Crest Nicholson Holdings PLC · LSE:CRST
Crest Nicholson — FY2005 Earnings Presentation
35 slides from Crest Nicholson's earnings presentation, Jan 25, 2006
Slide 1: 2005 Preliminary Announcement
25th January 2006 2005 PRELIMINARY ANNOUNCEMENT
Slide 2: Financial Highlights
Financial Highlights 2005 2004 % Turnover £714.3m £643.2m +11% Operating Profit* £97.0m £94.9m +2% Pre-tax Profit* £81.3m £82.1m -1% Earnings per Share* 48.9p 49.4p -1% Total Dividends per Share 12.9p 12.3p +5% Net Assets per Share 294p 260p +13% *2005: Before £2.1m exceptional costs re Heron approa
Slide 3: Trading Performance
Trading Performance 2005 £m 2004 £m % Sales: Housing 545.9 529.9 +3% Land sales 75.6 44.7 +69% Commercial uses 92.8 68.6 +35% 714.3 643.2 +11% Gross margin 148.0 143.9 +3% 20.7% 22.4% Overhead (51.0) (49.0) 7.1% 7.6% Operating profit 97.0 94.9 +2% 13.6% 14.8% 3
Slide 4: Housing Sales Analysis
Housing Sales Analysis 2005 2004 % Units Open market 1,865 1,812 +3% Affordable 621 712 -13% Total housing units 2,486 2,524 -2% Average selling price £k Open market 245 244 - Affordable 142 123 +15% Total housing ASP 220 210 +5% Turnover £m Open market 457.8 442.2 +4% Affordable 88.1 87.7 - Total h
Slide 5: Balance Sheet
Balance Sheet 2005 £m 2004 £m Fixed assets and investments 43.7 23.7 Operating Assets: Stock 640.1 771.9 Debtors 223.2 239.4 Land creditors (210.6) (372.1) Other creditors (169.0) (156.1) 483.7 483.1 527.4 506.8 Capital and reserves 367.4 328.4 Net debt 160.0 178.4 Capital employed 527.4 506.8 ROCE
Slide 6: Cash Flow
Cash Flow Oct 05 £m Oct 04 £m Group Operating Profit 93.3 92.9 Decrease/(Increase) in stock 131.8 (124.7) (Decrease)/Increase in land creditors (161.5) 63.2 Decrease/(Increase) in debtors 14.0 (114.4) 14.4 Increase in other creditors 14.4 39.7 Capex net of depreciation (18.8) (3.4) Interest, tax, di
Slide 7: Stock and WIP
Stock and WIP 2005 £m 2004 £m Development land 408.0 593.0 Strategic land 8.4 9.3 Total land 416.4 602.3 Building work in progress 223.7 169.6 Total stock and WIP 640.1 771.9 7
Slide 8: Housing Land Buying
Housing Land Buying 2005 2004 Plots contracted 3,245 3,570 Strategic plots converted 495 1,091 Total plots added 3,740 4,661 £000’s £000’s Average sales price per plot 186.8 188.4 Average plot cost 37.6 51.4 8
Slide 9: Contracted Land Banks
Contracted Land Banks 2005 2004 Short term housing Plots 14,945 15,060 Strategic land Plots 12,181 13,182 Commercial Sq. ft 1,620 1,833 000’s 9
Slide 10: Contracted Housing Land Bank
Contracted Housing Land Bank 2005 2004 Short term housing plots 14,945 15,060 Average Sales Price £000’s 184.5 192.2 Average Plot Cost £000’s 33.4 37.1 Land % of Sales 18.1% 19.3% 10
Slide 11: Portfolio Sales Value
Portfolio Sales Value 2005 2004 £m £m Housing 2,758 2,895 Commercial 450 418 TOTAL 3,208 3,313 = Gross development value of contracted land banks 11
Slide 12: Agreed pipeline at October 2005
Agreed pipeline at October 2005 • Oakgrove, Milton Keynes • Penarth Heights, Cardiff • Bath Western Riverside later phases £540m of future development value 12
Slide 13: Financing
Financing 2005 2004 Average borrowings £230.2 m £184.4 m Interest cost £15.7 m £12.8 m Interest cover 6.0 X 7.4 X Facilities available £380.4 m £351.9 m 13
Slide 14: Changes of accounting policy
Changes of accounting policy • Moving the housing revenue recognition point from build completion to legal completion – Sharpens the focus on cash by bringing cash and profit take points together – Brings us into line with the peer group • Implementing International Financial Reporting Standards (IF
Slide 15: Housing unit volumes
Housing unit volumes HY05 FY05 Build completion basis: Open market 830 1,865 Affordable 256 621 Total units 1,086 2,486 Legal completion basis: Open market 1,057 1,997 Affordable 300 457 Total units 1,357 2,454 Unit volume change 271 (32) 15
Slide 16: 2005 profit before tax reconciliation
2005 profit before tax reconciliation £m Profit before tax after exceptional costs UK GAAP 79.2 Net increase in cost of sales (mainly S&M expensed) (4.7) Preference dividend reclassified as finance cost (2.1) Net impact of discounting deferred land payments (2.7) Other (2.0) Profit before tax restat
Slide 17: Operating profit restatement
Operating profit restatement 2005 £m 2005 £m Change GAAP LC/IFRS Sales: Housing 545.9 557.6 11.7 Land sales 75.6 62.7 (12.9) Commercial uses 92.8 92.3 (0.5) 714.3 712.6 (1.7) Gross margin 148.0 153.2 5.2 20.7% 21.5% 0.8% Overhead (51.0) (51.2) (0.2) 7.1% 7.2% Operating profit 97.0 102.0 5.0 13.6% 14
Slide 18: Retained profit restatement
Retained profit restatement 2005 £m 2005 £m GAAP LC/IFRS Change Operating profit 97.0 102.0 5.0 Exceptional Heron costs (2.1) (2.1) - Interest (15.7) (21.0) (5.3) Pre- tax profit 79.2 78.9 (0.3) Tax (24.5) (25.0) (0.5) Earnings 54.7 53.9 (0.8) Preference dividend (2.1) - 2.1 Ordinary dividend (14.5)
Slide 19: Capital and reserves reconciliation
Capital and reserves reconciliation £m Capital and reserves per UK GAAP 367.4 Preference capital treated as borrowings (38.0) Equity and reserves per UK GAAP 329.4 Pension fund deficit (26.1) Reduction in stock (principally S&M) (12.0) Final dividend not accrued 9.8 Other revenue recognition deferra
Slide 20: Balance sheet restatement
Balance sheet restatement Change 2005 £m 2005 £m £m GAAP LC/IFRS Fixed assets and investments 43.7 45.4 1.7 Operating Assets: Stock 640.1 745.1 105.0 Debtors 223.2 33.5 (189.7) Land creditors (210.6) (148.3) 62.3 Other creditors (169.0) (211.6) (42.6) 483.7 418.7 (65.0) 527.4 464.1 (63.3) Capital an
Slide 21: Stephen Stone
Stephen Stone • Review of 2005 • Market conditions • Urban regeneration • Business improvement 21
Slide 22: 2005 Achievements
2005 Achievements • 3% increase in open market completions • 35% increase in mixed use commercial • Good land trading performance • Added to urban regeneration land bank – Contracted Camberley and Bath in the year – Contracted Oakgrove in December 05 • Received 3 urban regeneration awards 22
Slide 23: Current Housing Market
Current Housing Market • Jan 06 reservations about 20% up • Prices flat in South West and Midlands • Some sales price gains in the South East • Beginning to reduce sales incentives • Build cost inflation is modest • Early signs of an improving market Cautiously optimistic about 2006 market condition
Slide 24: Housing Forward Sales
Housing Forward Sales Oct Oct 2005 2004 % Build completion basis Units 2,262 1,752 Sales Value £227.9 m £201.1 m +13% Legal completion basis Units 3,056 2,611 Sales Value £389.6m £387.4m +1% Forward sales and YTD completions now over 50% of 2006 target 24
Slide 25: Urban regeneration impact on Crest
Urban regeneration impact on Crest • Our urban regeneration reputation is firmly established • Represents a huge potential land supply and earnings generator • The learning curve is behind us: – Product range: is being simplified – Overhead structure: is being rationalised • Dependable earnings flow
Slide 26: Urban regeneration content
Urban regeneration content Regen Other Total Regen % Housing plots 4,200 10,745 14,945 28% Average Sales Price £000’s 179.9 192.2 184.5 Housing portfolio £m 756 2,002 2,758 27% Average Plot Cost £000’s 16.9 39.8 33.4 Land % of Sales 9.4% 20.7% 18.1% 26
Slide 27: Urban regeneration contributions
Urban regeneration contributions 2005 2006 2007 2008 2009 2010 2011 2012 2013 Hemel Hempstead Ingress Park Bristol Harbourside Park Central Camberley Farnham Bath (phase 1) Oakgrove UR gives us land bank length and strength 27
Slide 28: CEO review of Crest's strengths
CEO review of Crest’s strengths • Strong land bank and land buying skills • Strong design and planning skills • Excellent product quality and customer service • Good business mix with affordable and mixed use • Good geographic positioning • Strong growth potential with urban regeneration 28
Slide 29: Business improvement
Business improvement • Margin gains from investment payback • Business improvement process launched • Workgroups established to drive for greater cost effectiveness • Each workgroup is chaired by an MD • Cost reduction targets set for each workgroup 29
Slide 30: Business improvement workgroups
Business improvement workgroups Design Finance & Technical Admin CEO/FD Customer Commercial service Sales & Production marketing Focus on margin gain through greater cost effectiveness 30
Slide 31: Design workgroup progress
Design workgroup progress • Developed standard apartment range based on modular principles • Introduced single internal fit out specification • Incorporating modern methods of construction • Applied the new range to next phase of Park Central, Birmingham 31
Slide 32: Phase optimisation gains
Phase 12 optimisation gains Old New Designs Designs Total units 34 53 +19 No of unit types 24 7 Square feet 21,240 27,958 +6,718 Sq ft per unit 625 528 32
Slide 33: Impact of new designs
Impact of new designs • Reduce drawing costs and technical fees • Shorten pre-production programme • Improve materials buying efficiencies • Reduce subcontract cost and risk • Shorten production programmes • Reduce marketing and brochure costs Improve project profits and cash flows 33
Slide 34: Business improvement target
Business improvement target • We will cut the product and overhead cost base • We are targeting annual cost savings of £10m by 2008 34
Slide 35: Conclusion
Conclusion • Early signs of an improving market • Strong land bank : more value to be unlocked • More urban regeneration value to come • Driving for better financial returns 35