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Share Name Share Symbol Market Type Share ISIN Share Description
Crest Nicholson Holdings Plc LSE:CRST London Ordinary Share GB00B8VZXT93 ORD 5P
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  -10.40 -2.56% 395.20 395.40 396.00 402.40 394.40 396.80 127,570 16:29:42
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Crest Nicholson Holdings PLC Half-year Report

24/06/2021 7:00am

UK Regulatory (RNS & others)


Crest Nicholson (LSE:CRST)
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From Mar 2021 to Sep 2021

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TIDMCRST

RNS Number : 9044C

Crest Nicholson Holdings PLC

24 June 2021

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

Crest Nicholson Holdings plc

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 APRIL 2021

STRONG HY21 TRADING PERFORMANCE

STRATEGY ON TRACK TO ACCELERATE GROWTH

FY21 EARNINGS GUIDANCE UPGRADED

Crest Nicholson Holdings plc ('Crest Nicholson', the 'Company' or the 'Group') today announces its unaudited interim results for the six months ended 30 April 2021:

Financial highlights

-- Revenue in the period increased to GBP324.5m (HY20: GBP240.0m), with home completions increasing to 1,017(1) (HY20: 775)

   --    Strong HY21 trading performance with sales per outlet week (SPOW) rate at 0.69 (HY20: 0.46) 

-- Forward sales of 2,771 units and Gross Development Value (GDV) of GBP691.8m as at 18 June 2021 (19 June 2020: 2,715 units and GBP575.1m GDV):

o Robust forward order book with approximately 93% of FY21 revenue covered

   --    Adjusted profit before tax(2) (APBT) for HY21 of GBP36.1m (HY20: GBP4.5m) 
   --    Profit before tax for HY21 of GBP36.3m (HY20: GBP51.2m loss before tax) 

-- Exceptional inventory impairment provision release of GBP7.6m (HY20: GBP43.2m exceptional charge), reflecting confidence in market conditions

-- Net exceptional charge for combustible materials provision of GBP7.9m (HY20: GBPnil) with HY21 provision now at GBP23.2m (HY20: GBP12.5m)

   --    Transformational progress in strengthening the balance sheet: 

o Net cash(3) at GBP130.4m (HY20: net debt GBP93.3m) - operated with net cash position throughout HY21. FY21 closing net cash expected to be around GBP170.0m

o Land creditors at GBP178.5m (HY20: GBP223.9m)

-- Interim dividend declared of 4.1 pence per share, in line with dividend policy and reflect ing confidence in outlook

-- FY21 APBT now expected to be at least GBP100.0m, including the Longcross Film Studio profit contribution

(1) HY21 includes joint venture units at full unit count (HY20: Group's share of joint venture units). HY21 is also on an equivalent unit basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale (HY20: no equivalent unit allocation to land sale element). This approach reflects the Group's actual production output and also removes the distortive impact on average selling prices (ASP) of land sales.

(2) Adjusted items represent the HY21 and HY20 statutory figures adjusted for exceptional items as disclosed in note 5 to the condensed consolidated financial statements. Adjusted performance metrics are as disclosed in note 20. These alternative (non-statutory) performance measures have been disclosed as the Directors believe this assists in better understanding the performance of the Group.

(3) Net cash is defined as cash and cash equivalents less bank loans, senior loan notes and other loans. See note 16 to the condensed consolidated financial statements for a reconciliation.

Strategic highlights

The Group continued to make good progress against all its strategic priorities in the half:

-- Retained Home Builders Federation (HBF) five-star rating for customer satisfaction for a further year

-- Investment in land for growth with 2,682 plots approved for purchase at an average gross margin of 26.5%, after sales and marketing costs

-- New house type range rollout on track, with over 6,700 future units in our short-term land portfolio now replanned with the new range:

o 425 new house type completions expected in FY21

o 80% of our private open market houses will be delivered using this range in 2022

   --    Several PRS deals exchanged or completed in HY21: 

o G rowing PRS interest in single family homes

   --    New initiatives implemented to support delivery of sustainability targets: 

o Enhanced suite of reporting to monitor site processes and activities

o B iodiesel trial underway

Further, the sale in May 2021 of 50% equitable interest in Longcross Film Studio is expected to deliver GBP45.0m cash consideration in the second half of FY21 and the profit contribution is expected to be in excess of GBP10.0m.

Key financial metrics

 
 GBPm (unless otherwise stated)              HY21      HY20   % Change 
 Home completions(1)                        1,017       775     31.2 
 
 Revenue                                    324.5     240.0     35.2 
 Adjusted gross profit(2)                    63.3      35.9     76.3 
   Adjusted gross profit margin(2)          19.5%     15.0%    450bps 
 Adjusted administrative expenses(2)       (23.1)    (24.8)    (6.9) 
 Net impairment losses on financial 
  assets                                    (0.2)         - 
 Adjusted operating profit(2)                40.0      11.1    260.4 
   Adjusted operating profit margin(2)      12.3%      4.6%    770bps 
 Adjusted net finance expense(2)            (4.8)     (5.5)    (12.7) 
 Share of joint venture results               0.9     (1.1)   (181.8) 
 Adjusted profit before tax(2)               36.1       4.5    702.2 
 Adjusted income tax(2)                     (7.3)     (0.9)    711.1 
 Adjusted profit after tax(2)                28.8       3.6    700.0 
                                          -------  -------- 
 Exceptional items net of income 
  tax                                         0.2    (44.1)   (100.5) 
 
 Gross profit/(loss)                         63.0     (7.3)   (963.0) 
  Gross profit/(loss) margin                19.4%    (3.0)%   2240bps 
 Operating profit/(loss)                     39.7    (44.0)   (190.2) 
  Operating profit/(loss) margin            12.2%   (18.3)%   3050bps 
 Profit/(loss) before tax                    36.3    (51.2)   (170.9) 
 Profit/(loss) after tax                     29.0    (40.5)   (171.6) 
 
 Adjusted basic earnings per share 
  (p)(2)                                     11.2       1.4    700.0 
 Basic earnings/(loss) per share 
  (p)                                        11.2    (15.8)   (170.9) 
 Dividend per share (p)                       4.1         - 
 

(1) HY21 includes joint venture units at full unit count (HY20: Group's share of joint venture units). HY21 is also on an equivalent unit basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale (HY20: no equivalent unit allocation to land sale element). This approach reflects the Group's actual production output and also removes the distortive impact on ASPs of land sales.

(2) Adjusted items represent the HY21 and HY20 statutory figures adjusted for exceptional items as disclosed in note 5 to the condensed consolidated financial statements. Adjusted performance metrics are as disclosed in note 20. These alternative (non-statutory) performance measures have been disclosed as the Directors believe this assists in better understanding the performance of the Group.

Current trading and outlook

Our trading performance in the first half has been strong, reflected in our HY21 SPOW rate of 0.69 and our forward order book being approximately 93% covered as at 18 June 2021. Based on demand for homes which will complete after the 30 September 2021 stamp duty deadline, we are confident that the housing market will remain robust, and this transition can be managed smoothly. We are also continuing to make good progress in all five of our strategic priorities and are increasingly confident about our future growth prospects.

Given our strong trading performance and confidence in outlook, including the Longcross Film Studio contribution, we now expect FY21 APBT to be at least GBP100.0m.

The Group intends to hold a Capital Markets Day in October 2021 to outline its future growth plans and long-term financial targets.

Peter Truscott, Chief Executive, said:

"I am very pleased with the strong trading performance the Group has delivered in the first half. This has been achieved against the backdrop of the ongoing pandemic and I would like to thank all Crest Nicholson employees and our partners for their dedication and commitment during this time.

We are making good progress in all five of our strategic priorities. Our balance sheet has been transformed and positions us strongly to grow in the future. Having completed the first part of our turnaround strategy, and implemented our operational efficiency programme, our focus now moves to rebuilding operating margins and delivering sustainable growth. We are evaluating options to enter new geographical markets and look forward to outlining these future growth plans and our long-term financial targets later this year."

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, please use the following link:

https://www.investis-live.com/crest-nicholson/60af6ae98b32171000bc8d75/fghj

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 408563. A playback facility will be available shortly after the presentation has finished. For further information, please contact:

Crest Nicholson

   Jenny Matthews, Head of Investor Relations                                    +44 (0) 7557 842720 

Tulchan Communications

James Macey White / Giles Kernick +44 (0) 20 7353 4200

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.

Chief Executive's Review

Business overview

We are delighted to report a strong set of results for HY21. Our strategy continues to deliver positive results across all areas of the business which is reflected in our performance. We have exceeded our own first half profit expectations and continue to make excellent progress in strengthening the balance sheet, closing the period with GBP130.4m of net cash versus GBP93.3m of net debt this time last year. Our land creditors have also reduced compared to the prior period and we operated throughout the first half with a net cash position. Finally, we have been active in the land market in the half, securing new opportunities that will help deliver our future growth ambitions.

Market conditions have been favourable and consistent, supported by the Government's decision to suspend stamp duty and to allow the sector to remain open during periods of COVID-19 restrictions. Consumer confidence in the stability of the housing market, coupled with changing working patterns and lifestyle choices, have underpinned demand, and meant both sales rates and prices have exceeded the pre-pandemic level. Since January 2021 demand has steadily increased with sales rates at their strongest in March and April. Reassuringly, we are seeing strong demand for homes scheduled to complete beyond the 30 September 2021 stamp duty deadline which gives us confidence that the transition from this Government support can be managed smoothly. Finally, our SPOW rate has improved compared to the prior period, and we have continued to sell homes in bulk where we have concluded that the characteristics and risk profile of the scheme are worth trading some profit for certainty of outcome and cash.

During the first half, there have been some labour and material shortages that have impacted build times. However, our operational efficiency programme has largely minimised any disruption. The additional costs attached to sourcing some materials have generally been offset by savings brought about by the standardisation of our product and specifications across the business.

As previously announced, and in line with our strategy, we continue to seek opportunities to maximise the value of our land portfolio and reinvest the proceeds into future developments. This is particularly relevant where the asset is not deemed core to our ongoing business operations. Therefore, we were delighted to announce on 14 May 2021 that we had disposed of our 50% equitable interest in Longcross Film Studio to our joint venture partner on that development, Aviva. This transaction is expected to complete in late summer 2021 and will result in a profit contribution in excess of GBP10.0m in FY21, and approximately a GBP45.0m cash inflow.

The transformational progress we have made strengthening our balance sheet, coupled with line of sight to the Longcross Film Studio disposal, has enabled us to act decisively in the land market. We have approved 2,682 plots for purchase, more than we utilised in the period, and at better gross margins than the new land purchased in FY20. This will be a key driver to our ongoing margin recovery ambition, which alongside volume growth will be our focus over the next few years.

Delivering outstanding customer service is one of our five strategic priorities. Everyone at Crest Nicholson has worked hard over the past year to make improvements to the customer journey. Accordingly, we were delighted to have retained our five-star customer satisfaction rating by the HBF for a further year.

Finally, I would like to acknowledge and thank the incredible efforts of all our colleagues throughout the first half. We recognise that the sector has been fortunate compared to many in its continued ability to trade and operate throughout the pandemic. However, this disruption has undoubtedly been felt in the personal lives of our people and I continue to be impressed by their commitment to build and deliver great homes for our customers and communities.

Excellent progress in operational efficiency

During the first half, the Group has continued to deliver efficiency improvements in all aspects of our operations. Overheads have remained tightly controlled and at sustainable levels, as we have increased build rates in response to the strong market demand. The new house type range has been central to these improvements. Rollout and adoption of the range is on track, and we expect 425 houses will be completed in FY21 using the range. Approximately 6,700 units have now been replanned and we expect 80% of our private open market houses will be delivered using this range in 2022.

The new house type range is the platform for consistent execution of many processes across our business. It enables us to deliver a high quality specification from a trusted selection of strategic suppliers. Build times are being reduced and site management activities are made simpler and more efficient. Consistent and repeatable construction processes are also the foundations of an effective health and safety environment on site, which will always be our number one priority.

We continue to seek opportunities to replan our sites. This is an ongoing process to maintain flexibility in our product offerings and to optimise the value of the developments. Replans and replotting will continue to bring positive benefits in coverage while also enhancing the returns from these investments.

During the period, we commenced the implementation of COINS (Construction Industry Solutions) to become our core operating system. Leveraging the latest industry-specific technology will provide some immediate benefits. It will increase our visibility and control of costs and provide greater insights and reporting tools to all levels of management. It is also the most utilised platform in the sector and is anticipated to be quickly adopted by our workforce. We expect to start transitioning onto COINS in late 2021.

Exceptional inventory impairment

As the business came out of the first lockdown in May 2020, the overwhelming consensus amongst market commentators was that house prices would fall sharply given the expected economic consequences of the pandemic. At this time, Crest Nicholson had some zero or low margin sites which would require impairing if this scenario were to be realised. This was the context for the exceptional net realisable value (NRV) provision that we made at HY20, as we applied an assumed 7.5% reduction in residential selling prices and a 32.0% reduction in commercial values across our whole portfolio.

In the short term these forecasts have proven to be pessimistic. The general economic backdrop has remained stable due to the significant and early interventions from the Government. The housing market has performed strongly, benefiting from remaining open throughout the pandemic, the suspension of stamp duty and changing working habits. All these factors have encouraged people to move home and resulted in house price inflation.

Accordingly, we have taken the decision to reassess the NRV provision without a forecast 7.5% residential sales price fall for all but one scheme. We have retained the 7.5% residential sales price fall assumption for the expected credit loss on the amounts loaned to the joint venture that holds the London Chest Hospital development, given its complexity and location. We have also retained the 32.0% commercial sales price fall assumption relating to commercial property, where market conditions remain challenging.

Although a large proportion of this provision has, or will be utilised to trade out of complex, mostly apartment-based legacy schemes, releasing the remaining balance has created an exceptional credit to the income statement of GBP7.6m.

Build costs and supply chain

Towards the end of the first half, we started to experience inevitable delays and shortages in labour and materials due to the fractured supply chains arising from the pandemic and lockdown restrictions. In most instances we managed this impact at a local level without any consequent disruption to operations.

At the start of the second half this disruption started to become more acute and we are now seeing increases in lead times for product deliveries to site and a limited number of significant price increases in certain product categories where there is greatest scarcity of supply. We expect these pressures to normalise in the medium term. However, it is possible that in the short term we will see further supply pressures start to emerge. Our move to a new standardised house type range and specification, coupled with the site replans, is delivering significant sourcing benefits to help offset these increases and we would also expect the current environment of house price inflation to help mitigate any impact to earnings.

Land investment

In order to realise our ambition to grow volumes across the business, it is important that we remain active in the land market. For Crest Nicholson this takes two forms. Firstly, drawing down land from our strategic portfolio into production, and secondly, being active and selective in the wider market for short term land. Overall, from these sources we have approved the purchase of 2,682 plots in the period at an average gross margin of 26.5%, after sales and marketing costs. This amount is above what we depleted in the half. Our new house type range and specification has enabled us to deliver efficient designs and build faster, which is allowing the Group to be more competitive than before in the land bidding process, while also delivering higher hurdle rates at the same time.

Although the market for short-term land in the best areas is more competitive than it has been for some time, as all developers look to rebuild their capacity and outlet numbers, we believe that the situation will moderate over time as the supply of sites increases. Behaviour amongst most buyers of land remains disciplined, and we have been able to acquire the amount that we need without compromising on margins or on the robust assumptions that underpin our bids.

Combustible materials provision

We recognise the review of building materials related to fire risks continues to evolve with changes to Building Regulations and Fire Safety Regulations, Government guidance and the way they are interpreted.

Upon joining the Group in 2019, the new Executive Leadership Team immediately conducted a detailed review of all current and legacy buildings to identify where there may be remediation requirements for combustible materials. This resulted in an exceptional charge to the income statement of GBP18.4m in FY19. This charge covered those buildings that we legally own or where a legal or constructive obligation to remedy the building was deemed to exist.

The Group continues to conduct a detailed periodic review of all ongoing remediation works including the assessment of costs to complete. As the year has progressed, within this changing and complex environment, we have reassessed the estimates of costs and likely duration of works. This has resulted in a GBP7.9m net exceptional charge to the income statement.

We continue to assess and engage with the HBF on the impact of the proposed construction levy tax for combustible materials.

Regulatory change

The industry is facing an unprecedented level of change over the coming years. The UK's plans to decarbonise the economy will inevitably change the specification and technical designs of what we build. The proposed changes to the UK's planning system are also transformational and will change the way we interact with several stakeholders.

Our industry has an important role to play in reducing carbon emissions and we welcome ambitious regulations to mitigate our sector's impact on the climate. The Future Homes Standard will see new homes delivered that are zero carbon ready. This will require us to make changes to how we design and build our homes and we are actively looking at opportunities to improve fabric efficiency and researching new fossil fuel-free heating technologies. We believe that these challenges can be successfully overcome by working closely with our suppliers and Government to effectively manage the timeline and risks of transition, and to ensure that our customers benefit from these changes.

Sustainability update

We recognise our role as a responsible builder and are committed to playing our part in achieving a net zero carbon economy. Sustainability is effectively embedded into our business strategy as one of its four foundations. We continue to integrate sustainability throughout the business to deliver value for our stakeholders. Alongside our focus on placemaking, we remain committed to delivering high quality, sustainable communities.

As announced in our FY20 results, we launched targets to reduce our carbon emissions (scopes 1 and 2) intensity by 25%, waste intensity by 15% and to purchase 100% renewable electricity, all by 2025. We are actively implementing initiatives to reduce our environmental impact. This has included developing a new suite of reports that enable us to monitor processes and activities at a site level to optimise energy and fuel usage and reduce safety risks.

We also appreciate that our scope 3 emissions, both from the homes we deliver to customers and the materials sourced from our supply chain, are a significant part of our carbon footprint. The Future Homes Standard will see us delivering zero carbon ready homes and we are working with our supply chain to collate data to seek ways of reducing upstream emissions.

We actively engage with the HBF and Future Homes Taskforce and recently joined the Supply Chain Sustainability School as we collaborate with industry peers, supply chain, Government and our partners to deliver social value while protecting our environment.

Longcross Film Studio divestment

The sale of our 50% equitable interest in Longcross Film Studio announced on 14 May 2021, supports one of the Group's five strategic priorities to utilise and maximise the value of its land portfolio. We expect our proceeds from this transaction to deliver a contribution in excess of GBP10.0m to APBT for FY21 and the receipt of GBP45.0m cash consideration by the end of the financial year.

The Group continues to hold a 50% equitable interest in the remaining 195 acres of Longcross Garden Village in a joint venture with Aviva. This prime site is expected to deliver up to 1,700 homes. The scheme is allocated for residential and ancillary development in the adopted Runnymede Borough Council Local Plan. It is intended that Crest Nicholson will develop and complete its share of this site in the future.

Outlook

We have started the year with a strong trading performance and are now approximately 93% sold against our full year revenue target. Production levels are being maintained to align with these rates of sale. As we continue to successfully implement our strategy, including the Longcross Film Studio contribution, we are pleased to announce we now expect FY21 APBT to be at least GBP100.0m.

Having completed the first part of our turnaround strategy, transforming the balance sheet and implementing our operational efficiency programme, our focus has now moved to rebuilding operating margins back to industry-normal levels.

Although we will make significant progress this year, our margin recovery in FY21 will continue to be impacted by our lower margin legacy sites. In this specific regard we continue to target bulk deal opportunities at relevant schemes to add to those already announced at Old Vinyl, Hayes and Sherborne Wharf, Birmingham at FY20. As we enter FY22 lower margin schemes will have a less dilutive impact on margins and the effect of our new land purchases, delivered predominantly with our new house type range and associated operational efficiencies, will accelerate the margin recovery process.

Our five existing regional divisions have capacity to deliver at least 3,250 homes per year, but in the longer term we wish to grow volumes beyond this level. Accordingly, we are evaluating options to enter new geographical markets.

We expect to see a stable market in the next few years with the demand for our products remaining robust, supply chain pressures moderating and more land becoming available. As such we are confident about the medium-term prospects of Crest Nicholson.

We look forward to setting out more detail of our strategy, including our future growth plans and long-term financial targets, at our Capital Markets Day in October 2021.

Financial Review

Completions and revenue

Open market (private) completions increased 82.6% to 701 (HY20: 384). Prior half year completions were significantly impacted by the first COVID-19 lockdown and the initial uncertainty surrounding the housing market. The Group recorded a lower level of affordable completions down to 198(1) (HY20: 208), and a lower level of bulk completions down to 118(1) (HY20: 183), reflecting the strong comparator for bulk completions in the first half of last year. Overall completions increased 31.2% to 1,017(1) (HY20: 775).

Open market (private) ASP was down 6.1% to GBP398k(2) (HY20: GBP424k) as we continue to trade out of our legacy London sites and our Midlands division continues to grow within the overall mix. Affordable ASP was up 26.6% to GBP176k(2) (HY20: GBP139k) principally due to the change to the equivalent unit approach, not reflected in the comparative. Group revenue, excluding joint venture revenue, of GBP13.1m (HY20: GBP2.4m), increased 35.2% to GBP324.5m (HY20: GBP240.0m) in the first half.

Sales

Sales rates as measured by SPOW, were 0.69 for the period compared to 0.46 for the prior half. The improvement reflects the strong housing market trading conditions experienced in the first half compared to the first COVID-19 lockdown and initial uncertainty in the comparable period.

Sales outlets were 57 (HY20: 64) in the period. The pandemic continues to cause delays to the acquisition process and planning and technical approvals of developments for all housebuilders. Over the medium term the Group expects to deliver volume growth and increase its number of outlets.

Forward sales as at 18 June 2021 were 2,771 units (at 19 June 2020 : 2,715) and GBP691.8m gross development value (GDV) (at 19 June 2020: GBP575.1m).

Operating profit and margin

Adjusted operating profit increased to GBP40.0m (HY20: GBP11.1m), with adjusted operating profit margin also increasing to 12.3% (HY20: 4.6%). The key driver of this strong improvement was delivered through the recovery in adjusted gross margin rate, up 450bps on prior year to 19.5% (HY20: 15.0%). The Group has recognised a comparatively lower number of legacy sites with weaker margins and is starting to benefit from the effects of the operational efficiency programme. These include the specification savings, the incremental margin from site replans as well as lower sales and marketing costs. For FY21 the Group expects the gross margin rate to be around 19.0%, reflecting the recognition of two weaker schemes in the second half, offset by the contribution from the Longcross Film Studio. For FY22 the Group expects the gross margin rate to increase to at least 21.0%.

Operating profit after exceptional items for the first half was GBP39.7m (HY20: GBP44.0m operating loss) reflecting the improved gross margin, operational efficiencies and lower exceptional items than HY20.

The Group also maintained a strong focus on overheads, with administrative expenses in the period down to GBP23.1m (HY20: adjusted administrative expenses GBP24.8m), which includes the repayment in full of the GBP2.5m Government Job Retention Scheme grant in December 2020. The reduction in administrative expenses demonstrates continuing progress in reducing the underlying overhead position.

(1) HY21 includes joint venture units at full unit count (HY20: Group's share of joint venture units). HY21 is also on an equivalent unit basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale (HY20: no equivalent unit allocation to land sale element). This approach reflects the Group's actual production output and also removes the distortive impact on ASPs of land sales.

(2) HY21 is on an equivalent unit basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale (HY20: no equivalent unit allocation to land sale element). HY21 ASP calculation includes joint venture units and sales prices at full unit value (HY20: Group's share of joint venture units).

Exceptional items

During the period the Group recorded a net exceptional credit before tax of GBP0.2m (HY20: GBP55.7m exceptional charge).

This credit comprised three elements: a net combustible materials charge of GBP7.9m (HY20: GBPnil), an inventory impairment credit of GBP7.6m (HY20: GBP43.2m charge) and a credit to finance expense of GBP0.5m (HY20: GBP0.6m charge). Detailed explanations for each of these items can be found in note 5. In the prior half year the Group also recorded restructuring costs of GBP4.5m and net impairment losses on financial assets of GBP7.4m.

In the year ended 31 October 2019 the Group considered the latest Government guidance notes in respect of combustible materials, fire risk and protection and regulatory compliance on completed developments. Following a detailed review of current and legacy buildings the Group recorded an exceptional charge of GBP18.4m where it believed a legal or constructive obligation to remedy the buildings existed. In the year ended 31 October 2020 the Group added to this provision by recording an exceptional net charge of GBP0.6m.

Against a complex and continually evolving backdrop the Group continues to carefully assess and update its anticipated obligations in this area. During the period the Group has recorded an exceptional charge of GBP10.3m to cover further expected remediation costs. Approximately half of this charge relates to revisions of forecasts on the previously identified programme of works and the other half relates to the inclusion of newly identified buildings now in scope. This has been offset by a GBP2.4m exceptional credit, relating to contractual recoveries from subcontractors and architects, resulting in a net combustible materials charge of GBP7.9m.

At the outset of the COVID-19 pandemic the Group considered the consensus of market commentary predicting significant contractions in house price volumes and prices. Accordingly, at 30 April 2020 the Group recorded a GBP33.9m net realisable value (NRV) charge and GBP9.3m of abortive work-in-progress. The NRV charge was based on an assumed 7.5% sales price reduction for residential properties in the portfolio and 32.0% for commercial units. Site specific provisions were also applied to schemes where the Group anticipated that further price action would be needed in a challenging market. These schemes share common characteristics of being complex, urban-located and predominantly comprise apartment accommodation.

Since establishing this provision, the housing market has performed strongly, through a combination of Government support and home movers responding to the COVID-19 impact on their lifestyles and ways of working. The Group has therefore decided to release the remaining, unrequired balance of the 7.5% sales price provision on all schemes apart from the London Chest Hospital. The Group has previously recorded an expected credit loss on the amounts loaned to the joint venture that holds the London Chest Hospital development and considers that this scheme still represents the characteristics of a complex, legacy scheme outlined above. Releasing the balance of this 7.5% provision has resulted in a GBP7.6m (HY20: GBP43.2m charge) exceptional credit in the period. The Group has not released the element of unutilised provision associated with commercial units due to continued uncertainty in this segment of the market.

The GBP0.5m credit (HY20: GBP0.6m charge) to finance expense relates to the Group's shared equity loan portfolio. The prior period charge reflects the application of the 7.5% sales price reduction outlined above, and in line with the removal of this assumption, this now results in an exceptional credit in the period.

Tax on exceptional items is GBPnil (HY20: GBP11.6m tax credit).

Financing and net debt

At 30 April 2021 the Group had net cash of GBP130.4m (HY20: GBP93.3m net debt). Net debt and land creditors were GBP48.1m (HY20: GBP317.2m). This significant improvement in the Group's liquidity position reflects the continued progress in closely managing work-in-progress, remaining disciplined in land acquisition, and trading out of complex legacy schemes, where it is economically sensible to do so. At 30 April 2021 the Group's GBP250.0m Revolving Credit Facility is undrawn (HY20: GBP250.0m drawn) and has remained so throughout the half.

Average net cash during the period was GBP80.5m (HY20: GBP125.0m net debt) and the Group is ungeared (HY20: 10.4% geared). Given the expected cash inflow from the sale of the Longcross Film Studio in the second half, and assuming the housing market remains stable in the pandemic environment, the Group expects the FY21 closing net cash position to be around GBP170.0m (FY20: GBP142.2m net cash).

Taxation

The effective tax rate applied to adjusted profit for the period was 20.2% (HY20: 20.9% tax rate on adjusted loss). This reflects the anticipated full year effective rate and is higher than the statutory rate of 19.0%.

Earnings per share

Adjusted basic earnings per share was 11.2 pence (HY20: 1.4 pence), reflecting the improved trading performance year-on-year. Earnings per share was 11.2 pence (HY20: loss per share 15.8 pence).

Dividend

The Board has declared an interim dividend of 4.1 pence per share, payable on 14 October 2021 to shareholders on the register on 24 September 2021. The dividend represents approximately one third of the dividend expected to be paid in respect of the financial year ending 31 October 2021.

Land and planning

The land market has become increasingly competitive during the first half against a backdrop of strong demand for new homes and developers looking to rebuild their capacity. Within this context the Group has remained selective and disciplined in its approach to new land acquisition but has also been able to take advantage of its significantly enhanced liquidity position.

Accordingly, in the period the Group approved the purchase of 2,682 plots at an average gross margin of 26.5%, after sales and marketing costs.

At 30 April 2021 the short-term land portfolio includes 15,138(1) (HY20: 16,263) plots. 760 (HY20: 422) plots were added in the period across three sites (HY20: three sites). The strategic portfolio now contains 22,176 (HY20: 21,383) plots with no plots added in the period. The combined assessed GDV of both portfolios is GBP11.9bn (HY20: GBP11.3bn). The increase compared to prior period is principally driven by the release of the remaining residential 7.5% NRV provision and the impact the assumption has on the GDV valuation. See note 5 for more details.

(1) HY21 includes joint venture units at full unit count (HY20: Group's share of joint venture units). HY21 is also on an equivalent unit basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale (HY20: no equivalent unit allocation to land sale element). This approach reflects the Group's actual production output and also removes the distortive impact on ASPs of land sales.

Principal Risks and Uncertainties

The Group's financial and operational performance as well as reputation are subject to several potential risks and uncertainties. These risks could, either separately or in combination, have a material impact on the Group's performance and shareholder returns.

Our divisional boards consider their individual risk registers on a half-yearly basis. The outcome of the divisional risk reviews and the Group's principal risks are carefully considered by the Executive Leadership Team. The Audit and Risk Committee and the Board have oversight of the Group's emerging and principal risks.

Emerging risks

Emerging risks are identified through horizon scanning by the Executive Leadership Team and the Board focusing on industry and macro-economic trends, complemented by the divisional boards reporting on potential significant impacts to future performance.

Production delays

There has been longer than anticipated delays and shortages in labour and materials principally because of the COVID-19 pandemic and Brexit disruption. This has coincided with strong levels of construction output with housebuilders and infrastructure projects (such as HS2) all benefiting from Government support to stay open and keep building. This has led to increased costs for certain materials and labour. We have mitigated these increased costs by gains achieved through standardisation sourcing benefits across the business. While we are currently delivering our planned levels of production, we expect these challenges to continue throughout the rest of the year before normalising next year.

Climate change

Climate change has short, medium and long-term implications for the business. The risks associated with climate change comprise transitional risk, such as emerging policy and the increasing cost of energy, and physical risks, including flooding, overheating and water shortages.

Regulatory change

We anticipate this risk will continue to evolve due to changes in regulations concerning energy efficiency and sustainability alongside legacy matters, such as combustible materials.

Reputational impact

Several legacy issues have impacted the perception of the housebuilding sector. If these issues continue to have negative impact on former customers and other stakeholders, there is a potential that this could become a principal risk.

Principal risks

Our principal risks are unchanged from those set out on pages 60 to 64 of the Group's Annual Integrated Report for the year ended 31 October 2020.

 
 Risk                        Risk description 
 Epidemic or pandemic             An epidemic or pandemic of an infectious disease 
  from infectious diseases         may lead to the imposition of Government controls 
                                   on the movement of people, including social 
                                   distancing, with the cessation of large parts 
                                   of the economy for a significant period of time. 
 
                                   This could lead to: 
                                    *    Short to medium-term impact to consumer confidence 
 
 
                                    *    Lack of liquidity and/or mortgage availability in the 
                                         mortgage market 
 
 
                                    *    Disruption to our ability to deliver services to 
                                         customers in the event of supply shortages and/or 
                                         widespread loss of key people (both employees and 
                                         subcontractors), with adverse impacts on customer 
                                         volumes and experience. 
 
 
 
                                   A prolonged economic downturn could materially 
                                   increase our pension deficit and associated 
                                   contributions. 
 
                                   Adverse impacts to the economy could also affect 
                                   our cash position and ability to fund investment 
                                   projects and ongoing operations. 
                            ------------------------------------------------------------------ 
 Demand for housing          A decline in macro-economic conditions in the 
                              UK, which negatively impacts the UK residential 
                              property market and reduces the ability for 
                              people to be able to buy homes, either through 
                              unemployment or low employment, constraints 
                              on mortgage availability, or higher costs of 
                              mortgage funding. 
 
                              Changes to regulations and taxes, for example 
                              stamp duty, taxes on additional home purchases 
                              and the impact of government schemes like Help 
                              to Buy. 
 
                              Decreased sales volumes occurring from a drop 
                              in housing demand, could see an increasing number 
                              of units held as unreserved stock and part-exchange 
                              stock with potential cash loss on final sales. 
 
                              An over-reliance on Help to Buy and other Government-backed 
                              ownership schemes to boost sales volumes and 
                              rates. 
                            ------------------------------------------------------------------ 
 Safety, health &            A significant health and safety event could 
  environment (SHE)           result in fatality, serious injury or a dangerous 
                              situation to an individual. 
 
                              Significant environmental damage could be caused 
                              by operations on site or in our offices (for 
                              example, water contamination from pollution). 
 
                              Lack of recognition of the importance of the 
                              wellbeing of employees. 
 
                              These incidents or situations could have an 
                              impact to the personal lives of our stakeholders, 
                              adverse effect on our reputation and ability 
                              to secure public contracts or, if illegal, prosecution, 
                              or significant financial losses. 
 
                              In addition, a SHE failure could lead to production 
                              delays and impact our ability to achieve financial 
                              forecasts and targets. 
                            ------------------------------------------------------------------ 
 Access to site labour       Rising production levels across the industry 
  and materials               put pressure on our materials supply chain. 
 
                              The industry is struggling to attract the next 
                              generation of talent into skilled trade professions. 
 
                              There is also a potential of a reduction of 
                              labour availability from the EU market. Increased 
                              use of more modern methods of construction could 
                              result in a labour market unwilling and unable 
                              to meet the skills and knowledge required and 
                              a materials supply chain lacking the scope and 
                              capacity. 
 
                              Given the current UK economic climate and uncertainty 
                              there is an enhanced likelihood of suppliers 
                              and subcontractors facing insolvency. 
                            ------------------------------------------------------------------ 
 Customer service            Customer service and/or build quality falls 
  and quality                 below our required standards resulting in reduction 
                              of reputation and trust, which could impact 
                              sales rates and volumes. 
 
                              Unforeseen product safety or quality issues 
                              or latent defects emerge due to new construction 
                              methods. 
 
                              Failure to effectively implement new regulations 
                              on build quality and respond to emerging technologies. 
 
                              Government guidance and mortgage lending policy 
                              for apartments with cladding has changed following 
                              the Grenfell tragedy. 
                            ------------------------------------------------------------------ 
 Information security        Cyber security risks such as data breaches and 
  and business continuity     hacking leading to the loss of operational systems, 
                              market-sensitive/competitive information or 
                              other critical data which risks non-compliance 
                              with data privacy requirements and a failure 
                              of our IT systems. 
 
                              This in turn could result in a higher risk of 
                              fraud and, as a result, financial penalties 
                              and an impact to reputation. 
                            ------------------------------------------------------------------ 
 Laws, policies and          This risk relates to both new regulations and 
  regulations                 legacy matters. 
 
                              Upcoming regulations and guidance 
                              Ongoing uncertainty surrounding the requirements 
                              of future regulatory changes could impact our 
                              ability to make medium and longer-term decisions. 
 
                              The planning environment continues to evolve. 
                              The interpretation of the National Planning 
                              Policy Framework continues to develop in an 
                              environment where local authorities and public 
                              sector resources are constrained. 
 
                              Failure to effectively implement new environmental 
                              regulations including the Future Homes Standard 
                              and net biodiversity gain. 
 
                              Legacy matters 
                              Failure to plan and implement the guidance notes 
                              issued by the Government in respect of combustible 
                              materials and fire safety. 
 
                              The changes to the guidance are becoming more 
                              stringent and impacting a number of our former 
                              developments and customers. 
                            ------------------------------------------------------------------ 
 Build cost management       Build cost inflation and unforeseen cost increases 
                              driven by demands in the supply chain or failure 
                              to implement adequate cost control systems. 
 
                              Lack of awareness and understanding of external 
                              factors that may impact build costs including 
                              complex planning permissions and emerging sustainability 
                              and environmental regulations. 
                            ------------------------------------------------------------------ 
 Attracting and retaining    An increasing skills gap in the industry at 
  our skilled people          all levels resulting in difficulty with recruiting 
                              the right and diverse mix of people for vacant 
                              positions. 
 
                              Employee turnover and inducting and embedding 
                              new employees, alongside the cost of wages increasing 
                              because of inflated offers in the market. 
 
                              Loss of knowledge within the Group which could 
                              result in inefficiencies, productivity loss, 
                              delays to business operations, increasing costs, 
                              and an overuse or reliance on consultants and 
                              the supply chain. 
                            ------------------------------------------------------------------ 
 Solvency and liquidity      Cash generation for the Group is a key part 
                              of our updated strategy, and our cash headroom 
                              could be affected by economic pressures that 
                              result in delayed receipts and potentially lower 
                              sales in the short to medium-term. 
 
                              Commitments to significant land and build obligations 
                              that are made ahead of revenue certainty. 
 
                              Fall in sales during economic slowdown and lack 
                              of available debt finance. 
 
                              Reductions in margins as average selling price 
                              falls, inability to restructure appropriately 
                              and unsustainable levels of work-in-progress. 
                            ------------------------------------------------------------------ 
 

Statement of Directors' Responsibilities

The Directors confirm that these condensed consolidated half year financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

-- an indication of important events that have occurred during the first six months 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 financial year; and

-- material related-party transactions in the first six months and any material changes in the related party transactions described in the last Annual Integrated Report.

The current Directors of Crest Nicholson Holdings plc are listed in the Annual Integrated Report for the year ended 31 October 2020.

A list of Directors is maintained on the Crest Nicholson website: www.crestnicholson.com . As previously notified, Sharon Flood will be stepping down as a Director on 30 June 2021.

By order of the Board

Peter Truscott

Chief Executive

24 June 2021

Registered number 6800600

CREST NICHOLSON HOLDINGS PLC

HALF YEAR RESULTS FOR THE SIX MONTHSED 30 APRIL 2021

CONDENSED CONSOLIDATED INCOME STATEMENT

 
                     Note              Half     Half year        Half              Half     Half year        Half              Full     Full year      Full 
                                       year         ended        year              year         ended        year              year         ended      year 
                                      ended                     ended             ended                     ended             ended                   ended 
                                   30 April      30 April    30 April          30 April      30 April    30 April        31 October    31 October        31 
                                                                                                                                                    October 
                                       2021          2021        2021              2020          2020        2020              2020          2020      2020 
                                  Unaudited     Unaudited   Unaudited         Unaudited     Unaudited   Unaudited           Audited       Audited   Audited 
                                              Exceptional                                 Exceptional               Pre-exceptional   Exceptional 
                                                    items                                       items                          item    item (note 
                            Pre-exceptional         (note               Pre-exceptional         (note                                          5) 
                                      items            5)       Total             items            5)       Total                                     Total 
                                       GBPm          GBPm        GBPm              GBPm          GBPm        GBPm              GBPm          GBPm      GBPm 
 
 Revenue              4               324.5             -       324.5             240.0             -       240.0             677.9             -     677.9 
 Cost of sales                      (261.2)         (0.3)     (261.5)           (204.1)        (43.2)     (247.3)           (570.2)        (43.8)   (614.0) 
                           ----------------  ------------  ----------  ----------------  ------------  ----------  ----------------  ------------  -------- 
 Gross 
  profit/(loss)                        63.3         (0.3)        63.0              35.9        (43.2)       (7.3)             107.7        (43.8)      63.9 
 Administrative 
  expenses                           (23.1)             -      (23.1)            (24.8)         (4.5)      (29.3)            (50.3)         (7.5)    (57.8) 
 Net impairment 
  losses on 
  financial 
  assets                              (0.2)             -       (0.2)                 -         (7.4)       (7.4)             (0.3)         (7.6)     (7.9) 
                           ----------------  ------------  ----------  ----------------  ------------  ----------  ----------------  ------------  -------- 
 Operating 
  profit/(loss)       6                40.0         (0.3)        39.7              11.1        (55.1)      (44.0)              57.1        (58.9)     (1.8) 
 Finance income                         1.5             -         1.5               1.7             -         1.7               3.4             -       3.4 
 Finance expense                      (6.3)           0.5       (5.8)             (7.2)         (0.6)       (7.8)            (14.1)         (0.5)    (14.6) 
                           ----------------  ------------  ----------  ----------------  ------------  ----------  ----------------  ------------  -------- 
 Net finance 
  (expense)/income                    (4.8)           0.5       (4.3)             (5.5)         (0.6)       (6.1)            (10.7)         (0.5)    (11.2) 
 Share of 
  post-tax 
  profits/(losses) 
  of joint 
  ventures 
  using the 
  equity method       10                0.9             -         0.9             (1.1)             -       (1.1)             (0.5)             -     (0.5) 
                           ----------------  ------------  ----------  ----------------  ------------  ----------  ----------------  ------------  -------- 
 Profit/(loss) 
  before tax                           36.1           0.2        36.3               4.5        (55.7)      (51.2)              45.9        (59.4)    (13.5) 
 
 Income tax 
  (expense)/credit    7               (7.3)             -       (7.3)             (0.9)          11.6        10.7             (8.5)          11.3       2.8 
 
 Profit/(loss) 
  for the period 
  attributable 
  to equity 
  shareholders                         28.8           0.2        29.0               3.6        (44.1)      (40.5)              37.4        (48.1)    (10.7) 
                           ----------------  ------------  ----------  ----------------  ------------  ----------  ----------------  ------------  -------- 
 
 Earnings/(loss) 
  per ordinary 
  share 
 Basic                8               11.2p                     11.3p              1.4p                   (15.8)p             14.6p                  (4.2)p 
 Diluted              8               11.2p                     11.3p              1.4p                   (15.8)p             14.5p                  (4.2)p 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
                                               Note        Half year        Half year    Full year 
                                                               ended            ended        ended 
                                                            30 April         30 April   31 October 
                                                      2021 Unaudited   2020 Unaudited         2020 
                                                                                           Audited 
                                                                GBPm             GBPm         GBPm 
 Profit/(loss) for the period attributable 
  to equity shareholders                                        29.0           (40.5)       (10.7) 
 Other comprehensive income/(expense): 
 Items that will not be reclassified 
  to the consolidated income statement: 
 Actuarial gains/(losses) of defined 
  benefit schemes                               11              17.2            (5.7)       (13.8) 
 Change in deferred tax on actuarial 
  gains/(losses) of defined benefit schemes                    (3.3)              1.1          2.7 
                                                     ---------------  ---------------  ----------- 
 Other comprehensive income/(expense) 
  for the period net of income tax                              13.9            (4.6)       (11.1) 
                                                     ---------------  ---------------  ----------- 
 Total comprehensive income/(expense) 
  for the period attributable to equity 
  shareholders                                                  42.9           (45.1)       (21.8) 
                                                     ---------------  ---------------  ----------- 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
                                               Note      Share      Share    Retained    Total 
                                                       capital    premium    earnings 
                                                                  account 
                                                          GBPm       GBPm        GBPm     GBPm 
 Half year ended 30 April 2021 (Unaudited) 
 Balance at 1 November 2020 - originally 
  reported                                                12.8       74.2       744.2    831.2 
 Change in accounting policy - land 
  options                                       19           -          -       (5.9)    (5.9) 
                                                     ---------  ---------  ----------  ------- 
 Balance at 1 November 2020 - Restated(1)                 12.8       74.2       738.3    825.3 
 Profit for the period attributable 
  to equity shareholders                                     -          -        29.0     29.0 
 Actuarial gains of defined benefit 
  schemes                                       11           -          -        17.2     17.2 
 Change in deferred tax on actuarial 
  gains of defined benefit schemes                           -          -       (3.3)    (3.3) 
                                                     ---------  ---------  ----------  ------- 
 Total comprehensive income for the 
  period                                                     -          -        42.9     42.9 
 Transactions with shareholders: 
 Equity-settled share-based payments                         -          -         0.7      0.7 
 Deferred tax on equity-settled share-based 
  payments                                                   -          -         0.2      0.2 
                                                     ---------  ---------  ----------  ------- 
 Balance at 30 April 2021                                 12.8       74.2       782.1    869.1 
                                                     ---------  ---------  ----------  ------- 
 (1) Restated to reflect the change in accounting policy on land options. 
  See note 19. 
 Half year ended 30 April 2020 (Unaudited) 
 Balance at 1 November 2019 - originally 
  reported                                                12.8       74.2       766.9    853.9 
 Change in accounting policy - land 
  options                                       19           -          -       (5.9)    (5.9) 
                                                     ---------  ---------  ----------  ------- 
 Balance at 1 November 2019 - Restated(1)                 12.8       74.2       761.0    848.0 
 Loss for the period attributable 
  to equity shareholders                                     -          -      (40.5)   (40.5) 
 Actuarial losses of defined benefit 
  schemes                                       11           -          -       (5.7)    (5.7) 
 Change in deferred tax on actuarial 
  losses of defined benefit schemes                          -          -         1.1      1.1 
                                                     ---------  ---------  ----------  ------- 
 Total comprehensive expense for 
  the period                                                 -          -      (45.1)   (45.1) 
 Transactions with shareholders: 
 Equity-settled share-based payments                         -          -         0.3      0.3 
 Purchase of own shares                                      -          -       (1.5)    (1.5) 
 Transfers in respect of share options                       -          -         0.4      0.4 
                                                     ---------  ---------  ----------  ------- 
 Balance at 30 April 2020                                 12.8       74.2       715.1    802.1 
                                                     ---------  ---------  ----------  ------- 
 (1) Restated to reflect the change in accounting policy on land options. 
  See note 19. 
 Year ended 31 October 2020 (Audited) 
 Balance at 1 November 2019 - originally 
  reported                                                12.8       74.2       766.9    853.9 
 Change in accounting policy - land 
  options                                       19           -          -       (5.9)    (5.9) 
                                                     ---------  ---------  ----------  ------- 
 Balance at 1 November 2019 - Restated(1)                 12.8       74.2       761.0    848.0 
 Loss for the year attributable to 
  equity shareholders                                        -          -      (10.7)   (10.7) 
 Actuarial losses of defined benefit 
  schemes                                       11           -          -      (13.8)   (13.8) 
 Change in deferred tax on actuarial 
  losses of defined benefit schemes                          -          -         2.7      2.7 
                                                     ---------  ---------  ----------  ------- 
 Total comprehensive expense for 
  the year                                                   -          -      (21.8)   (21.8) 
 Transactions with shareholders: 
 Equity-settled share-based payments                         -          -         0.5      0.5 
 Purchase of own shares                                      -          -       (1.8)    (1.8) 
 Transfers in respect of share options                       -          -         0.4      0.4 
                                                     ---------  ---------  ----------  ------- 
 Balance at 31 October 2020                               12.8       74.2       738.3    825.3 
                                                     ---------  ---------  ----------  ------- 
 

(1) Restated to reflect the change in accounting policy on land options. See note 19.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
                                                              Restated(1)   Restated(1) 
                                           Note       As at         As at         As at 
                                                   30 April      30 April    31 October 
                                                       2021          2020          2020 
                                                  Unaudited     Unaudited       Audited 
 ASSETS                                                GBPm          GBPm          GBPm 
 Non-current assets 
  Intangible assets                                    29.0          29.0          29.0 
  Property, plant and equipment                         1.7           2.5           2.0 
  Right-of-use assets                                   4.7           7.2           6.0 
  Investments in joint ventures             10          5.3           2.1           3.7 
  Financial assets at fair value 
   through profit and loss                              3.5           4.1           4.6 
  Deferred tax assets                                   7.0           7.2           9.8 
  Retirement benefit surplus                11          8.6             -             - 
  Trade and other receivables                          59.6          56.8          55.6 
                                                 ----------  ------------  ------------ 
                                                      119.4         108.9         110.7 
                                                 ----------  ------------  ------------ 
 Current assets 
  Inventories                               12      1,038.1       1,161.0       1,017.7 
  Financial assets at fair value 
   through profit and loss                              1.7           1.6           0.8 
  Trade and other receivables                          78.7         106.1          95.2 
  Current income tax receivable                         4.9          17.3           3.4 
  Cash and cash equivalents                 13        228.0         255.5         239.4 
                                                 ----------  ------------  ------------ 
                                                    1,351.4       1,541.5       1,356.5 
                                                 ----------  ------------  ------------ 
 Total assets                                       1,470.8       1,650.4       1,467.2 
                                                 ----------  ------------  ------------ 
 
 LIABILITIES 
 Non-current liabilities 
  Interest-bearing loans and borrowings     13       (97.6)       (346.9)        (97.2) 
  Trade and other payables                          (126.0)       (129.8)       (151.7) 
  Lease liabilities                                   (3.6)         (5.6)         (4.7) 
  Deferred tax liabilities                  11        (1.6)             -             - 
  Retirement benefit obligations            11            -         (8.4)        (13.8) 
  Provisions                                14        (8.1)         (5.1)         (3.4) 
                                                 ----------  ------------  ------------ 
                                                    (236.9)       (495.8)       (270.8) 
                                                 ----------  ------------  ------------ 
 Current liabilities 
  Interest-bearing loans and borrowings     13            -         (1.9)             - 
  Trade and other payables                          (347.2)       (339.8)       (357.0) 
  Lease liabilities                                   (2.1)         (2.6)         (2.3) 
  Provisions                                14       (15.5)         (8.2)        (11.8) 
                                                 ----------  ------------  ------------ 
                                                    (364.8)       (352.5)       (371.1) 
                                                 ----------  ------------  ------------ 
 Total liabilities                                  (601.7)       (848.3)       (641.9) 
                                                 ----------  ------------  ------------ 
 
 Net assets                                           869.1         802.1         825.3 
                                                 ----------  ------------  ------------ 
 
 EQUITY 
  Share capital                             17         12.8          12.8          12.8 
  Share premium account                     17         74.2          74.2          74.2 
  Retained earnings                                   782.1         715.1         738.3 
                                                 ----------  ------------  ------------ 
 Total equity                                         869.1         802.1         825.3 
                                                 ----------  ------------  ------------ 
 

(1) Restated to reflect the change in accounting policy on land options. See note 19.

Crest Nicholson Holdings plc Registered number 6800600. These condensed consolidated half year financial statements were approved by the Board of Directors on 24 June 2021.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 
                                                                Restated(1) 
                                                    Half year     Half year    Full year 
                                                        ended         ended        ended 
                                                     30 April      30 April   31 October 
                                                         2021          2020         2020 
                                                    Unaudited     Unaudited      Audited 
                                                         GBPm          GBPm         GBPm 
 Cash flows from operating activities 
 Profit/(loss) for the period attributable 
  to equity shareholders                                 29.0        (40.5)       (10.7) 
  Adjustments for: 
  Depreciation on property, plant and 
   equipment                                              0.6           3.8          4.4 
  Depreciation on right-of-use assets                     1.2           1.4          2.7 
  Net finance expense                                     4.3           6.1         11.2 
  Share-based payment expense                             0.7           0.3          0.5 
  Share of post-tax result of joint 
   ventures using the equity method                     (0.9)           1.1          0.5 
  Movement of inventories impairment                   (12.4)          43.2         29.3 
  Net impairment of financial assets                      0.2           7.4          7.9 
  Income tax expense/(credit)                             7.3        (10.7)        (2.8) 
                                                   ----------  ------------  ----------- 
 Operating profit before changes in working 
  capital and provisions                                 30.0          12.1         43.0 
  Decrease in trade and other receivables                14.2          32.7         45.8 
  (Increase)/decrease in inventories                    (8.0)        (60.4)         96.8 
  Decrease in trade and other payables                 (28.6)        (92.4)       (52.9) 
  Contribution to retirement benefit 
   obligations                                          (5.6)         (3.7)        (6.7) 
                                                   ----------  ------------  ----------- 
 Cash generated from/(used by) operations                 2.0       (111.7)        126.0 
 
 Finance expense paid                                   (3.5)         (4.4)        (8.7) 
 Income tax paid                                        (7.4)         (8.1)        (3.1) 
 
 Net cash (used by)/generated from operating 
  activities                                            (8.9)       (124.2)        114.2 
                                                   ----------  ------------  ----------- 
 
 Cash flows from investing activities 
  Purchases of property, plant and equipment            (0.3)         (0.2)        (0.3) 
  Disposal of financial assets at fair 
   value through profit and loss                          0.6           1.0          1.3 
  Funding to joint ventures(1)                          (7.5)        (13.3)       (15.6) 
  Repayment of funding from joint ventures(1)             5.9           9.0         10.1 
  Finance income received                                 0.1           0.2          0.3 
                                                   ----------  ------------  ----------- 
 Net cash outflow from investing activities             (1.2)         (3.3)        (4.2) 
                                                   ----------  ------------  ----------- 
 
 Cash flows from financing activities 
  Repayment of bank and other borrowings                    -             -       (36.9) 
  Proceeds from borrowings                                  -         215.0            - 
  Principal elements of lease payments                  (1.3)         (1.5)        (2.9) 
  Purchase of own shares                                    -         (1.5)        (1.8) 
  Transfer in respect of share options                      -           0.4          0.4 
                                                   ----------  ------------  ----------- 
 Net cash (outflow)/inflow from financing 
  activities                                            (1.3)         212.4       (41.2) 
                                                   ----------  ------------  ----------- 
 
 Net (decrease)/increase in cash and cash 
  equivalents                                          (11.4)          84.9         68.8 
 
 Cash and cash equivalents at the beginning 
  of the year                                           239.4         170.6        170.6 
 
 Cash and cash equivalents at end of the period         228.0         255.5        239.4 
                                                   ==========  ============  =========== 
 

(1) 30 April 2020: funding to joint ventures and repayment of funding from joint ventures was shown as net funding to joint ventures of (GBP4.3m). The balance has been restated to gross up the cash flows as required by IAS 7. 31 October 2020 was previously restated (see the Group's Annual Integrated Report for the year ended 31 October 2020) .

CREST NICHOLSON HOLDINGS PLC

HALF YEAR RESULTS FOR THE SIX MONTHSED 30 APRIL 2021

NOTES TO THE CONDENSED CONSOLIDATED HALF YEAR FINANCIAL STATEMENTS (unaudited)

   1    BASIS OF PREPARATION 

The Company is a public limited company incorporated, listed and domiciled in the UK. The address of the registered office is Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN. The condensed consolidated half year financial statements consolidate the results of the Company and its subsidiaries (together referred to as the Group) and include the Group's interest in jointly controlled entities.

These condensed consolidated half year financial statements for the six months ended 30 April 2021 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the UK Financial Conduct Authority and with International Accounting Standard 34, 'Interim financial reporting', as adopted by the European Union. These condensed consolidated half year financial statements do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the Group's Annual Integrated Report for the year ended 31 October 2020, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, and international financial reporting standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

These condensed consolidated half year financial statements do not comprise statutory financial statements within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 October 2020 were approved by the Board of Directors on 26 January 2021 and delivered to the Registrar of Companies. The report of the auditor on those accounts was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These condensed consolidated half year financial statements are unaudited but have been subject to a review in accordance with International Standard on Review Engagements 2410 'Review of Interim Financial Information performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board. The auditor's review report for the period to 30 April 2021 is set out below.

Going Concern

The Group has a GBP250.0m Revolving Credit Facility (RCF) provided by its four syndicate banks which expires in June 2024. At 30 April 2021 this facility was undrawn and had remained so throughout the reporting period. Net cash at 30 April 2021 was GBP130.4m.

The Group also has placed GBP100.0m of senior loan notes at fixed interest rates which mature from 2024 to 2029. Both the RCF and senior loan notes include covenants in respect of gearing, tangible net worth and interest cover. At the outset of the COVID-19 pandemic, and throughout the subsequent disruption, the Group has acted decisively to ensure a healthy liquidity position is always maintained. As such the Group has operated within the prevailing covenants during the period and no amendments to the terms of its covenants have been made because of the pandemic's impacts.

The Group maintains detailed long-term financial forecasts which are regularly scrutinised by the Board. Forecast cash flows and profitability contained in these forecasts have had various downside test scenarios applied against them to understand whether a theoretical covenant breach could occur. The Group's principal risks and uncertainties are the basis for determining which downside tests should be applied and these are described in detail above.

The Group's management forecasts through to the end of October 2023 formed the base case model. This took into account the Directors' views on expected volumes and prices as well as build costs and production levels. In deriving the most severe, but plausible scenario and its impact on the Group's financial performance and position, the Group has modelled the following assumptions which were overlaid on the base case:

-- An immediate 15.0% sales volume reduction on all unexchanged open market and affordable units

-- An immediate 10.0% sales price reduction on all unexchanged open market units and 5.0% on affordable units

The Group has then reasonably assumed that the following mitigating actions could be taken to manage this scenario, and has modelled:

   --      Sales and marketing costs are flexed down in line with the reduced sales volume 
   --      Overhead reductions across the Group 

-- Build costs and associated cash outflows fall by 5.0%, starting 6 months after the sales price reduction, as subcontractors and suppliers reduce their prices in a lower demand environment

   --      Land spend is reduced to reflect the lower demand environment 

-- A dividend policy of 2.5 times (earnings) cover means that any dividend payment reduces if profitability is lower.

The Directors have carefully considered this severe, but plausible scenario and consider that the Group will continue to comply with all its borrowing covenants for the forecast horizon. There are further mitigating actions which the Directors could also consider which have not been modelled. The Directors consider that the Group will have adequate resources in place, for at least 12 months from the date of these results, to remain liquid and operational, and have therefore adopted the going concern basis of accounting in preparing the half year financial statements.

Critical accounting estimates and judgements

The preparation of the condensed consolidated half year financial statements under IFRS requires the Directors to make estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses and related disclosures. In applying the Group's accounting policies, the key judgements taken that have a significant impact on the financial statements, include those involving estimates, which are listed below, the judgement to present certain items as exceptional (see note 5), certain revenue policies relating to recognition over time and part exchange sales (see revenue and profit recognition accounting policy within the Group's Annual Integrated Report for the year ended 31 October 2020), and the recognition of the defined benefit pension scheme surplus (see note 11).

Estimates and associated assumptions affecting the financial statements are based on historical experience and various other factors that are believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result of new information.

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future period if the revision affects both current and future periods.

The Directors have made estimates and assumptions in reviewing the going concern assumption as detailed above. The Directors consider the key sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value of assets and liabilities are the carrying value of inventories, estimation of project profitability (both detailed within the Group's Annual Integrated Report for the year ended 31 October 2020), and, the carrying value of inventories (see note 5 and 12) and the valuation of the pension scheme assets and liabilities (see note 11).

Other areas of accounting estimates and judgements

Combustible materials

The combustible materials provision requires assumptions to be made in the calculation of the costs of interrogation, replacement materials, works to complete and disruption to customers, along with the timing of forecast expenditure. During the period the combustible materials provision has been increased following further review. If forecast remediation costs are 10.0% higher than provided, the exceptional items charge in the condensed consolidated income statement would be GBP2.2m higher. See note 5 and 14 for additional details.

Accounting policies

The principal accounting policies adopted in the condensed consolidated half year financial statements are consistent with those applied by the Group in its Annual Integrated Report for the year ended 31 October 2020 except in respect of taxation which is based on the expected effective tax rate that would be applicable to expected annual earnings, and, the impact on inventories of options purchased in respect of land and project management fee income, as detailed below.

Inventories

Options purchased in respect of land are recognised initially as a prepayment within inventories and written down on a straight-line basis over the life of the option. If planning permission is granted and the option exercised, the option is not written down during that period and its carrying value is included within the cost of land purchased. In prior periods the Group policy has been to test the carrying values of options for impairment rather than amortise on a straight-line basis. When options were exercised, previous impairments were reversed and included as part of the inventory cost. The difference in accounting treatment is GBP5.9m after tax, which has been treated as a prior year restatement (see note 19).

Adoption of new and revised standards

The following new standards, amendments to standards and interpretations are applicable to the Group and are mandatory for the first time for the financial year beginning 1 November 2020:

   --      Amendments to IFRS 3 'Business combinations' 
   --      Amendments to IAS 1 and IAS 8: Definition of material 
   --      Amendments to IFRS 9, IAS 39 and IFRS 7: Interest rate benchmark reform 
   --      Amendment to IFRS 16 Leases COVID-19: Related rent concessions 

The adoption of the amendments in the period did not have a material impact on the financial statements.

Impact of standards and interpretations in issue but not yet effective

There are a number of standards, amendments and interpretations that have been published that are not mandatory for the 31 October 2021 reporting period and have not been adopted early by the Group. The Group does not expect that the adoption of these standards, amendments and interpretations will have a material impact on the financial statements of the Group in future periods.

Alternative performance measures

The Group has adopted various Alternative Performance Measures (APMs), as presented within note 20. These measures are not defined by IFRS and therefore may not be directly comparable with other companies' APMs, and should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.

   2    SEGMENTAL REPORTING 

The Executive Leadership Team, as disclosed in the Group's Annual Integrated Report for the year ended 31 October 2020 on page 76, which is accountable to the Board, has been identified as the chief operating decision-maker for the purposes of determining the Group's operating segments. The Executive Leadership Team approves investment decisions, allocates Group resources and performs divisional performance reviews. The Group operating segments are considered to be its divisions, each of which has its own management board. All divisions are engaged in residential-led, mixed use developments in the United Kingdom and therefore, having regard to the aggregation criteria in IFRS 8, the Group has one reportable operating segment.

   3    SEASONALITY 

In common with the rest of the UK housebuilding industry, activity occurs throughout the year, with peaks in sales completions in spring and autumn. This creates seasonality in the Group's trading results and working capital. I n addition to this, the current and prior financial period results have been impacted by the COVID-19 pandemic and the related Government imposed lockdown measures, which have caused further fluctuations in the trading performance and working capital cycle.

   4    REVENUE 
 
                                                Half year   Half year    Full year 
                                                    ended       ended        ended 
                                                 30 April    30 April   31 October 
                                                     2021        2020         2020 
 Revenue type                                        GBPm        GBPm         GBPm 
 Open market housing including specification 
  upgrades                                          287.4       196.0        581.8 
 Affordable housing                                  31.3        28.6         76.6 
                                               ----------  ----------  ----------- 
 Total housing                                      318.7       224.6        658.4 
 Land and commercial sales                            3.4        14.3         17.8 
 Freehold reversions                                  2.4         1.1          1.7 
                                               ----------  ----------  ----------- 
 Total revenue                                      324.5       240.0        677.9 
                                               ----------  ----------  ----------- 
 
                                                Half year   Half year    Full year 
                                                    ended       ended        ended 
                                                 30 April    30 April   31 October 
                                                     2021        2020         2020 
 Timing of revenue recognition                       GBPm        GBPm         GBPm 
 Revenue recognised at a point in time              284.9       187.2        551.2 
 Revenue recognised over time                        39.6        52.8        126.7 
                                               ----------  ----------  ----------- 
 Total revenue                                      324.5       240.0        677.9 
                                               ----------  ----------  ----------- 
 
 Proceeds received on the disposal of part exchange properties, 
  which is not included in revenue, were GBP23.6m (30 April 2020: 
  GBP22.0m, 31 October 2020: GBP40.6m). These have been included 
  within cost of sales. 
 
                                                    As at       As at        As at 
                                                 30 April    30 April   31 October 
                                                     2021        2020         2020 
 Assets and liabilities related to contracts 
  with customers                                     GBPm        GBPm         GBPm 
 Contract assets                                     46.3        56.4         53.6 
 Contract liabilities                              (32.1)      (35.8)       (32.8) 
 

Contract assets have decreased to GBP46.3m from GBP53.6m since 31 October 2020, reflecting a lower amount of unbilled work-in-progress on affordable housing and other open market bulk sales at the period end.

Contract liabilities have reduced to GBP32.1m from GBP32.8m since 31 October 2020, reflecting a lower amount of payments on account received from customers in excess of billable work-in-progress on affordable housing and other open market bulk sales on contracts on which revenue is recognised over time.

Based on current forecasts for building and billing, management expects a significant proportion of the contract liabilities total to be recognised as revenue over the next 12 months.

   5    EXCEPTIONAL ITEMS 

Exceptional items are those which, in the opinion of the Directors, are material by size and/or non-recurring in nature and therefore require separate disclosure within the condensed consolidated income statement in order to assist the users of the financial statements in understanding what the Directors consider to be the underlying business performance of the Group. Any material reversal of these amounts will be reflected through exceptional items.

Exceptional items for the half year ended 30 April 2021 relate to the same category of items booked in previous financial periods.

 
                                            Half year  Half year   Full year 
                                                ended      ended       ended 
                                             30 April   30 April  31 October 
                                                 2021       2020        2020 
Cost of sales                                    GBPm       GBPm        GBPm 
Combustible materials charge                     10.3          -         2.6 
Combustible materials credit                    (2.4)          -       (2.0) 
                                            ---------  ---------  ---------- 
Net combustible materials charge                  7.9          -         0.6 
 
Inventory impairment (credit)/charge            (7.6)       43.2        43.2 
                                            ---------  ---------  ---------- 
Total cost of sales exceptional charge            0.3       43.2        43.8 
 
Administrative expenses 
Restructuring costs                                 -        4.5         7.5 
 
Net impairment losses on financial assets           -        7.4         7.6 
 
Net finance expense 
Finance expense (credit)/charge                 (0.5)        0.6         0.5 
Total exceptional (credit)/charge               (0.2)       55.7        59.4 
Tax credit on exceptional (credit)/charge           -     (11.6)      (11.3) 
                                            ---------  ---------  ---------- 
Total exceptional (credit)/charge after 
 tax credit                                     (0.2)       44.1        48.1 
                                            ---------  ---------  ---------- 
 

Net combustible materials charge

In the year ended 31 October 2019, following the latest Government guidance notes in respect of combustible materials, fire risk and protection, and regulatory compliance on completed developments, the Group recorded an exceptional charge of GBP18.4m.

In the year ended 31 October 2020, the Group reassessed the adequacy of the provision held, resulting in a net combustible materials charge of GBP0.6m, comprising a charge of GBP2.6m and a credit of GBP2.0m from settlement of claims against architects and subcontractors for incorrect building design or workmanship. These costs were previously included within the combustible materials exceptional expense. As the recognition of the initial charge related to the settlement received was an exceptional expense, the settlement is therefore recognised as an exceptional income.

In the half year ended 30 April 2021, the Group again reassessed the adequacy of the provision held, resulting in a net charge of GBP7.9m, comprising a charge of GBP10.3m and a credit of GBP2.4m from settlements of claims against architects and subcontractors. See note 14 for additional information.

Inventory impairment

Reflecting the anticipated deterioration to the housing sector and future economic uncertainty caused by COVID-19, the Group recorded a GBP43.2m exceptional inventory impairment charge in the half year to 30 April 2020, comprising GBP33.9m net realisable value (NRV) charge on current operational developments and GBP9.3m on abortive work-in-progress. This provision was reviewed at 31 October 2020 and the overall balance remained unchanged. The GBP33.9m NRV charge was based on a consensus of external market commentary estimates from which the Directors derived key assumptions.

Sales price reductions of 7.5% and 32.0% for unexchanged residential and commercial units were applied to the entire inventory portfolio respectively. In addition, site specific provisions were also applied to schemes where the Directors anticipated that further price action would be needed in a challenging market. These schemes share common characteristics of being complex, urban-located and predominantly comprise apartment accommodation. Three of these complex legacy developments comprised the majority of the write down.

In the half year ended 30 April 2021, the Group has not experienced the residential sales price reductions previously forecast. Since recording the NRV charge the Government has acted decisively to support the housing market, allowing it to remain open during COVID-19 restrictions, and extending the deadline for the initial stamp duty holiday to 30 September 2021. The propensity to move home has also been boosted by expected changes to future remote working expectations. Accordingly, the Group has considered whether it remains appropriate to hold the remaining, unutilised residential 7.5% sales price provision and has concluded it should be released. Therefore, an exceptional inventory impairment credit of GBP7.6m has been recognised in the period. The sales price provision of 32.0% for unexchanged commercial units has been maintained due to continued uncertainty in this segment of the market.

The remaining NRV provision of GBP24.7m held by the Group as presented in note 12, mainly represents site specific provisions on three complex legacy developments which are unaffected by the removal of the residential 7.5% sales price reductions.

Administrative expenses and net impairment losses on financial assets

In the half year ended 30 April 2021 the Group recorded restructuring costs of GBPnil (30 April 2020: GBP4.5m, 31 October 2020: GBP7.5m) within administrative expenses and net impairment losses on financial assets of GBPnil (30 April 2020: GBP7.4m, 31 October 2020: GBP7.6m).

Finance expense

Financial assets at fair value through profit and loss comprise shared equity loans secured by way of a second charge on the property. The prior period charge reflects the application of the 7.5% sales price reduction, and in line with the removal of this assumption as noted above, this results in a reduced exceptional finance expense of GBP0.5m in the current half year.

Taxation

An income tax credit of GBPnil (30 April 2020: GBP11.6m, 31 October 2020: GBP11.3m) has been recognised in relation to the above exceptional items.

   6    OPERATING PROFIT/(LOSS) 

Operating profit of GBP39.7m (30 April 2020: GBP44.0m operating loss, 31 October 2020: GBP1.8m operating loss) from continuing activities is stated after crediting/(charging):

 
                                          Half year   Half year           Full year 
                                              ended       ended               ended 
                                           30 April    30 April          31 October 
                                               2021        2020                2020 
                                               GBPm        GBPm                GBPm 
 Inventories impairment movement (note 
  12)                                          12.4      (36.8)              (29.3) 
 Joint venture project management fees 
  received (note 18)                            0.7         0.5                 1.4 
 Government grants (repaid)/received          (2.5)         0.6                 2.5 
 
 

Government grants

During the half year ended 30 April 2020 and year ended 31 October 2020 the Group recognised a GBP0.6m and GBP2.5m credit respectively, within administrative expenses relating to the Government's Job Retention Scheme (JRS). On 14 December 2020, the Group voluntarily repaid the JRS grant, representing a charge within administrative expenses in the current period.

   7    TAXATION 

The rate of taxation (expense)/credit on profit/(loss) for the half year ended 30 April 2021 is 20.1% (30 April 2020: 20.9% credit) and reflects the best estimate of the weighted average annual effective tax rate which is expected to apply to the Group for the year ending 31 October 2021. This calculation uses rates substantively enacted by 30 April 2021 as required by IAS 34 'Interim Financial Reporting'.

On 3 March 2021, the Chancellor of the Exchequer announced that the standard rate of UK corporation tax would increase from 19.0% to 25.0% from April 2023. As this change was not substantively enacted by the condensed consolidated statement of financial position date, the impact is not reflected in these interim financial statements. Had the rate change been enacted by the condensed consolidated financial position date, the net deferred tax impact would have been an increase in net deferred tax of GBP1.7m.

   8    EARNINGS/(LOSS) PER ORDINARY SHARE 

Basic earnings/(loss) per share is calculated by dividing profit/(loss) attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period. For diluted earnings per share, the weighted average number of shares is increased by the average number of potential ordinary shares held under option during the period. This reflects the number of ordinary shares which would be purchased using the difference in value between the market value of shares and the share option exercise price. The market value of shares has been calculated using the average ordinary share price during the period. Only share options which have met their cumulative performance criteria have been included in the dilution calculation. The earnings and weighted average number of shares used in the calculations are set out below.

 
                                                      Earnings   Weighted      Per 
                                                                  average    share 
                                                                   number 
                                                                       of   amount 
                                                                   shares 
 Half year ended 30 April 2021 - Total                    GBPm   millions    pence 
 Basic earnings per share                                 29.0      256.8     11.3 
 Effect of share options                                     -        0.7 
                                                     ---------  ---------  ------- 
 Diluted earnings per share                               29.0      257.5     11.3 
                                                     ---------  ---------  ------- 
 
 Half year ended 30 April 2021 - Pre-exceptional 
 Basic earnings per share                                 28.8      256.8     11.2 
 Effect of share options                                     -        0.7 
                                                                           ------- 
 Diluted earnings per share                               28.8      257.5     11.2 
                                                     ---------  ---------  ------- 
 
 Half year ended 30 April 2020 - Total 
 Basic loss per share                                   (40.5)      256.8   (15.8) 
 Effect of share options                                     -          - 
                                                                           ------- 
 Diluted loss per share                                 (40.5)      256.8   (15.8) 
                                                     ---------  ---------  ------- 
 
 Half year ended 30 April 2020 - Pre-exceptional 
 Basic earnings per share                                  3.6      256.8      1.4 
 Effect of share options                                     -        0.3 
                                                                           ------- 
 Diluted earnings per share                                3.6      257.1      1.4 
                                                     ---------  ---------  ------- 
 
 Full year ended 31 October 2020 - Total 
 Basic loss per share                                   (10.7)      256.8    (4.2) 
 Effect of share options                                     -          - 
                                                                           ------- 
 Diluted loss per share                                 (10.7)      256.8    (4.2) 
                                                     ---------  ---------  ------- 
 
 Full year ended 31 October 2020 - Pre-exceptional 
 Basic earnings per share                                 37.4      256.8     14.6 
 Effect of share options                                     -        0.3 
                                                                           ------- 
 Diluted earnings per share                               37.4      257.1     14.5 
                                                     ---------  ---------  ------- 
 
   9    DIVIDS 
 
                                                     Half       Half    Full year 
                                                     year       year        ended 
                                                    ended      ended 
                                                 30 April   30 April   31 October 
                                                     2021       2020         2020 
 Dividends declared as distributions to equity       GBPm       GBPm         GBPm 
  shareholders in the period: 
 Proposed interim dividend for the year ending 
  31 October 2021 of 4.1 pence per share (30 
  April 2020 and 31 October 2020: nil pence 
  per share)                                         10.5          -            - 
                                                ---------  ---------  ----------- 
 
 

Due to the impact of COVID-19, and associated business and economic uncertainty, no dividends were paid during the year ended 31 October 2020. The final 2019 dividend of 21.8 pence per share was cancelled, which would have been due on 9 April 2020. The proposed interim dividend was approved by the Board on 24 June 2021 and, in accordance with IAS 10 "Events after the Reporting Period", has not been included as a liability in this condensed consolidated half year financial information. The interim dividend will be paid on 14 October 2021 to all ordinary shareholders on the Register of Members on 24 September 2021.

10 INVESTMENTS

Investments in joint ventures

The tables below provide financial information for joint ventures that are material to the Group. All joint ventures have their place of business in Great Britain, are 50% owned and are accounted for using the equity method, in line with the prior period.

 
                                           As at      As at        As at 
                                        30 April   30 April   31 October 
                                            2021       2020         2020 
 Total investments in joint ventures        GBPm       GBPm         GBPm 
 Crest Sovereign (Brooklands) LLP(1)           -          -            - 
 Bonner Road LLP(1)                            -          -            - 
 Crest A2D (Walton Court) LLP                1.7        0.7          1.0 
 Elmsbrook (Crest A2D) LLP                   3.5        1.3          2.6 
 Other non-material joint ventures           0.1        0.1          0.1 
                                       ---------  ---------  ----------- 
 Total investments in joint ventures         5.3        2.1          3.7 
                                       ---------  ---------  ----------- 
 

(1) Net of cumulative losses

 
                                                 Half year   Half year    Full year 
                                                     ended       ended        ended 
                                                  30 April    30 April   31 October 
                                                      2021        2020         2020 
 Group's share in joint venture profit/(loss) 
  for the period                                      GBPm        GBPm         GBPm 
 Crest Sovereign (Brooklands) LLP                      0.3       (0.5)        (0.7) 
 Bonner Road LLP                                     (0.6)       (0.7)        (1.2) 
 Crest A2D (Walton Court) LLP                          0.3       (0.1)        (0.1) 
 Elmsbrook (Crest A2D) LLP                             0.9         0.2          1.5 
 Total Group's share in joint venture 
  profit/(loss) for the period                         0.9       (1.1)        (0.5) 
                                                ----------  ----------  ----------- 
 
 
                                             As at      As at        As at 
                                          30 April   30 April   31 October 
                                              2021       2020         2020 
 Amounts due from joint ventures              GBPm       GBPm         GBPm 
 Crest Sovereign (Brooklands) LLP             21.1       19.3         21.4 
 Bonner Road LLP(2)                           18.8       19.0         18.8 
 Crest A2D (Walton Court) LLP                 15.5        9.4         12.0 
 Elmsbrook (Crest A2D) LLP                     1.2        4.8          2.3 
 Other non-material joint ventures               -        0.9            - 
                                         ---------  ---------  ----------- 
 Total amounts due from joint ventures        56.6       53.4         54.5 
                                         ---------  ---------  ----------- 
 

(2) Stated after expected credit loss of GBP11.0m (30 April 2020: GBP10.6m, 31 October 2020: GBP10.8m)

11 RETIREMENT BENEFIT SURPLUS/(OBLIGATIONS)

The retirement benefit surplus/(deficit) recognised on the defined benefit scheme in the condensed consolidated statement of financial position represents the surplus/(deficit) of the fair value of the Crest Nicholson Group Pension and Life Assurance Scheme's (the Scheme) assets over the present value of Scheme liabilities. There has been a material improvement in the position going from a deficit of GBP13.8m at 31 October 2020 to a surplus of GBP8.6m at 30 April 2021. This was driven by improved asset performance and a reduction in liabilities due to increasing interest rates being reflected in the discount rate.

The amounts recognised in the condensed consolidated statement of financial position on the defined benefit scheme is as follows:

 
                                                       As at      As at               As at 
                                                    30 April   30 April          31 October 
                                                        2021       2020                2020 
                                                        GBPm       GBPm                GBPm 
 Present value of scheme liabilities                 (216.0)    (212.6)             (228.3) 
 Fair value of scheme assets                           224.6      204.2               214.5 
                                                   ---------  ---------  ------------------ 
 Retirement benefit surplus/(deficit) recognised 
  at period end                                          8.6      (8.4)              (13.8) 
                                                   ---------  ---------  ------------------ 
 
 Deferred tax asset recognised at period 
  end within non-current assets                            -        1.6                 2.6 
 Deferred tax liability recognised at period 
  end within non-current liabilities                   (1.6)          -                   - 
 

The rules of the Scheme provide the Group with an unconditional right to a refund of surplus assets on the gradual settlement of the Scheme's liabilities. In the ordinary course of business the Scheme trustees have no unilateral right to wind the Scheme up. Based on these rights and in accordance with IFRIC 14, the Group has made the judgement that the net surplus in the Scheme is recognised in full.

At the condensed consolidated statement of financial position date the substantively enacted future corporation tax rate for FY21 and beyond is 19.0%, on which the deferred tax liability on the retirement benefit surplus has been evaluated.

Amounts recognised in comprehensive income:

The current and past service costs, settlements and curtailments, together with the net interest expense for the period are included in the condensed consolidated income statement. Remeasurements of the retirement benefit asset/(liability) are included in the condensed consolidated statement of comprehensive income.

 
                                                       Half year   Half year           Full year 
                                                           ended       ended               ended 
                                                        30 April    30 April          31 October 
                                                            2021        2020                2020 
 Service cost                                               GBPm        GBPm                GBPm 
 Administrative expenses                                   (0.3)       (0.2)               (0.4) 
 Net interest expense                                      (0.1)           -               (0.1) 
                                                      ----------  ----------  ------------------ 
 Expense recognised in the condensed consolidated 
  income statement                                         (0.4)       (0.2)               (0.5) 
                                                      ----------  ----------  ------------------ 
 
 Remeasurements of the net asset/(liability) 
 Return on Scheme assets                                     6.0       (8.5)                 1.3 
 Gain/(loss) arising from changes in financial 
  assumptions                                                7.3       (0.5)              (13.8) 
 Gain/(loss) arising from changes in demographic 
  assumptions                                                2.2         2.7               (3.7) 
 Experience gain                                             1.7         0.6                 2.4 
                                                      ----------  ----------  ------------------ 
 Actuarial gains/(losses) recorded in the 
  condensed consolidated statement of comprehensive 
  income                                                    17.2       (5.7)              (13.8) 
                                                                              ------------------ 
 
 Total defined benefit scheme gains/(losses)                16.8       (5.9)              (14.3) 
                                                      ----------  ----------  ------------------ 
 
 
                                             Half year   Half year    Full year 
                                                 ended       ended        ended 
                                              30 April    30 April   31 October 
                                                  2021        2020         2020 
 The principal actuarial assumptions used            %           %            % 
  were: 
 Liability discount rate                          1.90        1.60         1.50 
 Inflation assumption - RPI                       3.35        2.55         3.05 
 Inflation assumption - CPI                       2.65        1.75         2.25 
 

12 INVENTORIES

 
                                                        Restated(1)         Restated(1) 
                                                As at         As at               As at 
                                             30 April      30 April          31 October 
                                                 2021          2020                2020 
                                                 GBPm          GBPm                GBPm 
 Work-in-progress                               934.1         961.5               889.8 
 Completed buildings including show homes        85.6         183.5               107.0 
 Part exchange inventories                       18.4          16.0                20.9 
                                            ---------  ------------  ------------------ 
                                              1,038.1       1,161.0             1,017.7 
                                            ---------  ------------  ------------------ 
 

(1) Restated to reflect the change in accounting policy on land options. See note 19.

During the period and as detailed in note 5, the remaining unutilised residential 7.5% sales price provision has been released creating an exceptional inventory impairment credit of GBP7.6m (30 April 2020: GBP33.9m exceptional charge, 31 October 2020: GBP33.9m exceptional charge).

Total inventories are stated net of a net realisable value provision of GBP24.7m (30 April 2021: GBP44.6m, and, 31 October 2020: GBP37.1m), mainly relating to the impairments as disclosed in the Group's Annual Integrated Report for the year ended 31 October 2020, net of the residential 7.5% sales price reduction assumption.

Of the GBP24.7m remaining NRV provision at 30 April 2021 it is currently forecast that over half will be used in the second half of 2021 financial year end as some sites subject to NRV are forecast to be legally completed.

 
 Movements in the NRV provision               As at      As at               As at 
                                           30 April   30 April          31 October 
                                               2021       2020                2020 
                                               GBPm       GBPm                GBPm 
 At beginning of the period                    37.1        7.8                 7.8 
 Pre-exceptional NRV (credited)/charged 
  in the period                               (0.7)        4.0                 2.9 
 Pre-exceptional NRV used in the period       (3.7)      (1.1)               (2.1) 
 Exceptional NRV (credited)/charged in 
  the period (note 5)                         (7.6)       33.9                33.9 
 Exceptional NRV used in the period           (0.4)          -               (5.4) 
                                          ---------  ---------  ------------------ 
 Total movement in NRV in the period         (12.4)       36.8                29.3 
                                          ---------  ---------  ------------------ 
 At end of the period                          24.7       44.6                37.1 
                                          ---------  ---------  ------------------ 
 
 

During half year ended 30 April 2020 and full year ended 31 October 2020 the Group wrote off as an exceptional item GBP9.3m of work-in-progress and other associated costs on a project where the scheme is no longer profitable and therefore aborted. The combination of this and the exceptional NRV provided in the period of GBP33.9m is GBP43.2m, representing the total exceptional inventory impairment charge per note 5.

13 CASH AND CASH EQUIVALENTS, INTEREST-BEARING LOANS AND BORROWINGS

 
                                                     As at      As at        As at 
                                                  30 April   30 April   31 October 
                                                      2021       2020         2020 
                                                      GBPm       GBPm         GBPm 
 Cash and cash equivalents                           228.0      255.5        239.4 
                                                 ---------  ---------  ----------- 
 
 Non-current interest-bearing loans and 
  borrowings 
 Revolving credit facility                               -    (250.0)            - 
 Senior loan notes - maturing 2024 to 
  2029                                             (100.0)    (100.0)      (100.0) 
 Revolving credit facility and senior 
  loan notes issue costs                               2.4        3.1          2.8 
                                                    (97.6)    (346.9)       (97.2) 
                                                 ---------  ---------  ----------- 
 Current interest-bearing loans and borrowings 
 Other loans                                             -      (1.9)            - 
                                                 ---------  ---------  ----------- 
 

At 30 April 2021, the Group had undrawn revolving credit facilities of GBP250.0m (30 April 2020: GBPnil, 31 October 2020: GBP250.0m).

14 PROVISIONS

 
                      As at        As at   As at         As at        As at   As at         As at        As at     As at 
                   30 April     30 April      30      30 April     30 April      30    31 October   31 October        31 
                                           April                              April                              October 
                       2021         2021    2021          2020         2020    2020          2020         2020      2020 
                Combustible        Other   Total   Combustible        Other   Total   Combustible        Other     Total 
                  materials   provisions             materials   provisions             materials   provisions 
                       GBPm         GBPm    GBPm          GBPm         GBPm    GBPm          GBPm         GBPm      GBPm 
 At beginning 
  of the 
  period               14.8          0.4    15.2          14.6          1.6    16.2          14.6          1.6      16.2 
 Provided 
  in the 
  period               10.3            -    10.3             -            -       -           2.6            -       2.6 
 Utilised 
  in the 
  period              (1.9)            -   (1.9)         (2.1)        (0.4)   (2.5)         (2.4)        (0.4)     (2.8) 
 Released 
  in the 
  period                  -            -       -             -        (0.4)   (0.4)             -        (0.8)     (0.8) 
               ------------  -----------  ------  ------------  -----------  ------  ------------  -----------  -------- 
 At end 
  of the 
  period               23.2          0.4    23.6          12.5          0.8    13.3          14.8          0.4      15.2 
               ------------  -----------  ------  ------------  -----------  ------  ------------  -----------  -------- 
 
 Of which: 
 Non-current            8.1            -     8.1           5.1            -     5.1           3.4            -       3.4 
 Current               15.1          0.4    15.5           7.4          0.8     8.2          11.4          0.4      11.8 
               ------------  -----------  ------  ------------  -----------  ------  ------------  -----------  -------- 
                       23.2          0.4    23.6          12.5          0.8    13.3          14.8          0.4      15.2 
               ------------  -----------  ------  ------------  -----------  ------  ------------  -----------  -------- 
 

Combustible materials

In the year ended 31 October 2019, following the latest Government guidance notes in respect of combustible materials, fire risk and protection and regulatory compliance on completed developments, the Group recorded an exceptional charge of GBP18.4m. At the time the Group conducted a detailed review of all current and legacy buildings to identify those that were impacted and estimated remediation costs where a legal or constructive obligation to remediate the buildings existed. The charge is a complex calculation considering many different inputs including the height and square footage of the impacted buildings, costs of interrogation, estimated costs of replacement materials and labour, the extent of the works to be complete and potential disruption to customers.

In the year ended 31 October 2020, the Group reassessed the adequacy of the provision held, resulting in a net combustible materials charge of GBP0.6m, comprising a charge of GBP2.6m and a credit of GBP2.0m in settlements of claims against architects and subcontractors.

During the half year ended 30 April 2021 the Group continued to reassess the estimates on costs and timing of works and associated adequacy of the provision held. This resulted in an increase of GBP10.3m in the provision. Approximately half of this increase is due to revisions of forecasts on previously assessed buildings, and half on newly identified buildings requiring fire-related remedial works. The Group spent GBP1.9m in the period across a number of buildings requiring further investigative costs, including balcony and cladding related works.

The provision of GBP23.2m represents the Group's best estimate of costs at 30 April 2021. The Group will continue to assess the magnitude and utilisation of this provision in future financial reporting periods. The Group recognises that guidance in this area is evolving over time and that assumptions may require revising, resulting in changes to the expected cash outflow. The Group expects to have completed any required remedies within a five-year period. The Group expects to utilise GBP15.5m of the remaining provision within one year, and the balance within two to five years.

The Group is continuing to review the recoverability of costs incurred from third parties where we have a contractual right of recourse. In the period GBP2.4m was recovered from third parties, which has been recorded as an exceptional credit in the consolidated income statement. See note 5 for income statement disclosure.

Other provisions

Other provisions are dilapidation provisions on commercial properties where the Group previously held the head lease. These leases are now terminated and the provision represents forecast costs to be incurred in bringing the buildings back to their original condition.

15 FINANCIAL ASSETS AND LIABILITIES

 
                                              As at      As at        As at 
                                           30 April   30 April   31 October 
                                               2021       2020         2020 
 Financial assets                              GBPm       GBPm         GBPm 
 Sterling cash deposits                       228.0      255.5        239.4 
 Trade receivables                             28.7       41.2         32.7 
 Amounts due from joint ventures               56.6       53.4         54.5 
 Contract assets                               46.3       56.4         53.6 
 Other receivables                              4.0        7.8          7.9 
                                          ---------  ---------  ----------- 
 Total cash equivalents and trade and 
  other receivables                           363.6      414.3        388.1 
 Financial assets at fair value through 
  profit and loss                               5.2        5.7          5.4 
                                          ---------  ---------  ----------- 
 Total financial assets                       368.8      420.0        393.5 
                                          ---------  ---------  ----------- 
 
 

Financial assets at fair value through profit and loss are held at fair value and categorised as level three within the hierarchical classification of IFRS 13 Revised. The carrying value of cash and cash equivalents, trade and other receivables, amounts due from joint ventures and contract assets is a reasonable approximation of fair value which would be measured under a level 3 hierarchy.

 
                                                As at      As at        As at 
                                             30 April   30 April   31 October 
                                                 2021       2020         2020 
 Financial liabilities                           GBPm       GBPm         GBPm 
 Revolving credit facility                          -      250.0            - 
 Senior loan notes                              100.0      100.0        100.0 
 Other loans                                        -        1.9            - 
 Land payables on contractual terms 
  carrying interest                              65.0       72.0        101.9 
 Land payables on contractual terms 
  carrying no interest                          113.5      151.9        103.8 
 Amounts due to joint ventures                    0.1        0.1          0.1 
 Lease liabilities                                5.7        8.2          7.0 
 Other trade payables                            35.7       36.0         36.2 
 Other payables                                   9.2        9.7          8.6 
 Accruals                                       214.5      159.6        222.9 
                                            ---------  ---------  ----------- 
 Total financial liabilities at amortised 
  cost                                          543.7      789.4        580.5 
                                            ---------  ---------  ----------- 
 
 

The carrying value of the Group's financial liabilities is a reasonable approximation to their fair value.

16 NET DEBT AND LAND CREDITORS

 
                                          As at      As at        As at 
                                       30 April   30 April   31 October 
                                           2021       2020         2020 
                                           GBPm       GBPm         GBPm 
 Cash and cash equivalents                228.0      255.5        239.4 
 Non-current interest-bearing loans 
  and borrowings                         (97.6)    (346.9)       (97.2) 
 Current interest-bearing loans and           -      (1.9)            - 
  borrowings 
                                      ---------  ---------  ----------- 
 Net cash/(debt)                          130.4     (93.3)        142.2 
 Land payables on contractual terms 
  carrying interest                      (65.0)     (72.0)      (101.9) 
 Land payables on contractual terms 
  carrying no interest                  (113.5)    (151.9)      (103.8) 
                                      ---------  ---------  ----------- 
 Net debt and land creditors             (48.1)    (317.2)       (63.5) 
                                      ---------  ---------  ----------- 
 
 

17 SHARE CAPITAL

 
                                         Shares      Nominal    Share     Share 
                                         issued       value    capital   premium 
                                                                         account 
                                         number       pence     GBPm      GBPm 
 As at 30 April 2021, 30 April 2020 
  and 31 October 2020                  256,920,539      5       12.8      74.2 
                                      ------------            --------  -------- 
 

18 RELATED PARTY TRANSACTIONS

Related parties are consistent with those disclosed in the Group's Annual Integrated Report for the year ended 31 October 2020.

The Group had the following transactions with its joint ventures in the period:

 
                                             Half year   Half year    Full year 
                                                 ended       ended        ended 
                                              30 April    30 April   31 October 
                                                  2021        2020         2020 
                                                  GBPm        GBPm         GBPm 
 Interest income on joint venture funding          1.4         1.1          2.7 
 Project management fees received                  0.7         0.5          1.4 
 Amounts due from joint ventures, net 
  of expected credit losses                       56.6        53.4         54.5 
 Amounts due to joint ventures                     0.1         0.1          0.1 
 Funding to joint ventures                       (7.5)      (13.3)       (15.6) 
 Repayment of funding from joint ventures          5.9         9.0         10.1 
 

19 CHANGE IN ACCOUNTING POLICY

Inventories

In previous financial statements options purchased in respect of land were initially recognised as a prepayment within inventories at cost and subject to annual impairment reviews, with provisions made to reflect loss of value. When a land contract was subsequently secured from an option subject to impairment, the previously impaired costs were written back to the income statement and capitalised within work-in-progress. Upon development of the land, this capitalised cost is charged to cost of sales as housing units are sold.

The Group has changed this policy to be more in line with common industry practice and to provide more reliable and relevant information, which it believes improves the understanding of the performance of the business. Land options are now written down on a straight-line basis over the life of the option, with no subsequent write back to the consolidated income statement when a land contract is secured. The updated policy is disclosed within note 1.

This change in policy will result in the derecognition of GBP7.3m of land options previously written back to the income statement, and create an associated deferred tax asset of GBP1.4m. The previous income statement write backs did not occur in the periods ended 31 October 2019, 30 April 2020 or 31 October 2020, thus the consolidated income statement for these periods does not require restatement. The impact on previously reported consolidated statement of financial position is presented below.

 
                                     As at      As at        As at 
                                1 November   30 April   31 October 
                                      2019       2020         2020 
                                      GBPm       GBPm         GBPm 
 Deferred tax assets 
 As previously reported                6.4        5.8          8.4 
 Change in accounting policy           1.4        1.4          1.4 
                               -----------  ---------  ----------- 
 As reported                           7.8        7.2          9.8 
                               -----------  ---------  ----------- 
 
 Inventories 
 As previously reported            1,151.1    1,168.3      1,025.0 
 Change in accounting policy         (7.3)      (7.3)        (7.3) 
                               -----------  ---------  ----------- 
 As reported                       1,143.8    1,161.0      1,017.7 
                               -----------  ---------  ----------- 
 
 Total assets 
 As previously reported            1,576.2    1,656.3      1,473.1 
 Change in accounting policy         (5.9)      (5.9)        (5.9) 
                               -----------  ---------  ----------- 
 As reported                       1,570.3    1,650.4      1,467.2 
                               -----------  ---------  ----------- 
 
 Net assets 
 As previously reported              853.9      808.0        831.2 
 Change in accounting policy         (5.9)      (5.9)        (5.9) 
                               -----------  ---------  ----------- 
 As reported                         848.0      802.1        825.3 
                               -----------  ---------  ----------- 
 
 Retained earnings 
 As previously reported              766.9      721.0        744.2 
 Change in accounting policy         (5.9)      (5.9)        (5.9) 
                               -----------  ---------  ----------- 
 As reported                         761.0      715.1        738.3 
                               -----------  ---------  ----------- 
 
 Total equity 
 As previously reported              853.9      808.0        831.2 
 Change in accounting policy         (5.9)      (5.9)        (5.9) 
                               -----------  ---------  ----------- 
 As reported                         848.0      802.1        825.3 
                               -----------  ---------  ----------- 
 
 

20 ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)

The Group uses a number of alternative performance measures (APM) which are not defined within IFRS. The Directors use the APMs, along with IFRS measures, to assess the operational performance of the Group as detailed in the Strategic Report on pages 1 to 65 of the Group's Annual Integrated Report for the year ended 31 October 2020, and above. Definitions and reconciliations of the financial APMs used compared to IFRS measures, are included below:

Adjusted performance metrics

Adjusted performance metrics as shown below comprise statutory metrics adjusted for the exceptional items as presented in note 5 of the consolidated financial statements. The exceptional items have a material impact to reported performance and arise from recent, unforeseen events. As such, the Directors consider these adjusted performance metrics reflect a more accurate view of its core operations and underlying business performance.

 
                                                            Exceptional 
 Half year ended 30 April 2021                  Statutory         items   Adjusted 
 Gross profit                           GBPm         63.0           0.3       63.3 
 Gross profit margin                     %           19.4           0.1       19.5 
 Administrative expenses                GBPm       (23.1)             -     (23.1) 
 Administrative expenses/overhead 
  efficiency                             %            7.1             -        7.1 
 Net impairment losses on financial 
  assets                                GBPm        (0.2)             -      (0.2) 
 Operating profit                       GBPm         39.7           0.3       40.0 
 Operating profit margin                 %           12.2           0.1       12.3 
 Net finance expense                    GBPm        (4.3)         (0.5)      (4.8) 
 Profit/(loss) before tax               GBPm         36.3         (0.2)       36.1 
 Income tax (expense)/credit            GBPm        (7.3)             -      (7.3) 
 Profit/(loss) after tax                GBPm         29.0         (0.2)       28.8 
 Basic earnings/(loss) per share       Pence         11.3         (0.1)       11.2 
 Diluted earnings/(loss) per share     Pence         11.3         (0.1)       11.2 
 
 
                                                            Exceptional 
 Half year ended 30 April 2020                  Statutory         items   Adjusted 
 Gross (loss)/profit                    GBPm        (7.3)          43.2       35.9 
 Gross (loss)/profit margin              %          (3.0)          18.0       15.0 
 Administrative expenses                GBPm       (29.3)           4.5     (24.8) 
 Administrative expenses/overhead 
  efficiency                             %           12.2         (1.9)       10.3 
 Net impairment losses on financial 
  assets                                GBPm        (7.4)           7.4          - 
 Operating (loss)/profit                GBPm       (44.0)          55.1       11.1 
 Operating (loss)/profit margin          %         (18.3)          22.9        4.6 
 Net finance expense                    GBPm        (6.1)           0.6      (5.5) 
 (Loss)/profit before tax               GBPm       (51.2)          55.7        4.5 
 Income tax credit/(expense)            GBPm         10.7        (11.6)      (0.9) 
 (Loss)/profit after tax                GBPm       (40.5)          44.1        3.6 
 Basic (loss)/earnings per share       Pence       (15.8)          17.2        1.4 
 Diluted (loss)/earnings per share     Pence       (15.8)          17.2        1.4 
 
 
                                                            Exceptional 
 Full year ended 31 October 2020                Statutory         items   Adjusted 
 Gross profit                           GBPm         63.9          43.8      107.7 
 Gross profit margin                     %            9.4           6.5       15.9 
 Administrative expenses                GBPm       (57.8)           7.5     (50.3) 
 Administrative expenses/overhead 
  efficiency                             %            8.5         (1.1)        7.4 
 Net impairment losses on financial 
  assets                                GBPm        (7.9)           7.6      (0.3) 
 Operating (loss)/profit                GBPm        (1.8)          58.9       57.1 
 Operating (loss)/profit margin          %          (0.3)           8.7        8.4 
 Net finance expense                    GBPm       (11.2)           0.5     (10.7) 
 (Loss)/profit before tax               GBPm       (13.5)          59.4       45.9 
 Income tax credit/(expense)            GBPm          2.8        (11.3)      (8.5) 
 (Loss)/profit after tax                GBPm       (10.7)          48.1       37.4 
 Basic (loss)/earnings per share       Pence        (4.2)          18.8       14.6 
 Diluted (loss)/earnings per share     Pence        (4.2)          18.7       14.5 
 

Gearing including land creditors

Gearing including land creditors is total net debt and land creditors divided by equity shareholders' funds and total net debt and land creditors.

 
                                                         Restated(1)   Restated(1) 
                                                 As at         As at         As at 
                                              30 April      30 April    31 October 
                                                  2021          2020          2020 
 Total net debt and land creditors 
  (note 16)                           GBPm        48.1         317.2          63.5 
                                             ---------  ------------  ------------ 
 
 Equity shareholders' funds(1)        GBPm       870.3         802.1         825.3 
 Total net debt and land creditors    GBPm        48.1         317.2          63.5 
                    GBPm                         918.4       1,119.3         888.8 
                                             ---------  ------------  ------------ 
 
 Gearing including land creditors       %          5.2          28.3           7.1 
 

(1) Restated to reflect the change in accounting policy on land options. See note 19.

21 CONTINGENT LIABILITIES

There are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinary course of business. It is impractical to quantify the financial effect of performance bonds and other arrangements. The Directors consider the possibility of a cash outflow in settlement of performance bonds and other arrangements to be remote.

In the ordinary course of business the Group enters into certain land purchase contracts with vendors on a conditional exchange basis. The conditions must be satisfied for the Group to recognise the land asset and corresponding provisions within the consolidated statement of financial position. No land payable in respect of conditional land acquisitions has been recognised.

The Group provides for all known material legal actions, where having taken appropriate legal advice as to the likelihood of success of the actions, it is considered probable that an outflow of economic resource will be required, and the amount can be reliably measured. No contingent liability in respect of such claims has been recognised.

In FY19, the Group created a combustible materials provision, which was subsequently increased in FY20 and HY21. This provision is subject to the Directors' estimates on costs and timing, and the identification of further legacy developments where the Group may have an obligation to remediate. The Group recognises that guidance in this area continues to evolve over time and that assumptions may require revising, resulting in a further cash outflow. The Group is reviewing the recoverability of costs incurred from third parties where we have a contractual right of recourse. No contingent assets have been recognised.

22 EVENTS AFTER THE REPORTING PERIOD

On the 14 May 2021 the Group exchanged contracts for the sale of our 50% equitable interest in Longcross Film Studios to our joint venture partner on that development, Aviva. Completion is expected in late summer 2021, and will result in a profit contribution in excess of GBP10.0m in FY21, and approximately a GBP45.0m cash inflow. This event has no impact on these condensed consolidated financial statements as at 30 April 2021.

Crest Nicholson Holdings plc

Half Year Results for the six months ended 30 April 2021

Independent review report to Crest Nicholson Holdings plc

Report on the condensed consolidated half year financial statements

Our conclusion

We have reviewed Crest Nicholson Holdings plc's condensed consolidated interim financial statements (the "interim financial statements") in the unaudited interim results of Crest Nicholson Holdings plc for the 6 month period ended 30 April 2021 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

   --    the Condensed Consolidated Statement of Financial Position as at 30 April 2021; 

-- the Condensed Consolidated Income Statement and the Condensed Consolidated Statement of Comprehensive Income for the period then ended;

   --    the Condensed Consolidated Cash Flow Statement for the period then ended; 
   --    the Condensed Consolidated Statement of Changes in Equity for the period then ended; and 
   --    the explanatory notes to the interim financial statements. 

The interim financial statements included in the unaudited interim results of Crest Nicholson Holdings plc have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The unaudited interim results, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the unaudited interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the unaudited interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

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 United Kingdom. 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, 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.

We have read the other information contained in the unaudited interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

24 June 2021

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