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Crest Nicholson Holdings plc Half Year Results 2020

Crest Nicholson Holdings plc

Unaudited interim results for the six months ended 30 April 2020

Decisive action to protect the balance sheet and reposition for future growth


Crest Nicholson Holdings plc (Crest Nicholson, the Group, or the Company) today announces its interim results for the six months ended 30 April 2020.

Commenting on today’s results, Peter Truscott, Chief Executive of Crest Nicholson, said:

"Despite a difficult first half performance we have made excellent progress implementing our updated strategy. We are ahead of our own expectations in a number of our strategic priorities and that has been delivered against the backdrop of COVID-19. The health and safety of our customers, employees and extended supply chain will always be our number one priority and as you would expect we continue to focus closely on ensuring the safe return of these groups to our sites and sales and management offices. I am hugely grateful to all Crest Nicholson employees who have quickly pulled together to make this happen.

Before lockdown the business was performing well and trading in line with our expectations. We were continuing to recognise further improvements to margin in our current developments and short-term land portfolio. We were also delighted to be awarded five-star status by the HBF customer satisfaction scheme in March this year.

However, we cannot ignore the risks that COVID-19 presents to the UK housing market even if we cannot predict with certainty what the impact of those risks will be. Therefore, we have adapted our strategy by deferring the planned opening of an additional division and targeting further reductions in overheads. Taking decisive action now will ensure Crest Nicholson is able to flourish in whatever market conditions may emerge in the future including if the market quickly returns to growth."

Strategic highlights

  • Best sales week for the rolling 12-month period in the week before UK lockdown announced
  • Excellent progress in implementing improvements across all five of our strategic priorities:
    • achieving Home Builders Federation (HBF) five-star rating for customer satisfaction
    • £30m further build cost savings identified and £20m now embedded
    • 3,362 plots in re-plan with new house types 
    • strong pipeline of partnership opportunities
  • Adaptation of strategy announced in January in anticipation of more challenging trading conditions:
    • deferral of planned new division opening
    • further overhead reductions proposed saving c.£5m pa
  • Encouraging early signs since re-opening:
    • increasing levels of web traffic, footfall and conversion rates
    • reservation rates returning to pre-lockdown levels

Key financials

£m (unless otherwise stated) HY20 HY19
% Change

Revenue

240.0 501.9
(52.2)%
Adjusted gross profit1 35.9 100.3
(64.2)%
Adjusted gross profit margin %1 15.0% 20.0%

Adjusted administrative expenses1 (24.8) (29.5)
(15.9)%


   

Adjusted operating profit

11.1 70.8
(84.3)%
Adjusted operating profit margin %1 4.6% 14.1%
 
Adjusted profit before tax1 4.5 64.4
(93.0)%
Exceptional items net of income tax  (44.1) -

Adjusted basic earnings per share1 1.4  20.2    (93.1)% 
 
Gross (loss)/profit (7.3) 100.3
(107.3)%

Gross (loss)/profit margin %

(3.0)% 20.0%

Operating (loss)/profit (44.0) 70.8
(162.1)%
Operating (loss)/profit margin % (18.3)%  14.1%
 
(Loss)/profit before tax (51.2) 64.4
(179.5)%
Basic (loss)/earnings per share (15.8)  20.2    (178.2)% 
Dividend per share (p) 11.2     
         
Net debt2 93.3 68.3    36.6%

 

(1) HY20 figures, adjusted for exceptional items, see note 5
(2) Net debt is cash and cash equivalents less interest bearing loans and borrowings

Financial overview

  • Revenue in the period fell to £240.0m and completed homes fell 34.7% to 775 (HY19: 1,187) 
  • Forward sales of £575.1m (HY19: £636.9m)3
  • Sales per outlet week (SPOW) excluding bulk reduced to 0.37 (HY19: 0.46)
  • Open market (including bulk) Average Selling Price (ASP) down 16.7% to £344k (HY19: £413k)
  • Average outlets grew to 64 (HY19: 58)
  • Loss before tax £51.2m (HY19: £64.4m profit)
  • Adjusted profit before tax (APBT) down to £4.5m (HY19: £64.4m) reflecting:
    • the impact of political uncertainty and COVID-19
    • land and commercial contribution £12.1m lower than prior half year
    • bulk contribution £13.7m lower than prior half year
  • Good progress in reducing adjusted administrative expenses to £24.8m (HY19: £29.5m)
  • Net debt £93.3m (HY19: £68.3m):
    • net debt including land creditors £317.2m (HY19: £260.4m)
    • FY20 net cash expected to be higher than FY19
  • Ongoing reduction in average net debt to £125.0m (HY19: £136.6m) as proactive steps taken to protect balance sheet and control work-in-progress
  • Exceptional item charge of £4.5m for restructuring
  • Reinstating FY20 APBT guidance in the range of £35m-£45m
  • Reinstate dividend when appropriate

(3) Housing forward sales as at 19 June 2020. Prior half year restated to equivalent sales week.

COVID-19

  • Health and safety of our employees and customers is our number one priority. Closure of all sites and sales and management offices announced on 9 April 2020
  • Decisive action taken at the outset of the pandemic to preserve cash and liquidity:
    • pausing all discretionary land spend and applying rigorous expenditure and work-in-progress controls
    • furloughing 75% of employees from beginning of April under the Government’s Job Retention Scheme (JRS) with all employees unfurloughed by 31 May 2020
    • cancelling the final dividend for the full year ended 31 October 2019
    • put in place a £300m commercial paper facility to access the Government’s COVID Corporate Financing Facility (CCFF) – this facility is currently undrawn
  • Phased re-opening of sites from 18 May 2020 with new safety protocols
  • Modest number of reservations and completions were made for the six weeks to 18 May 2020
  • Non-cash exceptional items charge of £51.2m relating to COVID-19 impairment review

Current trading and outlook

From 18 May 2020 we started to resume build activity on our sites and reopened our sales offices in a phased and controlled manner. The Group has carefully considered guidance from Government, Public Health Authorities and the Construction Leadership Council in developing its new site protocols and procedures to safeguard the wellbeing of its customers and employees as they return to work. We will continue to review any updates to this guidance and actively monitor compliance in all parts of our organisation.

Given the economic and operational uncertainty resulting from COVID-19 the Group announced on 19 March 2020 that it was suspending financial guidance. While we have been encouraged by the improvement in the trading environment in recent weeks, with increasing levels of web traffic and footfall being converted into reservation rates similar to those seen prior to the lockdown, it remains a highly uncertain operating environment. However, in order to contextualise the Group’s half year results, and to give some visibility around the likely outturn for the full year, we are providing some additional market commentary and reinstating FY20 APBT guidance.

In the first two months of the period the Group experienced significant volatility and uncertainty associated with the run up to the General Election on 12 December 2019. Following the decisive political outcome our sales performance gained strong momentum in the run up to the spring selling season before the UK lockdown was introduced.

The combined impact of the political uncertainty, and the sales deferrals associated with COVID-19, significantly reduced profitability in the first half. Assuming that the lockdown continues to carefully unwind with supportive measures in place to facilitate building and selling homes, the Group expects profit in the second half of the year to be significantly higher than the first. On this basis the Group expects FY20 APBT to be in the range of £35m-£45m.

While the Group remains cautious in its assessment of the prospects for the UK housing market over the medium term it remains confident in its ability to successfully manage through further periods of instability. Accordingly, the Group has recently announced plans to defer its planned creation of another division and further reduce its overheads. The Group remains focused on improving its margins and increasing its cash reserves and is committed to returning to a sustainable dividend policy as soon as it is appropriate to do so. 

The Group has a £250m revolving credit facility (RCF) provided by four of the UK’s largest banks, expiring June 2024. It also benefits from £100m of senior loan notes which mature between 2024 and 2029. In addition, the availability of a further £300m of liquidity has been finalised through the CCFF commercial paper programme should the Group require it. At present this facility is undrawn. Accordingly, the Group believes it has sufficient and diverse sources of financing to operate in potentially more challenging market conditions.

Analyst and investor conference call and webcast

There will be an analyst and investor presentation via webcast, hosted by Peter Truscott, Chief Executive and Duncan Cooper, Group Finance Director, at 9.00 a.m. today. To join the presentation, go to the Crest Nicholson website: www.crestnicholson.com/investor-relations

There is also a facility to join the presentation and Q&A session via a conference call. Participants should dial +44 (0)20 3936 2999 and use confirmation code 234800. A playback facility will be available shortly after the presentation has finished.

For further information, please contact:


Crest Nicholson

+44 (0) 7552 842720

Jenny Matthews, Head of Investor Relations

   

Finsbury

+44 (0) 20 7251 3801

James Bradley

Philip Walters   

The person responsible for arranging the release of this announcement on behalf of the Company is Kevin Maguire, General Counsel and Company Secretary.

Cautionary statement regarding 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 Guidance 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.

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