26th Jan 2005 07:00
Crest Nicholson PLC26 January 2005 26th January 2005 CREST NICHOLSON PLC Preliminary Results Announcement Crest Nicholson PLC, the residential and mixed use development company, todayannounces results for the year ended 31st October 2004. Financial highlights: % increase • Turnover from continuing operations increased to £643.2m (2003: £550.5m) +17% • Profit before taxation increased to £82.1m (2003: £74.6m) +10% • Earnings per share increased to 49.4p (2003: 45.2p) + 9% • Proposed final dividend of 8.3p, making a total for the year of 12.3p(2003: 11.0p) +12% • Compound earnings per share growth 2000-2004 +17% • Net assets attributable to ordinary shares equivalent to 260p (2003:224p) +16% • Short term housing land bank 15,060 units (2003:13,204) - over 5 years supply +14% • Strategic land bank maintained at c.13,000 plots Operational highlights: • Total housing units up 30% to 2,524 houses sold (2003: 1,936) • Affordable housing units up 131% to 712 units (2003: 308) • Housing turnover up 14% to £529.9m (2003: £463.3m) • As anticipated, average selling price of £210,000 (2003: £239,000) reflecting increased volume of affordable housing • Land sales £44.7m (2003: £74.0m) • Strong commercial sales on mixed use projects of £68.6m (2003: £13.2m) • Development portfolio sales value up 12% to £3.31bn (2003: £2.96bn) with a further £1bn agreed pipeline of major urban regeneration projects at Oakgrove in Milton Keynes, Bath Western Riverside and Camberley Commenting today John Callcutt, Chief Executive, said:"These results begin to show the success of our focus on sustainable and mixeduse development. We have established our track record in the master planning anddelivery of large scale residential and mixed use developments and we lead themarket in our grasp of sustainability issues. We now look forward withconfidence to making further inroads into the huge urban regeneration market andthereby serving both shareholder and community interests." Enquiries to:Crest Nicholson PLC Brunswick Group LLPJohn Callcutt, Chief Executive Andrew FenwickStephen Stone, Chief Operating Officer Kate MillerPeter Darby, Finance Director Robert GardenerTel: 020 7404 5959 (on day of announcement) Tel: 020 7404 5959Tel: 01932 847272 (thereafter) The analyst presentation will be available on the Company's web sitewww.crestnicholson.com from 9.30am CHAIRMAN'S STATEMENT Results I am delighted to report another year of record results and strong progress indelivering Crest Nicholson's urban regeneration strategy.Pre-tax profits rose by 10% to £82.1m and our earnings per share increased by 9%to 49.4p. Dividend We are recommending a final dividend of 8.3p per share. This will give a totalfor the year of 12.3p, up 12%. The dividend will be covered 4.0 times. The finaldividend will be paid on 11th April 2005 to shareholders on the register at 11thMarch 2005. Strategy Crest's strategy is to be the market leader in the design and delivery ofsustainable housing and mixed use development. We have made considerableprogress with this strategy in 2004, the highlights of which have been theincrease in affordable housing, the establishment of a new eastern region andthe expansion in our urban regeneration work. With regard to urban regeneration, the success of our mixed use developmentssuch as Bristol Harbourside and Park Central, Birmingham and of Ingress Park,our flagship Thames Gateway development, has generated the momentum for Crest tomake further inroads in this important growth market. In September, we announcedthat we had been appointed as lead developer for the £500m development of theOakgrove Millennium Community, the very first millennium community project to beawarded. In October, we announced a partnership agreement with Grosvenor for the£1 billion regeneration of Bath Western Riverside. In November, we announcedthat we had entered into a contract with Surrey Heath Borough Council for the£100m redevelopment of a major site in Camberley town centre. Prospects Crest Nicholson is well placed to play a major role in delivering newsustainable communities and the supply of the affordable homes that are soclearly needed in all our areas of operation. Our market positioning offers ourshareholders excellent prospects for future growth and increased value. OPERATING AND FINANCIAL REVIEW Market PositioningUrban regeneration is a huge market and one in which Crest now has thereputation, track record, and skills to secure exciting opportunities which willdeliver both sustainable communities and increasing shareholder returns. Crest has moved decisively in recent years to position itself as a market leaderin sustainable development and the urban regeneration partner of choice for thepublic and private sectors. We apply our planning and management skills tocreate mixed use and mixed tenure developments in which current and futuregenerations will want to live and work.We have put innovative design, product quality and social awareness at the heartof our product offering and we have embraced the economic and social imperativeof producing more affordable housing, particularly in the South East, with theresult that we have more than doubled our production of affordable homes in2004. Trading Performance2004 was a record year for Crest with pre-tax profits up 10% to a new high of£82.1m (2003: £74.6m). Housing We increased the number of housing units sold by 30% to 2,524 (2003: 1,936).Open market units were up 11% at 1,812 (2003: 1,628) which was a solidperformance while the number of affordable units more than doubled to 712 units(2003: 308). While, in 2006 and beyond, the number of affordable units is set togrow, fewer affordable units will be delivered in 2005 due to the lumpy natureof the affordable programme. As previously announced, the average selling price fell to £210,000 as a resultof the doubling of affordable unit volumes. The average selling price of openmarket housing units was 5% lower at £244,000 (2003: £258,000) due to bothincreased volumes from our South West and Midlands businesses and our plannedmove to the broader mid market sector. In 2005, the average selling price willrise due to the temporary lull in affordable unit numbers noted above. Our housing forward sales position at the year end was 4% up at £201m (2003:£193m). Our current forward sales position is £265m (2003: £275m). This isslightly down due to the large number of reservations taken on the successfullaunch of Bristol Harbourside in the prior year. Land Sales As part of our strategy we assemble large sites and create substantial landvalue as we bring them through the planning process and into development.Crest's strength in land buying and planning enables us to secure a dependableflow of planning permissions on significantly more land than we are able todevelop. Sale of land is, and will continue to be, an integral part of Crest'smethod of operation not only to generate cash but also to allow us to adjust ourportfolio to changing market conditions. Housing land sales amounted to £45m, compared with £74m in 2003. The 2003comparative included the sale of sites in the South East which would haveincreased our exposure to the upper market sector. Mixed Use Commercial Commercial property sales amounted to £69m, compared with £13m last year. Theincrease reflects the flow of sales from the major mixed use schemes at BristolHarbourside, Park Central, Birmingham and Riverside, Hemel Hempstead. Our commercial forward sales position at the year end amounted to £109m (2003:£116m). Operating Margins The planned increase in affordable units and commercial sales, which haveinherently lower risks and margins than open market housing, led, as expected,to a reduction in the overall group gross margin from 24.5% to 22.4%. This wasoffset by a significant improvement in overhead efficiency to 7.6% (2003: 8.6%)attributable to turnover gains and tight overhead control. Overall operatingmargins were therefore 14.8% (2003: 15.9%). Housing and Commercial Portfolios In 2004, we acquired 44 sites comprising 4,661 plots, with a projecteddevelopment value of £883m. The short term housing portfolio now stands at 15,060 plots (2003: 13,204 plots)with a projected development value of £2.89bn (2003: £2.48bn), an increase of16% over the twelve months. At the current level of turnover, the portfoliorepresents over 5 years' supply. Our housing strategic land bank consists of 800 acres controlling 13,182 plots(2003: 13,236). Our aim is to substantially replace greenfield sites with urbandevelopment opportunities. Consequently, we expect the greenfield strategic landbank to reduce both in size and in proportion as it is consented and to bereplaced with urban regeneration land. The current commercial land portfolio covers over 100 acres for 1.8 millionsquare feet of commercial space with a development value of £418m. The majorityof this relates to the mixed use schemes at Bristol Harbourside, Riverside inHemel Hempstead, Park Central in Birmingham, Farnham and Chertsey North. Inaddition we have 240 acres of strategic commercial land. These housing and commercial statistics exclude the projects at Oakgrove inMilton Keynes, at Bath Western Riverside and in Camberley town centre which wereagreed but not contracted at year end. Financial Position Shareholders' funds increased by £42.6m or 15% to £328.4m. The net assetsattributable to the ordinary shares are equivalent to 260p per share compared to224p per share at October 2003, an increase of 16%. The Group's capital employed of £506.8m has increased by £139.1m and the returnon average capital employed is 21.7% compared to 23.4% last year. The increasein capital employed is due principally to a number of apartment blocks reachingbuild completion in the final quarter for which receipts are due in the firstquarter of 2005. The Group has a £225m five year Revolving Credit Facility from a syndicate ofnine banks. This together with the £120m US Private Placement and overdraftfacilities, means the Group has total borrowing facilities available of £352m.Net borrowings at the year end were £178.4m (2003: £81.9m), representing gearingof 54% (2003: 29%) which is in line with our normal gearing policy. Averageborrowings of £184.4m were similar to 2003 (£182.9m). Net interest costs at £12.8m were at a similar level to 2003 but interest coverhas improved to 7.4x, compared with 6.9x in 2003. Market Outlook In the second half of 2004 customers became more cautious following a successionof interest rate rises and the rate of house price inflation has abated. However, the fundamentals of the market remain good: demand is supported bycontinued growth in the UK economy and by low unemployment. Supply in thesouthern half of England, where we operate, is constrained by inflexibilities inthe planning system and intervention by the public sector. We believe thisshortage will help underpin prices in the coming year. While we expect to be operating in a less buoyant housing market, the quality ofthe housing land bank and the strength of our affordable and mixed usecommercial businesses give us confidence that we can make further progress in2005. Our emphasis on sustainable development in the context of urbanregeneration leaves us particularly well placed for the longer term. STATEMENT OF RESULTS for the year ended 31st October 2004 2004 2003 £m £m £m £mTurnover - including joint ventures (Note 1) 643.2 574.4Less: attributable to joint ventures (12.0) (12.0) ------ ------Group turnover - continuing operations 631.2 538.5Group turnover - discontinued operations - 631.2 23.9 562.4 ------ ------Cost of sales (489.3) (423.7) ------ ------Gross profit 141.9 138.7Operating costs (49.0) (50.8) ------ ------Group operating profit - continuing 92.9 87.9Operating profit/(loss) of joint ventures -continuing 2.0 (0.6) ------ ------Operating profit - including jointventures (Note 1) 94.9 87.3Net interest payable (12.8) (12.7) ------ ------Profit before taxation (Note 1) 82.1 74.6Taxation (25.1) (23.0) ------ ------Profit for the financial year 57.0 51.6Preference dividends (2.1) (2.1) ------ ------Profit attributable to ordinary 54.9 49.5shareholdersOrdinary dividends (13.7) (12.2) ------ ------Retained profit 41.2 37.3 ====== ====== Earnings per share (Note 2)Basic 49.4p 45.2pDiluted 49.0p 44.7p Dividends per share 12.3p 11.0p CONSOLIDATED BALANCE SHEET At 31st October 2004 2004 2003 Restated £m £m £m £mFixed assetsTangible assets 2.5 2.1Investments in joint ventures 21.2 15.6 -------- ------- 23.7 17.7Current assetsStocks 771.9 651.6Debtors 239.4 125.9Cash at bank and in hand 10.9 55.2 -------- ------- 1,022.2 832.7Creditors: amounts falling duewithin one year (304.4) (300.6) -------- ------- Net current assets 717.8 532.1 -------- ------- Total assets less current liabilities 741.5 549.8 Creditors: amounts falling dueafter more than one year (411.4) (262.9)Provisions for liabilities and charges (1.7) (1.1) -------- ------- (413.1) (264.0) -------- ------- 328.4 285.8 ======== ======= Shareholders' funds (Note 3) 328.4 285.8 ======== ======= Net borrowings 178.4 81.9 Gearing 54% 29% Net assets per ordinary share (Note 4) 260p 224p Consolidated Cash Flow Statement For the year ended 31st October 2004 2004 2003 £m £m £m £mNet cash (outflow)/inflow from operatingactivities (41.6) 88.7 Dividend received from joint venture 1.4 - Returns on investments and servicing offinanceInterest received 0.4 0.3Interest paid (12.8) (13.2)Preference dividends paid (2.1) (2.1) ------ ------Net cash outflow from returns oninvestments (14.5) (15.0)and servicing of finance TaxationCorporation tax paid (24.9) (15.8) Capital expenditure and financialinvestmentTangible fixed assets acquired (1.3) (0.8)Tangible fixed assets disposed - 0.3Acquisition of own shares for ESOP Trust (0.4) -Other fixed asset investment loan advances (8.8) (8.7)Other fixed asset investment loan 3.1 3.3repayments ------ ------Net cash outflow from capital expenditureand financial investment (7.4) (5.9) Acquisitions and disposalsDisposal of subsidiary companies 2.3 7.7 Equity dividends paid (12.8) (10.9) ------ ------Net cash (outflow)/inflow before financing (97.5) 48.8 FinancingProceeds from equity share issues 1.0 1.1Increase/(decrease) in bank loan and loan 51.0 (15.0)notes ------ ------Net cash inflow/(outflow) from financing 52.0 (13.9) ------ ------(Decrease)/increase in cash in year (45.5) 34.9 ====== ====== NOTES 1 Segmental Analysis Operating Pre-tax Capital Turnover profit profit employed £m £m £m £m 2004 Development 643.2 94.9 82.1 506.8 ========= ========= ========= ========= 2003 Restated Development 550.5 87.3 74.6 367.7 Construction - discontinued 23.9 - - - --------- --------- --------- --------- 574.4 87.3 74.6 367.7 ========= ========= ========= ========= 2 Earnings per shareEarnings per share are calculated on the profit attributable to ordinaryshareholders of £54.9m (2003: £49.5m), on a weighted average of 111,043,698(2003: 109,505,528) ordinary shares in issue during the year. Diluted earnings per share are calculated on the profit attributable to ordinaryshareholders of £54.9m (2003: £49.5m), on a weighted average of 112,042,818(2003: 110,641,033) ordinary shares on the basis that 2,555,643 (2003:3,156,724) share options had been exercised. 3 Reconciliation of shareholders' funds 2004 2003 Restated £m £m Retained profit 41.2 37.3Net proceeds from share issues 1.0 1.1Employee Share Ownership Trust movements 0.4 0.3 -------- -------- Net increase in shareholders' funds 42.6 38.7Opening shareholders' funds 285.8 247.1 -------- -------- Closing shareholders' funds 328.4 285.8 ======== ======== Shareholders' funds for 2003 have been restated by £0.3m to comply with UITF38 -Accounting for ESOP Trusts. 4 Net assets per shareNet assets per ordinary share is calculated on net assets of £290.4m (2003:£247.8m), after deducting the preference capital of £38.0m (2003: £38.0m) fromthe capital and reserves, on 111,395,562 (2003: 110,417,298) ordinary shares inissue and ranking for full dividends at 31st October 2004. 5 Statutory accountsThe financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31st October 2004 or 2003 but is derivedfrom those accounts. Statutory accounts for 2003 have been delivered to theRegistrar of Companies, whereas those for 2004 will be delivered following theCompany's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain a statement under Section 237(2) or (4) of the Companies Act 1985. 6 Annual General MeetingThe Annual General Meeting will be held at the Runnymede Hotel, Windsor Road,Egham, Surrey on Friday, 8th April at 12.00 noon. FIVE YEAR RECORD 2000 2001 2002 2003 2004Turnover (including joint ventures) £m £m £m £m £m-------------------------------------Development 411.4 392.9 515.5 550.5 643.2Construction -discontinued 133.1 193.2 180.9 23.9 - -------- -------- -------- -------- -------- 544.5 586.1 696.4 574.4 643.2 -------- -------- -------- -------- -------- ---Operating profit (including joint ventures) £m £m £m £m £m--------------------------------------------Development 52.2 59.6 79.2 87.3 94.9Construction -discontinued 0.9 1.2 (3.4) - - -------- -------- -------- -------- -------- 53.1 60.8 75.8 87.3 94.9 -------- -------- -------- -------- --------Operating margin -development 12.7% 15.2% 15.4% 15.9% 14.8% Pre-tax profit £m £m £m £m £m----------------Development 41.9 49.3 66.3 74.6 82.1Construction -discontinued 0.8 1.2 (3.3) - - -------- -------- -------- -------- -------- 42.7 50.5 63.0 74.6 82.1 -------- -------- -------- -------- -------- --- Housing---------Houses sold 1,717 1,543 1,899 1,936 2,524Average selling price £162,500 £186,700 £225,100 £239,300 £210,000Land bank - Short term(units) 7,778 10,424 10,760 13,204 15,060Average selling price £185,700 £185,800 £197,600 £187,900 £192,200Land bank - Strategic(units) 12,562 11,862 13,735 13,236 13,182 ---Balance sheet £m £m £m £m £m---------------Shareholders' funds 188.3 214.0 247.1 285.8 328.4Net borrowings 79.7 102.5 131.8 81.9 178.4 -------- -------- -------- -------- --------Capital employed 268.0 316.5 378.9 367.7 506.8 -------- -------- -------- -------- --------Gearing 42% 48% 53% 29% 54%Return on shareholders'funds (average) 24.0% 25.1% 27.3% 28.0% 26.7%Return on capitalemployed (average) 20.8% 20.8% 21.8% 23.4% 21.7% ---Ordinary shares-----------------Earnings per share 26.4p 30.8p 38.8p 45.2p 49.4pDividends per share 7.00p 8.00p 9.50p 11.0p 12.3pDividend cover 3.8x 3.8x 4.1x 4.1x 4.0xNet tangible assets pershare 141p 164p 192p 224p 260p Note: The figures for the years 2000 and 2001 have been restated to reflect thechange in income recognition policy in 2002. The figures for 2003 have beenrestated for the effect of UITF38 - Accounting for ESOP Trusts. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Crest Nicholson