Crest Nicholson Regulatory News (CRST)

Crest Nicholson Holdings plc

Half year Results 2014

Crest Nicholson Holdings plc (Crest Nicholson) today announces its half-year results for the six months ended 30 April 2014.

Strong volume and earnings growth

Performance Highlights - all figures pre-exceptional

· Housing legal completions up 35% at 1,091 (2013: 810).

· Sales per outlet week up 8% at 0.83 (2013: 0.77).

· Housing revenue up 31% on 2013 reflecting volume growth and higher open market Average Selling Prices (ASP).

· Gross profit margins up 90bps at 28.7% (2013: 27.8%); operating profit margins up 40bps at 18.5% (2013: 18.1%).

· Earnings per share up 32%.

· Strong balance sheet position; net debt/equity ratio of 12.5% (2013: 2.4%).

· 784 plots added to the short-term pipeline at an ASP of £338,000.

· Over 2,000 plots added to the strategic land bank across 6 sites.

· Forward sales at mid-June 2014 of £347.3m (2013: £330.9m), 5% ahead of prior year.

· Interim dividend proposed of 4.1p per share (2013: nil).

· New division and higher ASP's in housing mix to drive revenue growth of 70-80% in three years.

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

"Strong volume and earnings growth characterise excellent results from Crest Nicholson for the first half of the year. Demand for well-designed and sensitively delivered product remains high and the business is continuing to flourish in a good housing market, helping many purchasers fulfil their ambitions for home ownership. With an improving economic backdrop underpinning the strength of the sector and the opportunities available to the business, the Board remains confident in the outturn for the year."

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 9AE hosted by Stephen Stone, Chief Executive, and Patrick Bergin, Finance Director.

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.

Chief Executive's statement

Financial Review

Crest Nicholson, a leading residential developer operating in the Southern half of England is pleased to report an excellent operational result for the first half of the year, with good growth in sales, pricing and earnings.

Overall group revenues in the first six months of the year increased by 26%, to £241.1m (2013: £192.0m). Revenues in the first half of the year ordinarily account for approximately 40% of full year activity and this pattern is broadly expected to be repeated this year.

Housing revenues increased by 31%, incorporating a strong uplift on both open-market and affordable housing. The number of open-market housing units increased by 10% and a further 12% in ASP, underpinning a 24% increase in revenues.

Affordable revenues are up 89%. A significant increase in the number of affordable unit completions was partially offset by a reduction in the ASP of these units, as the associated affordable land sale revenues were booked in 2013. It is expected that the full-year split between open-market and affordable units will be broadly similar to prior years.

Gross margins at 28.7% are ahead of the prior year (2013: 27.8%) with the benefits of the strong sales pricing environment more than offsetting the impact of increases in input costs.

Operating profits of £44.7m are 28% higher than in 2013 and operating margins for the first six months were 18.5%, up 40bps on the 18.1% reported for half year 2013. Half year operating margins tend to be lower than at the full year, as administrative expenses as a percentage of sales are higher, with approximately 40% of full year revenues matched with nearly 50% of the overhead cost for the year. Accordingly, the business expects to report EBIT margins for the full year closer to 20.0%.

Profit before tax at £38.4m is 37% ahead of the prior year figure of £28.1m (before exceptional costs) and profit after tax on the same basis is up by 41% at £30.9m (2013: £21.9m).

Earnings per share (EPS) for the period at 12.3 pence is 32% higher than the equivalent period in 2013. The 41% increase in post-tax earnings translates into a 32% increase in EPS as the weighted-average number of shares in issue in 2014 reflects the full effect of the primary issue of shares in February 2013.

The business had net cash outflows from operations in the first half of the year, reflecting the investment in infrastructure as we open up a number of our larger sites and land expenditure on new sites in higher-value areas. Having been in a net cash position at 31 October 2013, the business is forecasting to have net debt at 31 October 2014, reflecting these investments.

The Board has resolved to pay an interim dividend of 4.1pence per share, payable on 9 October 2014 to shareholders on the register on 26 September 2014. The dividend is covered three times by EPS of 12.3p.

Financing changes

During the period, the business successfully re-financed its loan obligations, increasing the level and duration of its banking facilities whilst reducing the overall cost of borrowing.

Amounts drawn under existing facilities of £100m of revolving credit and £40m ancillary with maturity dates in December 2016 were re-paid in full. These were replaced with a £200m revolving credit facility and an £80m ancillary facility, with maturity dates in March 2019. At 30 April 2014, the Group had undrawn revolving credit facilities of £85m and cash and cash equivalents of £89m.

At 30 April 2014, the business had net debt of £60.6m and a net debt/equity ratio of 12.5% (2013: 2.4%). Net debt at year end is expected to be at a similar level, reflecting our investment in higher ASP locations and in the infrastructure required to open up large strategic sites.

Sales

Sales rates in the six months to 30 April 2014 have averaged 0.83 sales per outlet per week, (2013: 0.77), an increase of 8%. Purchaser demand continues to be very strong and high levels of forward sales mean that production capacity is currently the most critical factor for volume growth.

Our production teams have worked hard to respond to this stronger market and have delivered a 35% increase in volumes in the six months to 30 April 2014 at 1,091 units (2013: 810).

Mortgage access and affordability continue to be favourable, particularly aided by the government's 'Help to Buy' scheme. First-time buyers have benefitted significantly from this initiative and account for 72% of the sales made by Crest Nicholson under the scheme in the six months to 30 April 2014. Correspondingly, average selling prices under 'Help to Buy' in the same period are comparatively low, at £227k.

The proposed extension of the scheme to 2020 offers the prospect of continued support to purchasers seeking to own their first home and provides a level of forward visibility that will enable the industry to plan ahead with confidence.

The average number of sales outlets from which the business has been selling has changed little, showing a slight reduction from 43 in 2013 to 42 for 2014. Faster rates of sale shorten the average period of time for which each location is selling and new site openings have not so far outweighed this impact. In spite of this, the business remains on track to deliver projected full-year volumes of approximately 2,500 units.

Cancellation rates on a moving annual total basis remain consistent with our long-term performance at 12% (2013: 13%) and units are promptly re-sold.

At mid-June 2014, the business has forward sales of £347.3m (2013: £330.9m) and has secured 87% of its forecast full-year revenues (2013: 88%).

Land and planning

During the period, 784 units were added to the short term land bank across 9 sites, bringing the short-term portfolio to 16,118 units (2013: 17,094).

The benefits of purchasing plots at higher average sales values and from the stronger pricing environment show through in the gross development value of the housing portfolio, which has increased to £4,127m, a 9% increase on £3,780m at 30 April 2013. On a per-unit basis, this increase is 16%.

The depth of our short-term land pipeline provides good visibility across our forecast horizon and positions the business well to selectively add outlet width when attractive opportunities arise.

In addition, 2,064 more plots were added to the strategic portfolio across 6 sites. Net of transfers to short-term portfolio, disposals and re-plans, this has brought the number of strategic sites up to 35 and 15,046 units (2013: 32 and 13,763). After the strong run we enjoyed in achieving planning consents and converting sites into the short-term land bank, we have focused our efforts on replenishing the supply of strategic land which has proved to be a strong source of high-margin land.

Business growth

Plans to establish a new division in the north-west Home Counties are well advanced and will provide a platform for the next stage of business growth. The addition of a further management team will allow the business to pursue further opportunities in an area which is very familiar to Crest Nicholson and further extend our presence in this key geography. A selection of existing portfolio sites will transfer into the new division to pump-prime the operation and appointments to key positions have already been made.

Initiating a new division in this manner enables the business to benefit swiftly from the additional management capacity and ensure an early contribution to the incremental overhead.

Alongside this increase in operational bandwidth, the business continues to secure sites with higher open-market ASPs, such that growth in housing revenues is in large part driven by higher value properties in the mix as well as rising unit outputs.

From a baseline of 2,172 units delivered in 2013, the business anticipates that volume delivery across our three year forecast horizon will increase by 25-30%. Increases in open market ASP, driven by the mix and location of product delivered, are expected to be of the order of 35-40% across the same timeframe.

Outlook

The generally improving economic outlook, with rising employment and a return to real wage growth, combined with improved mortgage access has underpinned a recovery in the housing market.

High levels of purchaser demand are evident and the sales environment for new-build housing is positive. Input cost inflation remains under control and business margins are benefiting both from robust pricing and operational efficiencies.

The comparatively low costs of servicing a mortgage may increase as a result of changes to base rates and/or regulatory interventions in the mortgage market. However, lending decisions now incorporate 'stress-testing' of the impact of increases in interest rates and the Board believes that any such increases should not unduly impact Crest Nicholson's sales levels.

UK Political audiences of all persuasions share a firm conviction that increasing the number of new homes built in the UK is desirable for society as a whole. New homes under construction in the UK increased by approximately 20% per cent in 2013 and, with continual improvement in the planning regime, volumes are on track to increase again in 2014. While London prices have risen rapidly until recently, any policy changes aimed at cooling the London market need to be mindful of the potentially detrimental effect on regional growth. We believe political leaders should hold firm to their convictions and provide the stable operating environment required for both large and SME house builders to commit to further volume increases.

With strong underlying fundamentals and the opportunities available to the business, the Board remains confident in the outturn for the year.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim results report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year 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 year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The directors of Crest Nicholson Holdings plc are listed in the Report and Accounts for the year ended 31 October 2013.

For and on behalf of the Board

Stephen Stone

Chief Executive

Registered number 6800600

17 June 2014

Independent review report to Crest Nicholson Holdings plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 April 2014 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of financial position, the condensed consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

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 UK. 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 Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 April 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

Bill Holland

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London E14 5GL

17 June 2014

Crest Nicholson Holdings plc Registered number 6800600

These condensed consolidated interim financial statements were approved by the Board of Directors on 17 June 2014.