very good 2013.

STRONG FINANCIAL PERFORMANCE

The Group is well positioned to take advantage of opportunities presented by strong demand for new housing. Delivering 2,172 units this year (2012: 1,882), Crest Nicholson is one of just nine major house builders.

The Group has performed very well in an improving market. Sales rates across the year have averaged 0.90 sales per outlet week (2012: 0.67), a 34% improvement on the prior year. This improvement was particularly marked in the second half of the year, following the introduction of the government's Help to Buy scheme, and has driven some of the increase in volumes for 2013. The stimulus from government schemes has served to reduce mortgage pricing and increase loan availability, creating the consumer confidence which has then supported the delivery of more new homes to meet pent-up housing demand.

Good reservation rates in the second half of the year have underpinned a strong opening forward sales position for 2014.

Revenues were 29% higher than last year, primarily reflecting the strong housing market. As expected, open-market Average Selling Prices (ASPs) were up 9% at £250k (2012: £230k), reflecting the mix of product being sold as well as increases in sales prices.

Resilient gross margins at 26.9% (2012: 27.4%) and a reducing overhead cost as a percentage of sale have resulted in operating profit margins (pre-exceptional costs) increasing to 18.5% (2012: 18.0%). These results, combined with effective cash management, generated a strong Return on average Capital Employed at 24.1% (2012: 20.7%).

DELIVERING THROUGH PARTNERSHIP

Effective partnering with the public and private sector has been key to increasing our delivery of desirable homes and communities. Over this period, we have continued to respond positively to major changes in the operating environment including the localism agenda, revisions to planning policy and a rapidly evolving market, and have been able to find ways forward with our partners to bring projects to life that had been stalled by the economic downturn.

Our distinctive approach to master planning and sustainable development has made us a lead partner for the public sector in several major brownfield projects:

Arborfield Garrison - This year we were announced as Development Manager by the Defence Infrastructure Organisation (formerly Defence Estates) for the transformation of the site into a thriving new community. This is one of the most significant residential-led development opportunities in the South East of England. With an estimated Gross Development Value of £600m, the project will deliver 2,000 much-needed homes and supporting infrastructure.

Centenary Quay -In partnership with the HCA and Southampton City Council, Centenary Quay became the first site to secure funding under the Government's Build to Rent scheme to deliver homes for the private rented sector. We are also partnering with University College London on a two-year post-construction and post-occupancy study (supported by the UK Government backed Technology Strategy Board)to understand the efficiency of the district heating system and gather customer feedback on comfort, control and design.

While commercial and mixed use development has not enjoyed the same levels of market activity as housing, Crest Nicholson's credentials and our commercial project management skills equip us to maintain and extend our presence in this segment.

For example, Longcross is a 300 acre site near Chobham sensitively set in an ecologically rich landscape. Acquired in conjunction with Aviva, it is intended to be one of our future backbone sites. If consented, the site will provide 1,500 well designed homes and a new business park, and offers the Group the opportunity to drive significant business value.

Industry-wide, housing starts in England have been on the rise and at the end of the third quarter 2013 had reached 117,120, 15.6% above the same period in 2012.This has resulted in a number of material supply challenges including extended deliveries in blocks and bricks and some cost pressures as the volume of work increases. Material supply challenges should correct as the supply chain gains confidence and gears up production. In addition, we foster a partnership approach and engagement with consultants and suppliers at early project stages, helping us to identify and address supply issues in a mutually beneficial way.

CUSTOMERS AT THE HEART OF OUR BUSINESS

This year, we helped 571 purchasers to acquire their new home with the help of Government-backed incentive schemes.

Our goal is to grow understanding of our customers' evolving needs and ensure that during the home-buying process and beyond, they are fully supported. Having held a five-star rating for three years, we were disappointed to be awarded four stars in the HBF/NHBC Customer Satisfaction Survey.

We took immediate measures to address this at the start of the year, including addressing some weaker areas of production performance in one of our divisions and intensifying our efforts on quality of finish. As a result we have already observed improving performance in customer feedback.

WORKING IN OUR COMMUNITIES

We aim to be a positive presence in the local communities where we operate. This begins with planning and design, where we work to build consensus through genuine, open engagement and consultation. During construction, we aim for very high standards of environmental protection and cleanliness, with minimal disruption to local residents. This is reflected in our Considerate Contractors Scheme (CCS) score of 37/50, recognised by CCS as 'Very Good' and above the industry average.

Wherever we operate we want to add value to communities and develop ongoing relationships. We regularly engage with local schools and groups - welcoming visits to our sites or going into classrooms to share information and safety advice. We also support community projects with fundraising and sponsorship and are proud to have become sponsors of London Irish Rugby Club and we continue to work closely with the Club on the redevelopment of their training ground in Sunbury on Thames.

We remain committed to raising funds for Variety, the Children's Charity, and have raised a total of £460,652 to date including £53,233 in 2013.

To mark our 50th anniversary year, we partnered with international charity Habitat for Humanity, setting ourselves a target to raise sufficient funding to build 50 new homes for people in need throughout the world. We beat the target, raising a total of £124,457- enabling almost 100 new homes to be provided. In celebration of this work the Group sponsored 12 employees from across the business, including three apprentices and two graduates, to travel to Malawi to work on one of the building projects.

DEVELOPING AND SUPPORTING OUR PEOPLE

We are proud of the talent, commitment and energy of our employees, and in turn we ensure transparency, openness and investment in skills, with a commitment to engaging our people in the vision and direction of the Group.

Our apprentice and graduate programmes are very well established, offering routes into the industry for individuals with vocational as well as more academic qualifications. These programmes are important for Crest Nicholson's future as well as helping to replenish skills that the sector has, in part, lost over the past few years. We took on many more young recruits this year; graduates and apprentices now represent almost 11% of our workforce.

We aim to be an employer of choice in order to attract, retain and develop the right people, which is essential to maintaining the high quality delivery of sustainable homes and developments which ultimately contributes to our financial success.

We have always invested in our people, even through difficult times, and the time is right to take this to the next level in order to identify and develop the next generation of leaders from amongst our existing employees.

We are committed to upholding human rights in all our activities. Our business operates wholly within the UK, and sources goods and services within the UK. We openly support the International Labour Organisation Conventions and do so through our human resource practices and policies and via our contractual arrangements, through which we encourage supply chain standards of our subcontractors and suppliers to meet the Conventions.

KEEPING OUR PEOPLE SAFE

Health and safety is of paramount importance to us and as Director with overall responsibility, I can report that we held our Annual Injury Incidence Rate steady, and again outperformed our peer group and the construction sector as a whole in this headline indicator. There were no prosecutions, fines or improvement notices issued in the year. One enforcement action relating to a work at height contravention was speedily resolved using our response procedures.

The Board has further strengthened its proactive approach to risk management by appointing a further specialist to the Group health and safety function and by integrating site environmental risk management into this multi-disciplinary team. We have also reviewed our escalation procedures to ensure appropriate Director-level response and oversight of serious incidents.

EMBEDDING SUSTAINABILITY

Sustainability is core to the Group's strategy and we endeavour to balance the three dimensions - social, environmental and financial - in our decision making process at strategic, operational and project level.

Engaging with local people is integral to this process. We engage genuinely and openly in order to understand local people's priorities and how new development can support these - for example through the provision of community buildings and green infrastructure at our Bolnore Village development in Haywards Heath. Embedding sustainability also means operating within environmental limits, and we have continued to focus efforts on efficient use of resources and reducing our climate-related impacts.

One of the most significant sustainability impacts we can make as a business is through our product. This year we increased the number of homes built to higher levels of the Code for Sustainable Homes with 49% built to Code levels 3 and 4. The number of homes we built to Code level 4 increased from 15% in 2012 to 26%, demonstrating our progression to increasingly higher sustainability standards.

In the Next Generation sustainability benchmark, we were pleased to maintain our consistent top performance, holding2nd position for the 6th consecutive year and increasing our score to 87%.

Driving value through low carbon design and innovation

Strong demand for our homes, evident in our excellent sales performance, is a result of high quality master-planning and design, seen in developments such as Oakgrove Village in Milton Keynes where we are delivering a completely new housing led mixed-use development of 1,100 new homes and 5,000m2 of commercial and community buildings, in partnership with the HCA.

Another landmark this year was seeing homeowners move into our five AIMC4 homes, which we have delivered through our participation in the AIMC4 consortium - a unique research project supported by the UK Government's Technology Strategy Board.

Following the stretching technical and construction achievements to realise Code 4 energy performance through fabric-first solutions, the AIMC4 homes now face the real test of occupier monitoring and feedback over 12 months. The knowledge gained will underpin our ambition to ensure that our customers gain the full benefits of living in sustainable, low carbon homes that support a flexible modern lifestyle.

Operating within environmental limits

In 2007 we set a target to reduce our operational carbon footprint (emissions associated with offices, business travel and commuting) by 25% by 2020. Against the 2007 baseline we have achieved a 16% reduction.

This year we have greatly increased the scope and robustness of our data, which for the first time includes all emissions associated with site activity. In summary, our Scope 1 and Scope 2 emissions represent 2.65 tonnes of carbon equivalent per 1,000 square feet of delivery.

Next year we will review our targets and reset the baseline year taking into account the full scope of our activities. Our carbon reduction strategy will continue to focus on energy efficiency, travel and customer and employee engagement.

Resource efficiency remains a key priority. Through the Crest Nicholson Waste Panel which we convened with external experts, suppliers, colleagues, which is independently chaired by the National Industrial Symbiosis Programme (NISP), we have continued to work with our supply chain and are making good progress to reduce packaging and other waste on our sites. We can now more accurately measure site level performance, and have developed incentivised contracts and revised processes to cut waste, deliver cost efficiencies and benefit the environment.

BUILDING A SUSTAINABLE FUTURE

Our business is strongly positioned, with a long land bank and an ability to drive significant volume from a broad range of sales outlets across the south of England. Rates of sale have improved since the end of 2012and we expect the currently strong trading environment to persist throughout 2014.

We will continue to innovate and exploit opportunities to drive shareholder value and increase delivery in line with government policy. This will include significant efforts, already underway in 2013, to secure growth through the private rental sector under the Government's Build to Rent scheme. We are also actively looking at opening up another division within our current areas of operation, to help deliver growth in unit volumes in the medium term.

As the business grows and opens new sales outlets, these will continue to include a proportion of larger 'backbone' sites, providing a long term supply of future, emerging and mature developments where our design, sustainability and master-planning credentials come to the fore and provide a competitive advantage.

Underpinning this, our increased focus on developing the skillbase across the entire workforce will ensure Crest Nicholson continues to nurture the aptitudes required to differentiate itself in the market. Notwithstanding the achievements and progress outlined in this review, as a successful business we cannot afford to stand still. Our experienced management team has spent some time reflecting on the strengths that the business enjoys today and how we may need to adapt to sustain a robust position in the future.

Our success has been built on core principles of design and innovation, customer focus and sustainability. Many aspects of our current competitive positioning will continue to be a source of value for our stakeholders. In addition, our ability to identify and respond to emerging trends and needs lays the groundwork for a sustainable future.

Today, though, we can look back with pride on an extremely good year in the Group's history, with the business very well placed and confident of its direction. Our employees have once again been instrumental in this success and I thank them wholeheartedly for their hard work and professional contribution.

Stephen StoneChief Executive

FINANCE DIRECTOR'S REVIEW 

TRADING PERFORMANCE

Crest Nicholson's financial performance in 2013 has been very strong, reflecting the improved growth trajectory of the Group.

Overall revenues of £525.7m were 29% ahead of the £408.0m achieved in 2012.

Housing revenues of £491.2m (2012: £372.2m) were 32% up on prior year, whilst unit completions of 2,172 (2012: 1,882) were up by 15%. Higher average selling prices contributed significantly to revenue growth, reflective of the change in product and location mix, including the first unit contributions from our new London-centric division.

Revenues from Commercial and Land Sales combined amounted to £34.5m (2012: £35.9m), continuing to provide a useful contribution to overall business performance. Within the Commercial sphere, a new food store was delivered on our Oakgrove site and let to Waitrose, providing a valuable amenity for the emerging community.

Gross margins held fairly steady at 26.9% (2012: 27.4%), assisted by robust pricing in our core areas of operation, whilst the increase in business scale drove a reduction in administrative expenses as a percentage of sales, from 9.5% in 2012 to 8.4% in 2013, before exceptional costs.

Exceptional costs of £5.9m in connection with the IPO of the Group in February 2013 have been charged to administrative expenses, reflecting legal, accounting and advisory costs of the IPO of £3.5m, and a share-based payment charge of £2.4m which crystallised upon listing.

The combination of gross margin resilience and the reduction in overhead cost as a proportion of turnover as the business grows resulted in a strong improvement in pre-exceptional operating margin for 2013, to 18.5% (2012: 18.0%).

FINANCE EXPENSE AND TAXATION

Net financing expense is slightly higher at £10.3m in the year (2012: £9.4m), with changes in the imputed interest on other financial assets and on deferred land payable the principal drivers. The cost of servicing bank loans and overdrafts reduced from £10.4m in 2012, to £8.3m in 2013, reflecting the debt re-financing that was entered into in December 2012 and the additional equity raised by the Group as part of the IPO.

Income tax expense in the year of £15.3m (2012: £1.8m income) primarily reflected deferred tax arising from the reversal of temporary differences in the year, with additional changes in deferred tax due to reductions in the rate of Corporation Tax. The effective tax rate for the year was lower than the standard rate of UK Corporation Tax, primarily due to the recognition of previously unrecognised temporary differences.

In 2012 the Group had a net tax credit, arising from the recognition of deferred tax assets in respect of previously unrecognised temporary differences.

EARNINGS PER SHARE

The change in taxation, from a net credit in 2012 to an expense in 2013, means that a 40% increase in pre-exceptional profit before tax translates to a more modest increase in Earnings per Share (EPS). Basic EPS on a pre-exceptional basis of 29.4p is 3.2% higher than the 28.5p comparative for 2012. Full details are shown in Note 9 to the financial statements.

DIVIDEND

The Board proposes to pay a final dividend of 6.5p per share for the financial year ended 31st October 2013, which subject to shareholder approval, will be paid on 9th April to shareholders on the register at the close of business on 14th March.

CASH FLOW AND FINANCIAL POSITION

The Group had Net Assets at 31st October 2013 of £470.3m, (2012: £347.1m), an increase of £123.2m.

The increase comprised £66.0m of retained earnings, £3.3m net movement in equity plus the benefit of the £53.9m of equity raised at IPO.

Strong cash generation from housing completions has enabled the Group to continue to invest in growing our operational footprint, in line with our business strategy.

The investment that the business has made in land and work-in-progress is reflected in a £108.3m rise in inventories. Infrastructure expenditure has increased, as a number of recently converted strategic sites are brought into production, whereas stocks of completed units have reduced, being £32.4m at 31st October 2013 (2012: £41.0m), reflective of faster sales rates in the second half of this year.

The Group continues to focus on Return on average Capital Employed (ROCE) as a key business metric and our strong operating profit performance combined with ongoing capital efficiency have generated an increase in ROCE from 20.7% in 2012 to 24.1% in 2013.

FINANCING

During the year, the Group successfully re-financed certain of its loan obligations and raised additional equity capital through its IPO in February. Term loans of £152.0m with a maturity date of September 2015 were repaid in full. These loans were partially replaced with a borrowings facility of £100m, raised under a Revolving Credit Facility with an expiry date of December 2016.

As part of the February IPO, additional equity capital of £53.9m (net of issue costs) was raised, further strengthening the equity base of the business.

At 31st October 2013, the Group had net cash of £42.5m (2012: net debt of £30.3m).

The ungeared (net cash) position at 31st October 2013 compares with a net debt/equity ratio of 8.7% at 31st October 2012.

LAND BANK

The Group's contracted land bank is summarised in terms of units and gross development value (GDV) as follows:

Plots in the short term land bank have declined marginally, as the Group has continued to adopt a policy of broadly replacing the units that are sold in the year. At 31st October 2013, the short term land bank of 16,388 plots represents 7.5 years of supply (2012: 9.0 years).

The GDV of the short term land bank has increased by 6.6%, with higher ASPs in the portfolio offsetting the decrease in unit numbers. These ASPs (including both open-market and affordable units) were £237k at 31st October 2013, up 10% on £215k at the end of October 2012.

The strategic land bank has been bolstered by three significant additions in the year, at Chippenham, Warwick and Arborfield, near Reading, as well as a number of smaller sites under option.

Planning consents were achieved during the year on two smaller sites, furthering a now established record of pull-through from strategic land bank into the short-term portfolio.

ASPs in the strategic land bank have risen to £247k, a 7% increase on the £231k reported for October 2012.

Patrick Bergin

Finance Director

CREST NICHOLSON HOLDINGS PLC

Consolidated Income Statement

For year ended 31st October 2013

CREST NICHOLSON HOLDINGS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For year ended 31st October 2013

The "Notes to the Consolidated Financial Statements" below form part of these financial statements.

CREST NICHOLSON HOLDINGS PLC

Consolidated Statement of Changes in Equity

For year ended 31st October 2013

The "Notes to the Consolidated Financial Statements" below form part of these financial statements.

CREST NICHOLSON HOLDINGS PLC

Consolidated Statement of Financial Position

As at 31st October 2013

The "Notes to the Consolidated Financial Statements" below form part of these financial statements.

CREST NICHOLSON HOLDINGS PLC

Consolidated Cash Flow STATEMENT

For year ended 31st October 2013

The "Notes to the Consolidated Financial Statements" below form part of these financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Preliminary announcement

The financial information contained in this preliminary announcement which was approved by the Board of Directors does not constitute the Company's statutory accounts for the years ended 31st October 2013 or 2012. Statutory accounts for 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; their reports were (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 498(2) or (3) Companies Act 2006.

Basis of preparation

Crest Nicholson Holdings plc (the "Company") is a Company incorporated in the UK. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group") and include the Group's interest in jointly controlled entities. The parent Company financial statements present information about the Company as a separate entity and not about its Group.

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("EU IFRSs") and have been prepared on the historical cost basis except for other financial assets, which are stated at their fair value. The Company has elected to prepare its parent Company financial statements in accordance with UK GAAP; these are presented in the section "Company Statement of Financial Position" towards the end of this document.

The preparation of financial statements in conformity with IFRS requires management to make assumptions and judgements that affect the application of policies and reported amounts within the financial statements. Assumptions and judgements are based on experience and other factors that management consider reasonable under the circumstances. Actual results may differ from these estimates.

The Group's activities are financed by a combination of ordinary shares, bank borrowings and cash in hand. At 31st October 2013 the Group held cash and cash equivalents of £124.5m (2012: £150.1m) and cash resources net of borrowings of £42.5m (2012: cash deficit net of borrowings of £30.3m). The Group has operated within its banking covenants throughout the year, has bank facilities of £100m expiring in December 2016, with £55m remaining available for drawdown under such facilities at 31st October 2013. The Directors consider that the Group is well placed to manage business and financial risks in the current economic environment and has sufficient resources to continue in operation for the foreseeable future. For these reasons, the Directors consider it appropriate to prepare the financial statements of the Group on a going concern basis.

Judgements made by the Directors, in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

The accounting policies set out below have, unless otherwise stated, have been applied consistently to all periods presented in these Group financial statements.

There were no new standards, amendments or interpretations that were adopted by the Group and effective for the first time for the financial year beginning 1st November 2012 that were material to the Group.

Consolidation

(a) Subsidiaries

The consolidated financial statements include the accounts of Crest Nicholson Holdings plc and entities controlled by the Company (its subsidiaries) at the reporting date. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The profits and losses of subsidiaries acquired or sold during the year are included as from or up to their effective date of acquisition or disposal.

On acquisition of a subsidiary, all of the subsidiary's separable, identifiable assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. All changes to those assets and liabilities and the resulting gains and losses that arise after the Group has gained control of the subsidiary are charged to the post acquisition income statement or statement of comprehensive income.

(b) Joint ventures

A joint venture is an undertaking in which the Group has a participating interest and which is jointly controlled under a contractual arrangement.

Where the joint venture involves the establishment of a separate legal entity, the Group's share of results of the joint venture after tax is included in a single line in the consolidated income statement and its share of net assets is shown in the consolidated statement of financial position as an investment.

Where the joint venture does not involve the establishment of a legal entity, the Group recognises its share of the jointly controlled assets and liabilities and income and expenditure on a line by line basis in the statement of financial position and income statement.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of the acquired entity at the date of the acquisition. Goodwill arising on acquisition of subsidiaries and businesses is capitalised as an asset. Goodwill allocated to the strategic land holdings is recognised as an asset, being the intrinsic value within these holdings in the acquired entities, which is realised upon satisfactory planning permission being obtained and sale of the land. Goodwill is assessed for impairment at each reporting date. Any impairment loss is recognised immediately in the income statement.

Revenue and profit recognition

Revenue comprises the fair value of the consideration received or receivable, net of value-added tax, rebates and discounts but excludes the sale of properties taken in part exchange.

Revenue is recognised on house sales at legal completion. For affordable housing sales in bulk, revenue is recognised upon practical completion and when substantially all risks and rewards of ownership are transferred to the buyer.

Revenue is recognised on land sales and commercial property sales from the point of unconditional exchange of contracts. Where the conditions for the recognition of revenue are met but the Group still has significant acts to perform under the terms of the contract, revenue is recognised as the acts are performed.

Profit is recognised on a plot-by-plot basis, by reference to the margin forecast across the related development site.

Provision is made for any losses foreseen in completing a site as soon as they become apparent.

Seasonality

In common with the rest of the UK house building 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.

Operating leases

Operating lease rentals are charged to the income statement on a straight line basis over the period of the lease.

Taxation

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income.

Current tax is the expected tax payable on taxable profit for the period and any adjustment to tax payable in respect of previous periods. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences, except those exempted by the relevant accounting standard and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Dividends

Dividends are recorded in the Group's financial statements in the period in which they are approved by the shareholders. Interim dividends are recognised when paid.

Employee benefits

(a) Pensions

The Group operates a defined benefit pension scheme (closed to new employees and to future service accrual since May 2010) and also makes payments into a defined contribution scheme for employees.

In respect of defined benefit schemes, the net obligation is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, such benefits measured at discounted present value, less the fair value of the scheme assets. The rate used to discount the benefits accrued is the yield at the statement of financial position date on AA credit rated bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit method. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the lives of employees and financing costs are recognised in the periods in which they arise. The Group recognises expected scheme gains and losses via the income statement and actuarial gains and losses are recognised in the period they occur directly in other comprehensive income.

Payments to the defined contribution schemes are accounted for on an accruals basis.

(b) Share-based payments

In accordance with IFRS 2 'Share-based payments', the fair value of equity-settled, share based compensation plans is recognised as an employee expense with a corresponding increase in equity. The fair value is measured as at the date the options are granted and the charge amended if vesting does not take place due to non-market conditions not being met. The fair value is spread over the period during which the employees become unconditionally entitled to the shares and is adjusted to reflect the actual number of options that vest. At the statement of financial position date, if it is expected that non-market conditions will not be satisfied, the cumulative expense recognised in relation to the relevant options is reversed. The proceeds received are credited to share capital (nominal value) and share premium when the options are exercised.

Exceptional items

Exceptional items are those significant items that are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance.

Property, plant and equipment

Property, plant and equipment are initially recognised at cost.

Plant and equipment are depreciated on cost less residual value on a straight line basis at rates varying between 10% and 33% determined by the expected life of the assets.

Freehold land is not depreciated.

Inventories

Inventories are stated at the lower of cost and net realisable value. Land includes land under development, undeveloped land and land option payments. Work in progress comprises direct materials, labour costs, site overheads, associated professional fees and other attributable overheads.

Land options purchased are initially stated at cost. Option costs are written off over the remaining life of the option and also subject to impairment reviews. Impairment reviews are performed on a regular basis and provisions made where considered necessary.

Land inventories and the associated land payables are recognised in the statement of financial position from the date of unconditional exchange of contracts. Where land is purchased on deferred settlement terms then the land and the land payable are discounted to their fair value. The land payable is then increased to the settlement value over the period of financing, with the financing element being charged as interest expense through the income statement.

Trade and other receivables

Trade and other receivables are stated at their fair value at the date of recognition and subsequently at amortised cost less impairment.

Other financial assets

Other financial assets (which comprise shared equity receivables) are classified as being available for sale and initially recognised at fair value. Changes in fair value relating to the expected recoverable amount are recognised in the income statement; changes in fair value arising from a change of discount factor are recognised in other comprehensive income and accumulated in equity, until the asset is divested. On disposal of these assets, the difference between the carrying value and the consideration received plus cumulative fair value movements previously recognised in equity is recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents are cash balances in hand and in the bank. For the purpose of the cash flow statement, bank overdrafts are considered part of cash and cash equivalents as they form an integral part of the Group's cash management.

Interest bearing loans and borrowings

Borrowings are recognised initially at fair value, net of direct transaction costs. Finance charges are accounted for on an accruals basis in the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise or included within interest accruals.

Trade and other payables

Trade payables are generally not interest bearing and are stated at their nominal amount which is considered to be their fair value. Trade payables on deferred terms are initially recorded at their fair value, with the discount to nominal value being charged to the income statement as interest over the duration of the deferred payment.

Provisions

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount can be reliably estimated.

Accounting estimates and judgements

Management considers the key estimates and judgements made in the financial statements to be related to:

Carrying value of land and work in progress and profit recognition

Inventories of land, work in progress and completed units are stated in the statement of financial position at the lower of cost and net realisable value. Due to the nature of development activity and in particular, the length of the development cycle, the Group has to allocate site-wide development costs such as infrastructure between units being built and/or completed in the current year and those for future years. It also has to make estimates of the cost to complete such developments. These estimates are reflected in the margin recognised on developments in relation to sales recognised in the current and future years and the carrying value of the land and work in progress.

There is a degree of inherent uncertainty in making such estimates. The Group has established internal controls that are designed to ensure an effective assessment is made of inventory carrying values and the costs to complete developments.

Other financial assets

The fair value of future anticipated cash receipts takes into account the Directors' view of an appropriate discount rate, future house price movements, receipt timings and default rates. Directors review the assumptions at each period end.

Goodwill

The carrying value of goodwill is substantially dependent on the ability of the Group to successfully progress its strategic land holdings. Changes to the planning regime could undermine current assumptions about the sites which are expected to be successfully developed.

Pension liabilities

Management has employed the services of an actuary in setting these estimates, however, they recognise the risk that both expected investment returns and ultimate scheme payments may differ substantially from current forecasts.

Deferred tax

Management assess whether there will be sufficient future profits to utilise deferred tax assets recognised at the statement of financial position date.

Share-based payments

Assumptions are made in determining the fair value of employee services received in exchange for the grant of options under share-based payments awards at the date of grant, and of the likely outcome of non-market conditions.

Standards and interpretations in issue but not yet effective

The below standards and amendments have not been applied in these financial statements:

· Amendment to IAS 19 Employee Benefits. The assumed actuarial return on assets will be restricted to the pension scheme discount rate which will increase the reported net finance costs of the scheme. The impact of the new standard on the reported profit before tax for the year ended 31st October 2013 would be a reduction of £0.4m. Effective for the period beginning on 1st November 2013.

· IFRS 10 Consolidated Financial Statements. The standard provides a single control model for the inclusion of entities in consolidated financial statements. Effective for the period beginning on 1st November 2014.

· IFRS 11 Joint Arrangements. The standard requires the equity method to be used when consolidating jointly controlled entities, and does not permit the use of the proportional method. Effective for the period beginning on 1st November 2014.

· IFRS 12 Disclosure of Interests in Other Entities. The standard requires additional disclosure in relation to subsidiaries, joint arrangements, associates and unconsolidated entities. Effective for the period beginning on 1st November 2014.

· IFRS 13 Fair Value Measurement. The standard defines fair value and provides a single IFRS framework for measuring fair value. Effective for the period beginning on 1st November 2013.

The above standards and the amendments will be adopted in the financial statements in the year they become effective and their adoption is not expected to have a significant effect on the Group's financial statements.

No segmental information has been presented as the Directors consider that, as the Group's main operation is that of a house builder and it operates entirely within the UK, there are no separate segments either business or geographic to disclose having taken into account the aggregation criteria provisions of IFRS 8.

Exceptional costs of £5.9m in connection with the IPO in February have been charged as administrative expenses in the year. These costs reflect legal, accounting and advisory costs of the IPO of £3.5m, and a share-based payment charge of £2.4m which crystallised upon listing.

Amounts paid to the Company's Auditor in respect of services to the Company, other than the audit of the Company's financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

The Directors consider all employees of the Group to be employed within the same category of Development.

Key management comprises the Executive Management Team, which includes the Executive Directors of the Board as they are considered to have the authority and responsibility for planning, directing and controlling the activities of the Group. Key management remuneration, including Directors, comprised:

Information relating to Directors remuneration, incentive plans, share options and pension entitlement appears in the Directors Remuneration Report. Directors remuneration comprised:

During the year, the Group's forecast interest payments and receipts profile was reviewed, and previously irrecoverable non-trade deficits were re-assessed as recoverable.

The total tax charge for the year is lower (2012: tax income, lower) than the standard rate of UK corporation tax of 23.42% (2012: 24.83%). The differences are explained below:

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 20th March 2014, and in accordance with IAS 10 'Events after the Reporting Period', has not been included as a liability in these financial statements.

Basic earnings per share is calculated by dividing profit attributable to equity shareholders by the weighted average number of Ordinary shares in issue during the year. For diluted earnings per share, the weighted average number of shares is adjusted to assume the conversion of all potentially dilutive ordinary shares. The 2012 weighted average number of shares is the number before the issue of new share capital during the year.

The number of shares for the years ended 31st October 2012 and 2013 above take account of the share reorganisation that happened in February 2013.

Goodwill arose on the acquisition of Castle Bidco Limited on 24th March 2009. Goodwill is allocated to acquired strategic land holdings and is tested annually for impairment. The recoverable amounts are determined by assessing value in use, being the present value of the forecast cash flows from the expected development and sale of properties on the strategic land. The forecast looks at the likelihood and scale of permitted development, forecast build costs and forecast selling prices, using a discount rate of 9.05% (2012: 8.89%), covering a period of 22 years from 2009 (being the minimum period that management expects to benefit from the acquired strategic land holdings) and based on current market conditions.

The Group's share of joint ventures net assets, income and expense is made up as follows: