Strategy

Our desire to build a multi-channel, multi-tenure business is driven by two factors - how we source our land and how the way our customers choose to live is changing.

We are a better and more resilient business for being able to acquire land from different sources. We already have a large strategic land portfolio, managed by CNPSL. This capability enables us to acquire land following the granting of planning permission, usually at a discount and usually in the context of a one-to-one price negotiation. It results in enhanced margins and is a capital-efficient method of controlling land. However, this approach to acquisition comes with a high degree of uncertainty of delivery timescales and often sites are large and complex.

Crest Nicholson also has a strong track record of working with partners to acquire land to be developed jointly. Our partners range from Homes England and the Defence Infrastructure Organisation to financial institutions.

The nature of these developments results in generally complex projects with uncertainty around the time that they will come through to production. Accordingly, we also need to acquire a proportion of our land on the open market. This land is short term in nature and far more predictable from a timing and delivery perspective, but it is more likely to have been purchased following a competitive process and can carry a larger capital investment in the initial land cost. These shorter-term sites have lower associated margins, reflecting the lower level of risk and higher level of certainty.

Crest Nicholson enjoys an enviable reputation for its placemaking skills, and we intend to preserve and build on this. In many ways, it is what we are known for.

We define placemaking in subjective terms - aiming to create developments that, through their distinctive design, quality public realm and attention to detail, are simply 'places in which our customers wish to live' The Government agenda, led by its new National Design Guide, is very much aligned to our strengths in this area.

However, placemaking extends far beyond the physical environment that we create; it also encompasses building strong, sustainable communities. Some of the best examples of where we have delivered this are seen in our Garden Villages, such as Tadpole Garden Village in Swindon, Wiltshire.

We enjoy a reputation for building high quality, well-specified developments using careful methods of construction. We will continue setting ourselves these high standards. However, great placemaking and build quality must be balanced with delivering strong returns. We are a business of significant scale, operating across a number of geographies in the UK, and we must ensure we focus our investment in design and quality on the areas most valued by customers and communities.

Crest Nicholson has a large and desirable land portfolio with a strong weighting in Southern England where the demand is high and the supply side is more constrained. The larger proportion of this land is held under option, or is drawn down gradually, representing good capital efficiency for the Company and its shareholders. The Executive Leadership Team believe there is significant future value in this portfolio for our stakeholders, and that enhanced returns can be delivered by overlaying our planned operational efficiencies onto these assets. This is a core part of the Group’s future investment proposition.

In recent years the Group has sold an increasing proportion of land to realise immediate value. While some external land sales can be supported by an overwhelmingly strong economic case, and because our land is held in a capital-efficient manner, there is limited need from a cash flow perspective to sell these assets in the short term. We will adopt an approach on our larger sites whereby the land portfolio is utilised firstly for our own operational needs and, only after this, for partnerships and joint ventures or external disposals.

We will need to increase our number of outlets and points of sale. In each case, our initial priority is for one Crest Nicholson sales outlet, or two where the product offering can be differentiated.

In the future, we will assess the demand and returns for bulk sales to institutional investors. Joint venture undertakings and external land sales, each offering different risks and benefits, will be assessed on a case by case basis.

We will also seek to improve the interface between Crest Partnerships and Strategic Land (CNPSL) and the divisions when servicing larger sites and handing over the individual parcels.

In summary, the land portfolio is extensive, of high quality and efficient to hold. Our initiatives will add to what is already an excellent asset base.

Significant benefits will be derived from the adoption of our new house type range which comprises 24 core house types and builds on some of the benefits of open and broken plan living. The new range also adds closed plan options within the same building shell. It is designed to be plotted effectively with common depths enabling efficient roof construction and the ability for accommodation to be arranged over two, two and a half, and three floors. An added benefit is the flexibility of the range to be dressed with a wide variety of elevational styles so as to ensure the built design is always individual and appropriate to its local vernacular, supporting our commitments to placemaking and distinctiveness. We will target 80% of our production coming from this new range over time.

To be considered as a leading UK house builder, we must be able to demonstrate commitment to delivering an outstanding customer experience. This is assessed during the process of buying a new Crest Nicholson home and through the quality of the aftercare service that we provide. Excellence in this respect is best acknowledged by being a five-star housebuilder accredited by the Home Builders Federation (HBF). We must strive to achieve this status every year.

While we are am pleased with the progress we have made this year, we must do more. Our quality and aftercare service must become more consistent; we have sites that have achieved outstanding results but, on some occasions, we have to acknowledge that we have fallen below the standards that we set for ourselves.

Our Group Production Director is taking a lead on this strategic priority at Executive Leadership Team level, working on a fundamental review of our delivery of homes and aftercare, with a stronger emphasis on site teams having more direct responsibility for quality, supported by the divisional-based customer service teams in providing aftercare.