RNS Number : 7393W
Crest Nicholson Holdings PLC
13 February 2017

Crest Nicholson Holdings plc





Crest Nicholson Holdings plc ("the Company")




The Company released its preliminary results announcement for the year ended 31 October 2016 on 24 January 2017 and has today published its 2016 Annual Integrated Report for the same period, and Notice of the 2017 Annual General Meeting which is to be held on 23 March 2017.

These documents will shortly be available for inspection at the National Storage Mechanism which is located at http://www.morningstar.co.uk/uk/NSM. Hard copy versions have been posted to shareholders who have elected to receive them in paper form.

The Notice of Annual General Meeting and Annual Integrated Report are also available to view or download in pdf format from the Company's website at www.crestnicholson.com/investor-relations.

The Company's financial statements and extracts of the Strategic Report were included in the Company's preliminary results announcement. That information together with the Appendix to this announcement, which contains additional information that has been extracted from the Annual Integrated Report for the year ended 31 October 2016, constitute the material required to be communicated in unedited full text for the purposes of compliance with Disclosure Guidance and Transparency Rule 6.3.5. Page numbers and cross references in the extracted information refer to page numbers and cross references in the Annual Integrated Report.


For further information, please contact:


Kevin Maguire

Company Secretary

Crest Nicholson Holdings plc

+44 (0) 1932 580 555


13 February 2017














Risk area


Controls and mitigation

Adverse macro-economic climate, caused by uncertainty following the UK vote to leave the EU


General economic slowdown with wider global growth issues (especially China and the Eurozone)

Uncertainty arising from policy, law or tax changes after the EU vote and government changes could affect both consumer demand and regulations in the market


Higher unemployment or fear of unemployment could undermine consumer confidence and reduce enthusiasm for purchasing a new home or the ability to secure a mortgage


Maintain review of economic and political environment and consider potential responses to changes in trading conditions


Consider exposure to specific areas (e.g. London) and broaden portfolio in more affordable areas

Loss of income at housing associations due to budget changes to rents

Returns on our strategic land holdings could be undermined; site starts could be delayed


Cascade s106 mechanisms to restore viability and continue to develop a balanced portfolio

Pressure on cash headroom and generation due to:

potential for delayed receipts in short term due to uncertainty over the UK leaving the EU; commitments to land and build obligations made ahead of certainty in revenue; high work-in-progress costs for new sites


Cash resources may be over-committed, leading to business disruption, reputational issues, covenant

breaches, dividend loss and stakeholder dissatisfaction

Robust cash management and borrowing/spending controls


Access to funding and use of alternative payment mechanisms


PRS offering potential for early cash generation

Build cost inflation

Increased build costs absorb

or exceed higher sales prices


Margin squeeze disappoints



Delivery uncertainty, as suppliers seek to 'price in' sales price inflation

Use alternative suppliers and

production methods


Robust contract arrangements to control costs


Leverage volume through long-term partnerships with strategic suppliers


Rapid and extensive changes to planning system and changes in political priorities combined with under resourcing in planning departments produce uncertainty, delays and potential challenges to viable development

Delays in obtaining planning consents and operational starts


Land becomes unviable due to increased planning cost burden

Work closely with key regulators and national/local

decision makers


Regularly review the Strategic Land Portfolio to accurately forecast operational starts


Seek prior planning approval on significant projects


Influence new CIL viability testing and appraise costs


Costs not adequately

controlled and managed;

unforeseen cost increases

Unreliable forecasting and sudden cost changes can erode margins


Pressure to maintain margins

and control costs can impact

on product quality

Regular cost forecast reviews

and increased standardisation in cost reporting


Early budget uploads and greater adherence to Agresso procedures


Quality standards set, met and reviewed


Cyber security breach

Theft of personal and/or business data


Subject to external financial crime


Disruption to IT services, affecting business operation

Robust virus protection and

internet security


Web checking of internet



Robust server set-up and

annual cyber security breach tests


Education of employees on

cyber security vulnerabilities

and encryption of data


The Government's new

Starter Homes policy (as

currently drafted)

Planning delays are likely

as local authorities balance

affordable provision

and viability


Distortions in sales activity

as purchasers seek to

secure windfalls resulting

from policy


Cash flow and ROCE

implications of reduced

upfront affordable housing

funding; increased macroeconomic



Identify and prioritise most

complex aspects of current

draft and seek further

amendment or clarity


Seek to move back towards

original provisions, i.e. use

of previously unallocated

brownfield and 100% starter

home offers


Work with HBF to establish a

common understanding and

set of proposals with other

HBF members

Help to Buy

incentive scheme

A reduction in size or

eligibility criteria could

reduce overall mortgage

access impacting demand,

sales values and rates of

sale, which could undermine

confidence in the market

There are alternative incentives but these are less compelling


Maintain policy-maker

awareness of construction sector economic contribution and need for first-time buyer incentives


High quality sales training to

increase resilience and prepare for a tougher market


Rising complexity

of projects

Cost over-runs on complex

projects can affect margins


Latent defects can generate

extra costs and reputational

damage, where new

materials and systems have

been deployed


Heightened expectations can

result in rushed projects and

subsequent problems

Project Committee oversight

and risk-based review by the

Group Technical Director


Consultative and partnership

approach at planning/

designing stage


Robust Crest Nicholson

project management


New hurdle rate matrix

addressing complexity and

other risks


Increased focus on re-use of

house types


Customer service falls

significantly below targeted

Crest Nicholson standard

Cost of remediation in time

and money


Loss of focus on more strategic activity and a lack

of staff morale as pride in job

is affected

Robust inspection process and use of Priority 1 monitoring to ensure an efficient approach


Penalties for sub-contractors in cases of poor workmanship


Launch of Making Customers

Feel Special and Valued learning programme


Employee retention and

succession management


Experience gaps lead to

poor outcomes

Shortages of key staff in

critical business areas

can introduce cost, delays

in bringing developments

forward or quality issues,

which can undermine

shareholder confidence and

erode customer satisfaction


Increased employee turnover

can create instability

and uncertainty


Skills and experience lost,

including through retirement,

are difficult to replace and

loss of knowledge within

the business can affect

overall efficiency


Ensure competitive pay, benefits, incentives and bonuses


Improved succession planning in place, with formal succession plans drawn up


Maintaining strong apprentice

and graduate programmes


Executive management and

coaching creating more internal candidates

Reputational damage from

a major product failure or

significant environmental,

health or safety issue

Injury or potential loss of life


Remediation costs


Loss of projects and associated revenues


Damage to Crest Nicholson



Potential civil or criminal


Board leadership and scrutiny of health, safety and environment


Raising profile of health and

safety across the Group and

setting objectives annually


New approaches trialled prior

to wider roll-out and product

quality guidelines agreed and monitored


Training for all employees

and awareness of industry

product debates


Supply and quality of materials and/or labour fails

to match desired production

levels, affecting lead times,

efficiency and cost

Supply chain issues constrain output and impact

on business performance


Adverse customer

experience as build

completion forecasting

is difficult and subject to

variation, which could mean

mortgage offers expire

and further delays to

legal completions

Dialogue with major suppliers

to help with advance planning and call-off by divisions


Spread risk across suppliers,

e.g. kitchen supply-and-fit contracts


Examine alternative production approaches, e.g. timber frame as opposed to blocks, and offsite manufacture


Maintain strong apprenticeship programme and encourage suppliers to do the same



The Directors are responsible for preparing the Annual integrated report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.


Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and the parent Company financial statements in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework', in accordance with the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:


·      select suitable accounting policies and then apply them consistently

·      make judgements and accounting estimates that are reasonable and prudent

·      state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent Company financial statements respectively

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.


The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.


The Directors consider that the annual integrated report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.


Each of the Directors, whose names and functions are listed on page 52, confirm that, to the best of their knowledge:


·      the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·      the Strategic report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.


Having assessed the principal risks and the other matters discussed in connection with the Viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

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