crest nicholson holdings annual report (2009)
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REPORT& ACCOUNTSFor the period 23rdJanuary 2009
to 31stOctober 2009
CREST NICHOLSON HOLDINGS LIMITED
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02
Directors report09Statement of Directors responsibilitiesin respect of the Directors reportand the nancial statements
10Independent Auditors Report to themembers of Crest NicholsonHoldings Limited
11Consolidated income statement
Consolidated statement of
recognised income and expense
13
Consolidated balance sheet14Consolidated cash ow statement
15Notes to the consolidatednancial statements
35Company balance sheet
36Notes to the companynancial statements
CONTENTS
FROM LEFT
Avante, Coxheath
ICON, Street
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Crest Nicholson is a leading
developer of sustainablecommunities whose mission
is to be the market leader
in the design and delivery
of sustainable housing and
mixed use communities.
The Directors present their annual report
with the consolidated accounts of the
company and its subsidiaries for the periodto 31stOctober 2009. The company was
incorporated on 23rdJanuary 2009.
PRINCIPAL ACTIVITYDuring the period to 31stOctober 2009,
the principal activity of the group was the
design and delivery of sustainable housing
and mixed use communities.
ACQUISITION OFCASTLE BIDCO LIMITED
On 24th
March 2009, Castle Bidco Ltd,the immediate parent company of Crest
Nicholson PLC, was acquired by the
company, as part of a nancial restructure
of the Crest Nicholson business. The
company became the ultimate parent
company of Crest Nicholson PLC (Crest),
which in turn owns the trading operations
of the group.
RESULTS AND DIVIDEND1Results for the nancial period ended
31stOctober 2009 reect ongoing difcultconditions in the housing market.
Although the rate of sales price decline
experienced by the industry during the
preceding year has abated in 2009,
a number of challenges remain. The
availability of mortgage nance has
continued to be constrained, property
valuations have remained subdued and
consumer condence remains fragile.
Against this back-drop, the businesshas performed well. Group prots before
interest, tax and exceptional items were
15.0m. The exceptional item represents
18.7m of the goodwill arising on CNHLs
acquisition of Castle Bidco Limited, which
was immediately impaired as it was not
supported by expected future cash ows.
Inclusive of the exceptional item, the group
recorded a loss after taxation for the year
of 50.5m.
The Directors do not propose a dividend.
DIRECTORS REPORT
FROM LEFT
Harbourside, Bristol
DIRECTORSREPOR
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1The consolidated accounts of the group include the results of the Castle Bidco Limited group from the acquisition date of 24th March 2009 to 31stOctober 2009. Year-on-yearcomparatives for Crest refer to the ongoing trading operations of the group.
Crest Nicholson holds the Queens Award for
Sustainable Development in honour of its continuous
achievement in the delivery of sustainable homes
and community regeneration.
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The nancial restructuring
effected through the acquisitionof Castle Bidco Limited placed
the continuing Crest Nicholson
group in a much stronger position
to deal with current economic
conditions and to take advantage
of commercially attractive
opportunities when they arise.
Liabilities to lenders were reduced
by 630m and the restructured
debt facilities were extended to the
end of March 2012.
FINANCIAL POSITIONCrest Nicholson Holdings Limited
is dependent for its working capitalrequirements on funds provided to it
through senior bank facilities totalling
500 million and a working capital facility
of 40 million. As part of the nancial
restructuring of the group, the Directors
prepared cash ow projections for the
period to maturity of the senior facilities.
These projections have been updated
subsequently and show that the group
is capable of operating within the bank
facilities currently available and meeting
the nancial covenant tests. However, thenature of the groups business is such that
there can be unpredictable variations in the
timing of cash inows and performance.
The Directors recognise that in the
current economic environment, risks existregarding the amount and timing of cash
ows from future sales and future building
costs and have considered the effect of
reasonably possible variations.
The Directors have concluded, after making
enquiries and considering the uncertainties
described above, that there is a reasonable
expectation that the group has adequate
resources to continue in operational
existence for the foreseeable future.
For these reasons, the Directors considerit appropriate to prepare the nancial
statements of the group on a going concern
basis. These nancial statements do not
include any adjustments that would result
from the going concern basis of preparation
being inappropriate.
DIRECTORS REPORT
Elements, Epsom
DIRECTORSREPOR
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Registered no. 6800600
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HOUSING
Total Crest housing completions in
2009 were 1,878 units, down 34%
on the 2,825 completions achieved
in 2008. Open market completions
of 1,365 (2008 2,005) were down
32%, whilst completions of
affordable units were down 37%
to 513 (2008 820).
The average sale price was 165k, down7.8% on the 179k recorded in 2008.
Forward sales for 2010 and later years
amounted to 165.7m (2008 164.2m),
which includes c.37% of 2010 open market
housing sales (2008 24%).
MIXED USE COMMERCIALCommercial property sales from Crests
mixed use schemes were 9.5m, down 78%
on the 43.8m achieved in 2008. Revenues
in 2008 were underpinned by the sale of the
lease on 100,000sq ft of ofce space at ourBristol Harbourside development; there
were no comparable transactions in 2009.
Conditions in the commercial property
market remain subdued, with both sales
and lettings proving increasingly difcult
to achieve against the backdrop of a
slowing economy.
MARGINSGroup gross prot margin for the period
was 13.9%, after sales and marketing costs.
The fair valuation of stock and work-in-
progress at the acquisition date included
an assessment of required margins, which
restores the protability of the land-bank to
more normal, commercial levels.
In addition, the business has maintained
a dialogue with suppliers and sub-
contractors, seeking to mitigate sales
price degradation through cost savings
and efciencies.
Crest has continued to rationalise its
operations, to reect the scale of downturn
that the business in common with the rest
of the industry has suffered. In January
2009, three of the six regional business
units were closed, generating further
overhead savings.
LAND BANKThe groups contracted land bank is
summarised in terms of units and grossdevelopment value as shown below:
The short term housing land bank declinedby 2,622 plots in the year, as the business
adopted a policy of restricting land buying
to conserve cash. There were also modest
impacts from re-planning certain sites,
to adopt a product mix more suited to the
current sales environment and offer greater
exibility on timing of production.
At the 2009 level of Crest turnover, the short
term housing portfolio represents over
6 years supply. The business also monitors
the number of selling outlets and selectiveland acquisitions at the right price and on
the right terms are planned, to ensure that
the business has an appropriate number of
sites open for sales at any one time.
Our strategic land bank has continued
to grow, offering a source of longer-term
development value as sites are converted
to short term portfolio at the prevailing
market price.
DIRECTORS REPORT
DIRECTORSREPOR
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UNITS GDV m UNITS GDV m
Short term housing 12,823 2,375 15,445 2,728
Short term commercial - 335 - 207
Total short term 12,823 2,710 15,445 2,935
Strategic land 18,330 3,449 17,759 3,322
Total under contract 31,153 6,159 33,204 6,257
2009 2008
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Despite the impact that the
current business downturn ishaving on the industry generally,
Crest remains rmly committed
to the core values of good design
and sustainability for which it
is renowned
BUSINESS SUSTAINABILITYIt remains the case that reductions in
mortgage availability and declining sales
values raise challenges to current models
of housing provision. The signicant gapbetween the levels of production that
the industry is willing and able to provide
and the Governments forecast for new
household formations, points to a serious
and growing housing shortage.
Crest is working with the public sector to
secure means of restoring viability to parts
of its land portfolio, including participating
in the government sponsored Kickstart
schemes, whilst retaining a commitment to
high quality and sustainable developments.
Crest continues to be committed to
the progressive reduction of its carbon
footprint both operationally and in itsown administration and recognises
the importance of understanding and
addressing the immediate and longer
term challenges posed by climate change.
Climate change is particularly important
for UK house building because Greenhouse
Gas (GHG) emissions from homes
contribute approximately 24% of UK
GHG emissions.
The group has carried out a climate change
impact assessment to provide a baseline forour management operations, to enable the
setting of targets for emissions reductions
and identify the specic measures by which
these reductions can be achieved. The
group also has a Climate Change Policyand
published its rst Climate Change review
last year.
We were pleased to see our sustainability
credentials recognised in the year by once
again achieving 2nd place in the Next
generation ranking of the environmental
performance of major UK developers. In a
year in which a number of other accolades
were received, Crest was pleased to achievetwo further Building for Life gold awards
from the Commission for Architecture and
the Built Environment (CABE). Schemes
are judged against criteria which embody
CABEs vision of functional, attractive and
sustainable housing.
EMPLOYEESCrests employees have performed very
well in what has been another difcult year
across the industry.
It has regrettably been necessary to engage
in further headcount reductions in order to
secure the future viability of the business.
Employees have been consulted during
these processes and, where positions have
been identied as redundant, every effort
has been made to re-deploy individuals in
suitable, alternative roles.
Where this has not been possible, Crest
has offered support in seeking alternative
employment.
DIRECTORS REPORT
DIRECTORSREPOR
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FROM LEFT
Kings Warren, Suffolk
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RISKS AND UNCERTAINTIESThe principal risks facing Crest in 2010
are that:
existing difculties in the UK housing
market will be compounded by a rise in
unemployment and/or pessimism about
employment prospects
lenders will continue to limit the
percentage loan-to-values that they are
prepared to lend to rst-time buyers and
maintain downward pressure
on valuations
consumers adopt a wait and see
approach in the face of uncertainty arisingfrom the forthcoming general election
and potential scal and/or monetary
tightening to address the national debt
The reduction in land buying that has been
a feature of both 2008 and 2009, coupled
with delayed operational commencementsdesigned to match production with demand,
will mean that 2010 volumes are likely to be
lower than 2009.
The nancing of Crests operations has
been restructured to reduce the interest
burden on the business and ensure that
there is sufcient working capital to sustain
trading. Latest forecasts, which take
account of current conditions, project that
there will be sufcient headroom within the
revised facilities to enable the business tocontinue trading and that the business will
meet its covenants.
In the longer term, the risks facing Crest
relate to the ability to restore an appropriate
capital structure when or before existingfacilities expire, the ability to recruit and
retain staff with the requisite skills to secure
and deliver sustainable developments
which generate appropriate returns and
that increasing regulation, cost and delay
will render schemes unviable.
DIRECTORS REPORT
DIRECTORSREPOR
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FROM LEFT
The Pier at Ingress Park Greenhithe
Dockside at Port Marine, Portishead
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In the short term, the business
will continue to face challengeswith subdued prices and lower
volumes. Over the longer
term, the fundamentals of the
housing market remain strong,
underpinned by a structural
imbalance between supply
and demand.
OUTLOOKThe steps that have been taken to
restructure the operations and the nancesof the business, along with our continued
commitment to excel in the area of
sustainable development, provide a solid
platform for future protability.
Share capital
Details of shares issued during the year are
set out in Note 19 to the accounts.
Donations
During the period the Group made
donations to charities of 2,000. Employeeshave continued to support the groups
nominated charity, The Variety Club and two
further Sunshine coaches were donated
in 2009, bringing to 11 the total number of
coaches donated. There were no political
donations made.
Employment policies
Arrangements exist to keep all employees
informed on matters of concern to themthrough a variety of media including
conferences, newsletters and meetings.
It is the policy of the Group that disabled
persons shall be considered for
employment, training, career development
and promotion on the basis of their
aptitudes and abilities, in common with
all employees. The services of any existing
employee who becomes disabled are
retained wherever possible.
Training
The Group recognises that its reputation is
very dependent on the quality, effectiveness
and skill base of its employees. There is
a commitment at Board level to ensure
that its employees and management are
properly inducted into the Company and
given necessary training to full their roles.
With ever increasing customer demands,
particular emphasis is placed on customer
service and build quality skills training.
DIRECTORS REPORT
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FROM LEFT
Admiralty Quarter, Portsmouth
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DirectorsThe Directors during the period were:-
Mr S Stone
(Appointed 23rdJanuary 2009)
Mr D P Darby
(Appointed 23rdJanuary 2009)
Mr N C Tinker
(Appointed 23rdJanuary 2009)
Mr P Callcutt
(Appointed 23rdJanuary 2009;
resigned 31stMarch 2009)
Mr A I Goldman(Appointed 23rdMarch 2009)
Mr A M Coppel
(Appointed 6thApril 2009)
Mr M G McCaig
(Appointed 6thApril 2009)
Enviromental policyIt is the Companys policy to assess
environmental issues which may beapplicable to its business, customers
and the general public and to take
such measures consistent with being a
responsible property development group.
Disclosure of informationto auditorsThe directors who held ofce at the date of
approval of this directors report conrm
that, so far as they are each aware, there
is no relevant audit information of which
the companys auditors are unaware;and each director has taken all the steps
that he ought to have taken as a director
to make himself aware of any relevant
audit information and to establish that
the companys auditors are aware of that
information.
AuditorsPursuant to section 487 of the Companies
Act 2006, the auditors will be deemed tobe reappointed and KPMG Audit Plc will
therefore continue in ofce.
By Order of the Board
K M Maguire
Secretary
29thJanuary 2010
DIRECTORS REPORT
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FROM LEFT
Mr S Stone
Cromwell Park, Tetbury
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DIRECTORSREPOR
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The directors are responsible
for preparing the DirectorsReport and the group and parent
company nancial statements in
accordance with applicable law
and regulations.
Company law requires the directors
to prepare group and parent company
nancial statements for each nancial
year. Under that law they have elected to
prepare the group nancial statements
in accordance with IFRSs as adoptedby the EU and applicable law and have
elected to prepare the parent company
nancial statements in accordance with
UK Accounting Standards and applicable
law (UK Generally Accepted Accounting
Practice).
Under company law the directors must not
approve the nancial statements unless
they are satised that they give a true and
fair view of the state of affairs of the group
and parent company and of their prot or
loss for that period.
In preparing each of the group and parent
company nancial statements, the directors
are required to:
select suitable accounting policies and
then apply them consistently;
make judgments and estimates that are
reasonable and prudent;
for the group nancial statements, state
whether they have been prepared in
accordance with IFRSs as adopted by
the EU;
for the parent company nancial
statements, state whether applicable UKAccounting Standards have been followed,
subject to any material departures
disclosed and explained in the nancial
statements; and
prepare the nancial statements on
the going concern basis unless it is
inappropriate to presume that the group
and the parent company will continue in
business.
The directors are responsible for keeping
adequate accounting records that are
sufcient to show and explain the parentcompanys transactions and disclose
with reasonable accuracy at any time the
nancial position of the parent company
and enable them to ensure that its nancial
statements comply with the Companies Act
2006. They have general responsibility for
taking such steps as are reasonably open
to them to safeguard the assets of the
group and to prevent and detect fraud and
other irregularities.
The directors are responsible for themaintenance and integrity of the corporate
and nancial information included on
the companys website. Legislation in
the UK governing the preparation and
dissemination of nancial statements may
differ from legislation in other jurisdictions.
DIRECTORSREPOR
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STATEMENT OF DIRECTORSRESPONSIBILITIESIN RESPECT OF THE DIRECTORS REPORT AND THE FINANCIAL STATEMENTS
FROM LEFT
The Academy, Kilburn
The Beacon, Hindhead
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ACCOUNTS
2009
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10
We have audited the nancial
statements of Crest Nicholson
Holdings Limited for the period
ended 31stOctober 2009 set out
on pages 11 to 37.
The nancial reporting framework that has
been applied in the preparation of the group
nancial statements is applicable law and
International Financial Reporting Standards
(IFRSs) as adopted by the EU. The nancial
reporting framework that has been applied
in the preparation of the parent company
nancial statements is applicable law and
UK Accounting Standards (UK Generally
Accepted Accounting Practice).
This report is made solely to the companys
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the companys
members those matters we are required
to state to them in an auditors report and
for no other purpose. To the fullest extentpermitted by law, we do not accept or
assume responsibility to anyone other than
the company and the companys members,
as a body, for our audit work, for this report,
or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIESOF DIRECTORS AND AUDITORSAs explained more fully in the Directors
Responsibilities Statement set out on page
9, the directors are responsible for the
preparation of the nancial statements and
for being satised that they give a true and
fair view. Our responsibility is to audit the
nancial statements in accordance with
applicable law and International Standards
on Auditing (UK and Ireland). Those
standards require us to comply with the
Auditing Practices Boards (APBs) Ethical
Standards for Auditors.
SCOPE OF THE AUDIT OF THEFINANCIAL STATEMENTSA description of the scope of an audit of
nancial statements is provided on the
APBs web-site at www.frc.org.uk/apb/
scope/UKNP.
OPINION ON FINANCIALSTATEMENTSIn our opinion:
the nancial statements give a true andfair view of the state of the groups and
of the parent companys affairs as at 31
October 2009 and of the groups loss for
the period then ended;
the group nancial statements have been
properly prepared in accordance with
IFRSs as adopted by the EU;
the parent company nancial statements
have been properly prepared in
accordance with UK Generally Accepted
Accounting Practice;
the nancial statements have been
prepared in accordance with the
requirements of the Companies Act 2006.
OPINION ON OTHER MATTERPRESCRIBED BY THE COMPANIESACT 2006In our opinion the information given in the
Directors Report for the nancial year
for which the nancial statements are
prepared is consistent with the nancial
statements.
MATTERS ON WHICH WEARE REQUIRED TO REPORTBY EXCEPTIONWe have nothing to report in respect of the
following matters where the Companies Act2006 requires us to report to you if, in our
opinion:
adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
the parent company nancial statements
are not in agreement with the accounting
records and returns; or
certain disclosures of directors
remuneration specied by law are not
made; or
we have not received all the information
and explanations we require for our audit.
W E J Holland (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
London29 January 2010
INDEPENDENT AUDITORS REPORTTO THE MEMBERS OF CREST NICHOLSON HOLDINGS LIMITED
http://www.frc.org.uk/apb/scope/UKNPhttp://www.frc.org.uk/apb/scope/UKNPhttp://www.frc.org.uk/apb/scope/UKNPhttp://www.frc.org.uk/apb/scope/UKNP -
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CONSOLIDATED INCOMESTATEMENT
ACCOUNTS
2009
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11
NOTE PERIOD ENDED31 OCT 2009
m
PERIOD ENDED31 OCT 2009
m
PERIOD ENDED31 OCT 2009
m
BEFOREEXCEPTIONAL
ITEMS
EXCEPTIONALITEM
(NOTE 3)
TOTAL
Revenue continuing activities 2 238.2 - 238.2
Cost of sales (205.2) - (205.2)
Gross prot 33.0 - 33.0
Administrative expenses (19.1) (18.7) (37.8)
Share of post tax prots from jointly controlled entities 0.8 - 0.8
Other operating income 0.3 - 0.3
Prot/(loss) from operations 4 15.0 (18.7) (3.7)
Finance income 6 4.7
Bank nance costs:
Nominal bank interest charges (10.5)
Amortisation of bank debt fair value discount (35.7)
6 (46.2)
Other nance costs 6 (5.5)
Loss before taxation (50.7)
Income tax credit 7 0.2
Loss for the period attributable toequity shareholders
(50.5)
For period ended 31stOctober 2009
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CONSOLIDATED STATEMENTOF RECOGNISED INCOMEAND EXPENSE
ACCOUNTS
2009
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12
NOTE 2009m
Cash ow hedges: effective portion of changes in fair value 19 0.2
Actuarial losses on dened benet pension schemes 19 (27.3)
Net expense recognised directly in equity (27.1)
Loss for the period (50.5)
Total recognised expense attributable to equity shareholders (77.6)
For period ended 31stOctober 2009
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CONSOLIDATEDBALANCE SHEET
ACCOUNTS
2009
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13
ASSETS NOTE 2009m
Non-current assets
Intangible assets 9 29.0
Property, plant and equipment 10 4.8
Investments 11 11.2
Available for sale assets 12 14.6
59.6Current assets
Inventories 13 386.0
Trade and other receivables 14 41.5
Cash and cash equivalents 101.9
529.4
Total assets 589.0
LIABILITIES
Non-current liabilities
Interest bearing loans and borrowings 15 (367.5)
Trade and other payables 16 (36.6)
Retirement benet obligations 22 (46.1)
Provisions 18 (17.9)
(468.1)
Current liabilities
Trade and other payables 16 (195.1)
Provisions 18 (3.4)
(198.5)
Total liabilities (666.6)
Net liabilities (77.6)
SHAREHOLDERS EQUITY
Share capital -
Retained earnings (77.6)
Total decit attributable to equity shareholders 19 (77.6)
At 31st
October 2009
These nancial statements were approved by the board of directors on 29th January 2010 and were signed on its behalf by:S Stone
D P DarbyDirectors
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CONSOLIDATEDCASH FLOW STATEMENT
ACCOUNTS
2009
|
14
2009m
Cash ows from operating activities
Loss for the period (50.5)
Adjustments for:
Depreciation charge 0.7
Loss on disposal of xed assets 0.1
Impairment of goodwill 18.7
Net nance charges 47.0
Share of prot of joint ventures (0.8)
Taxation (0.2)
Operating prot before changes in working capital and provisions 15.0
Increase in trade and other receivables (4.7)
Decrease in inventories 81.4
Increase in trade and other payables 9.4
Cash generated from operations 101.1
Interest paid (6.2)
Net cash from operating activities 94.9
Cash ows from investing activities
Acquisition of subsidiary, net of cash acquired 15.4
Proceeds from sales of property, plant and equipment 0.1
Purchases of property, plant and equipment (0.2)
Loans to joint ventures (0.9)
Increase in available for sale assets (5.9)
Net cash from investing activities 8.5
Cash ows from nancing activities
Net proceeds from the issue of share capital -
Debt arrangement & facility fees (1.5)
Net cash ow from nancing activities (1.5)
Net increase in cash and cash equivalents 101.9
Cash and cash equivalents at the beginning of the period -
Cash and cash equivalents at end of the period 101.9
For period ended 31stOctober 2009
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ACCOUNTS
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1. ACCOUNTING POLICIESCrest Nicholson Holdings Limited (the
company) is a company incorporated
in the UK. The company was incorporated
on 23rdJanuary 2009 and has
prepared accounts for the period
ended 31stOctober 2009.
The group nancial statements consolidate
those of the company and its subsidiaries
(together referred to as the group) and
include the groups interest in associates
and jointly controlled entities. The parent
company nancial statements presentinformation about the company as a
separate entity and not about its group.
The group nancial statements have been
prepared and approved by the directors in
accordance with International Financial
Reporting Standards as adopted by the
EU (Adopted IFRSs). The company has
elected to prepare its parent company
nancial statements in accordance with
UK GAAP; these are presented on pages
35 to 37.
The accounting policies set out below have,
unless otherwise stated, been applied
consistently to all periods presented in
these group nancial statements.
Judgements made by the directors, in the
application of these accounting policies
that have signicant effect on the nancial
statements and estimates with a signicant
risk of material adjustment in the next year
are discussed in note 26.
Measurement convention
The nancial statements are preparedin accordance with the historical cost
convention, except for certain nancial
instruments and available for sale assets,
which are carried at fair value.
Basis of preparation going concern
Crest Nicholson Holdings Limited
is dependent for its working capital
requirements on funds provided to it
through senior bank facilities totalling
500 million and a working capital facility
of 40 million. As part of the nancialrestructuring of the group, the Directors
prepared cash ow projections for the
period to maturity of the senior facilities
in March 2012. These projections have
been updated subsequently and show that
the group is capable of operating within
the bank facilities currently available and
meeting the nancial covenant tests.
However, the nature of the groups business
is such that there can be unpredictable
variations in the timing of cash inows and
performance. The Directors recognise that
in the current economic environment, risks
exist regarding the amount and timing of
cash ows from future sales and future
building costs and have considered the
effect of reasonably possible variations.
The Directors have concluded, after making
enquiries and considering the uncertainties
described above, that there is a reasonable
expectation that the group has adequate
resources to continue in operational
existence for the foreseeable future.
For these reasons, the Directors consider
it appropriate to prepare the nancialstatements of the group on a going concern
basis. These nancial statements do not
include any adjustments that would result
from the going concern basis of preparation
being inappropriate.
Consolidation
The consolidated accounts include the
accounts of Crest Nicholson Holdings
Limited and entities controlled by the
company (its subsidiaries) at the reporting
date. Control is achieved where thecompany has the power to govern the
nancial and operating policies of an entity
so as to obtain benets from its activities.
The prots and losses of subsidiaries
acquired or sold during the year are
included as from or up to their effective
date of acquisition or disposal.
On acquisition of a subsidiary, all of the
subsidiarys separable, identiable assets
and liabilities existing at the date of
acquisition are recorded at their fair values
reecting their condition at that date. All
changes to those assets and liabilities,
and the resulting gains and losses that
arise after the group has gained control
of the subsidiary are charged to the post
acquisition income statement or statement
of recognised income and expense.
NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS
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Goodwill
Goodwill arising on consolidationrepresents the excess of the cost of
acquisition over the groups interest in
the fair value of the identiable assets
and liabilities of the acquired entity at the
date of the acquisition. Goodwill arising on
acquisition of subsidiaries and businesses
is capitalised as an asset. Goodwill
allocated to the strategic land holdings is
recognised as an asset, being the intrinsic
value within these holdings in the acquired
entities, which is realised upon satisfactory
planning permission being obtained andsale of the land.
Goodwill is assessed for impairment at
each reporting date by performing a value
in use calculation, using a discount factor
based on the groups pre-tax weighted
average cost of capital. It is tested by
reference to the proportion of legally
completed plots in the period compared to
the total plots which are expected to receive
satisfactory planning permission in the
remaining acquired strategic land holdings,
taking account of historic experience and
market conditions. Any impairment loss
is recognised immediately in the income
statement.
Joint ventures
A joint venture is an undertaking in whichthe group has a participating interest
and which is jointly controlled under a
contractual arrangement.
Where the joint venture involves the
establishment of a separate legal entity,
the groups share of results of the joint
venture after tax is included in a single
line in the consolidated income statement
and its share of net assets is shown in
the consolidated balance sheet as an
investment.
Where the joint venture does not involve the
establishment of a legal entity, the group
recognises its share of the jointly controlled
assets and liabilities and income and
expenditure on a line by line basis in the
balance sheet and income statement.
Revenue recognition
Revenue comprises the fair value of the
consideration received or receivable, net
of value-added tax, rebates and discounts
but excludes the sale of properties taken
in part exchange.
Revenue is recognised once the value of
the transaction can be reliably measured
and the signicant risks and rewards of
ownership have been transferred.
Revenue is recognised on house sales at
legal completion. Revenue is recognised on
land sales and commercial property sales
from the point of unconditional exchange
of contracts. Where the conditions for therecognition of revenue are met but the
Group still has signicant acts to perform
under the terms of the contract, revenue is
recognised as the acts are performed.
Exceptional items
Exceptional items are those signicantitems which are separately disclosed by
virtue of their size or incidence to enable a
full understanding of the groups nancial
performance.
Taxation
Income tax comprises current tax and
deferred tax. Income tax is recognised in
the income statement except to the extent
that it relates to items recognised directly
in equity, in which case it is also recognised
in equity.
Current tax is the expected tax payable
on taxable prot for the period and any
adjustment to tax payable in respect of
previous periods. The groups liability for
current tax is calculated using tax rates that
have been enacted or substantively enacted
by the balance sheet date.
Deferred tax is provided on temporary
differences between the carrying amounts
of assets and liabilities in the nancial
statements and the corresponding tax
bases used in the computation of taxable
prot. Deferred tax liabilities are recognised
for all taxable temporary differences, except
those exempted by the relevant accounting
standard, and deferred tax assets are
recognised to the extent that it is probable
that taxable prots will be available against
which deductible temporary differences can
be utilised.
Dividends
Dividends are recorded in the groupsnancial statements in the period in which
they are paid.
NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS
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Property, plant and equipment
Property, plant and equipment is initiallyrecognised at cost. Freehold land is
not depreciated.
Plant, vehicles and equipment are
depreciated on cost less residual value on a
straight line basis at rates varying between
10% and 33% determined by the expected
life of the assets.
Available for sale assets
These assets are initially recognised at
fair value. Changes in fair value relatingto the expected recoverable amount are
recognised in the income statement;
changes in fair value arising from a change
of discount factor are recognised directly
in equity, until the asset is divested.
On disposal of these assets, the difference
between the carrying value and the
consideration received plus cumulative fair
value movements previously recognised
in equity is recognised in the income
statement.
Leases
A nance lease is a lease that transfers
substantially all the risks and rewards
incidental to the ownership of an asset;
all other leases are operating leases.
Assets acquired under nance leases are
capitalised and the outstanding future
lease obligations are shown in creditors.
Operating lease rentals are charged to the
income statement on a straight line basis
over the period of the lease.
Inventories
Inventories are valued at the lower of costand net realisable value. Land includes land
under development, undeveloped land and
land option payments. Work in progress
comprises direct materials, labour costs,
site overheads, associated professional fees
and other attributable overheads.
Land inventories and the associated land
creditors are recognised in the balance
sheet from the date of unconditional
exchange of contracts. If land is purchased
on deferred settlement terms then theland and the land creditor are discounted
to their fair value. The land creditor is then
increased to the settlement value over
the period of nancing, with the nancing
element being charged as interest expense
through the income statement.
Cash and cash equivalents
Cash and cash equivalents are cash
balances in hand and in the bank. For the
purpose of the cash ow statement, bank
overdrafts are considered part of cash and
cash equivalents as they form an integral
part of the groups cash management.
Offset arrangements across group
businesses are applied to arrive at the
net cash gure.
Retirement benet costs
The group operates a dened benetpension scheme (closed to new employees)
and also makes payments into a dened
contribution scheme for employees.
In respect of dened benet schemes, the
net obligation is calculated by estimating
the amount of future benet that employees
have earned in return for their service in
the current and prior periods, such benets
measured at discounted present value, less
the fair value of the scheme assets.
The discount rate used to discount thebenets accrued is the yield at the balance
sheet date on AA credit rated bonds that
have maturity dates approximating to
the terms of the groups obligations.
The calculation is performed by a qualied
actuary using the projected unit method.
The operating and nancing costs of such
plans are recognised separately in the
income statement; service costs are spread
systematically over the lives of employees
and nancing costs are recognised in the
periods in which they arise.
The group has applied the requirements
of IAS 19 (revised), recognising expected
scheme gains and losses via the income
statement and actuarial gains and losses
recognised in the period they occur directly
in equity through the statement
of recognised income and expense.
Payments to the dened contribution
schemes are accounted for on an
accruals basis.
NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS
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Financial Instruments
Trade receivables
Trade receivables which do not carry any
interest are stated at their nominal amount
less impairment losses.
Trade payables
Trade payables are generally stated at
their nominal amount; land payables with
deferred settlement terms are recorded at
their fair value.
Borrowings
Interest bearing bank loans and overdraftsare measured initially at fair value, net of
direct issue costs. Finance charges are
accounted for on an accruals basis in
the income statement using the effective
interest method and are added to the
carrying amount of the instrument to the
extent that they are not settled in the period
in which they arise or included within
interest accruals.
Derivative nancial instruments
and hedge accountingDerivative nancial instruments are
recognised at fair value. The fair value of
swaps is the estimated amount that the
Group would receive or pay to terminate the
swap at the balance sheet date, taking into
account the current creditworthiness of the
swap counterparties.
Where the derivative instrument is deemed
an effective hedge over the exposure being
hedged, the derivative instrument is treated
as a hedge and hedge accounting applied.
Under a fair value hedge the change in the
fair value of the derivative is recognised
in the income statement and offsets themovement in fair value of the hedged item.
Under a cash ow hedge, gains and losses
on the effective portion of the change in the
fair value of the derivative instrument are
recognised directly in equity.
Changes in the fair value of derivative
nancial instruments that do not qualify for
hedge accounting and any ineffectiveness in
the hedge relationship are recognised in the
income statement as they arise.
Hedge accounting is discontinued when
the hedging instrument expires or is sold,
terminated or exercised, or no longer
qualies for hedge accounting. At that
time, any cumulative gain or loss on the
hedging instrument recognised in reserves
is retained in reserves until the forecasted
transaction occurs. If a hedged transaction
is no longer expected to occur, the net
cumulative gain or loss recognised in
reserves is transferred to net prot or loss
for the period.
Provisions
A provision is recognised in the balance
sheet when the group has a present legal
or constructive obligation as a result of a
past event and it is probable that an outow
of economic benets will be required to
settle the obligation. If the effect is material,
provisions are determined by discounting
the expected future cash ows at a
pre-tax rate that reects current market
assessments of the time value of money
and, where appropriate, the risks specic tothe liability.
Impact of Standards and Interpretations in
issue but not yet effective
A number of relevant new standards,
amendment to standards and
interpretations are not yet effective for
the period ended 31 October 2009 and
have not been applied in preparing these
consolidated nancial statements:
Revised IAS 23 Borrowing Costsremoves
the option to expense borrowing costs and
requires that an entity capitalise borrowing
costs directly attributable to the acquisition,
construction or production of a qualifying
asset as part of the cost of that asset. Therevised IAS 23 will become mandatory for
the Groups 2010 nancial statements and
may constitute a change in accounting
policy for the Group.
IFRIC 15 - Real Estate Salesrequires real
estate sale agreements to be accounted
for under IAS 11 only if it is a contract to
provide construction services to the buyers
specications. Alternatively, if it is an
agreement for the sale of goods (completed
real estate units) then it would be accountedfor under IAS 18. The Group will review the
implications of IFRIC 15 in preparing its
2010 nancial statements.
Amendments to IAS 1 Presentation of
nancial statementsrequire companies
to present both a SOCIE and either a
statement of comprehensive income or
an income statement accompanied by a
statement of other comprehensive income
as nancial statements (formerly referred
to as primary statements).
NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS
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3. EXCEPTIONAL ITEMFollowing the acquisition of Castle BidcoLimited by Crest Nicholson Holdings
Limited on 24th March 2009, the goodwill
arising on acquisition was assessed for
impairment. An exceptional impairment
charge of 18.7m was made in the period.
2. REVENUEThere is no Group revenue in geographical
markets outside the United Kingdom.
No segmental information has been
presented as the Directors consider that
there is only one business and
geographical segment.
The amendments will become mandatory
for the Groups 2010 nancial statements.
Amendments to IFRS7 Financial
Instruments: Disclosure requires certain
fair value disclosures relating to fair
value measurements using a three level
hierarchy. The Group will review the
implications of these amendments in
preparing its 2010 nancial statements.
With the exception of revised IAS 23, the
Directors expect that the adoption of these
standards and interpretations in futureperiods will not have any signicant impact
on the nancial statements of the Group.
Revised IAS 23 Borrowing Costsmay
represent a change in accounting policy but
is likely to have only a modest impact on the
Groups 2010 nancial statements.
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Prot/(loss) from operations is stated after charging/(crediting) the items set out below: 2009m
Staff costs (Note 5) 15.8
Net loss on disposal of property, plant & equipment 0.1
Depreciation 0.7
Operating lease rentals:
Hire of plant and machinery 0.1
Other including land and buildings 2.5
Auditors remuneration: 000
Audit of these nancial statements 61
Audit of nancial statements of subsidiaries pursuant to legislation 114
Other services relating to taxation 21
2009
Average number of persons employed by the Group
Development 456
Head ofce 11467
Staff costs m
Wages and salaries 13.4
Social security costs 1.4
Other pension costs 1.0
15.8
2009
Directors' remuneration 000
Aggregate emoluments 871
2009
Highest paid Director 000Emoluments 341
Dened benet scheme
Accrued pension at end of year 99
4. PROFIT/(LOSS) FROM OPERATIONS
5. STAFF NUMBERS & COSTS
In addition to the Auditors remuneration disclosed above, fees of 7k were paid to the Groups auditors by the Crest Nicholson MoneyPurchase pension scheme in respect of the audit of the scheme.
Amounts paid to the Companys auditor in respect of services to the Company, other than the audit of the Companys nancial statements,
have not been disclosed as the information is required instead to be disclosed on a consolidated basis
Key Management comprises the Main Board, as the Directors are considered to have the authority and responsibility for planning, directing
and controlling the activities of the Group. Details of Directors remuneration, pension and share based payments are as follows:
Retirement benets are accruing to three directors under the Crest Nicholson dened benet scheme. The aggregate value of company
contributions paid for directors was 79,000.
number
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6. FINANCE INCOME & COSTS
7. TAXATION
2009m
Interest income 0.6
Imputed interest on available for sale assets 0.6
Expected return on dened benet pension plan assets 3.5
Finance income 4.7
Nominal bankinterest charges
Amortisation ofbank debt fairvalue discount
Total
m m m
Bank term loan Facility B 5.2 6.6 11.8
Bank term loan Facility E 3.7 29.1 32.8
Other interest 1.6 - 1.6
10.5 35.7 46.2
Imputed interest on deferred land creditors 1.5 - 1.5
Interest on dened benet pension plan obligations 4.0 - 4.0
5.5 - 5.5
Finance costs 16.0 35.7 51.7
2009
m
Current tax income
UK Corporation tax on prots for the period (0.2)
Deferred tax expense
Origination and reversal of temporary differences (note 17) -
Total tax in income statement (0.2)
2009m
Loss before tax (50.7)
Tax on Loss at 28% (14.2)
Effects of:
Expenses not deductible for tax purposes 0.6
Deductible temporary differences not recognised (0.4)
Land remediation tax credit (0.2)
Unrecognised tax losses 14.0
Total tax in income statement (0.2)
The total tax charge for the period is higher than the standard rate of UK corporation tax of 28%. The differences are explained below:
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8. DIVIDENDSThere were no distributions to equity shareholders in the period. No dividend has been proposed by the directors after the balance
sheet date.
9. INTANGIBLE ASSETS
10. PROPERTY, PLANT & EQUIPMENT
Goodwill arose on the acquisition of Castle Bidco Limited on 24th March 2009. Goodwill is allocated to acquired strategic land holdings
and is tested annually for impairment. The recoverable amounts are determined by assessing value in use, using a house building sector
weighted average cost of capital of 9.73%, covering a period of 22 years (being the minimum period that management expects to benet
from the acquired strategic land holdings) and based on current market conditions.
Total Goodwill2009m
Cost
At start of period -
Acquired through business combination 47.7
At 31st October 2009 47.7
Impairment
At start of period -
Impairment charge (18.7)
At 31stOctober 2009 (18.7)
Carrying value
At 31stOctober 2009 29.0
Total Plant, Vehicles &Equipment
2009m
Cost
At start of period -
Acquired through business combination 8.6
Additions 0.2
Disposals (0.5)
At 31stOctober 2009 8.3
Accumulated depreciation
At start of period -
Acquired through business combination 3.1
Charged in the period 0.7
Disposals (0.3)
At 31stOctober 2009 3.5
Net book value
At 31stOctober 2009 4.8
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11. INVESTMENTS
Cost ofInvestment
Loans Share of PostAcquisition
Reserves
Total
Joint ventures m m m m
At start of period - - - -
Acquired through business combination - 4.4 (15.2) (10.8)
Share of prot for the period - - 0.7 0.7
Additions - 6.8 - 6.8
At 31stOctober 2009 - 11.2 (14.5) (3.3)
Analysed on the balance sheet between:
Investments 11.2
Current liabilities provisions (note 18) (2.2)
Non-current liabilities provisions (note 18) (12.3)
At 31st
October 2009 (3.3)
The Group owns 500 ordinary shares of 1 each representing 50% of the issued share capital of Brentford Lock Limited, a company
registered in England, which was set up to redevelop a site in West London. The site was completed and all units sold in 2006. At 31 st
October 2009, 3m was due from Crest Nicholson Operations Limited to Brentford Lock Limited, pending declaration of a nal dividend.
The Group has a 50% interest in Crest Nicholson Bioregional Quintain LLP, a Limited Liability partnership set up to develop a site in
Brighton. At 31stOctober 2009, Crest Nicholson Bioregional Quintain LLP had Capital Employed of 15m.
The Group has a 50% interest in Crest/Galliford Try (Epsom) LLP, a Limited Liability partnership set up to develop three sites in Epsom. At
31stOctober 2009, Crest/Galliford Try (Epsom) LLP had Capital Employed of 78m.
Subsidiary undertakings
The subsidiary undertakings which are signicant to the Group and traded during the period are set out below. The Groups interest is in
respect of ordinary issued share capital which is wholly owned and all the subsidiary undertakings are incorporated in Great Britain and
included in the consolidated nancial statements.
Subsidiary Nature of business
Castle Bidco Limited Holding company
Crest Nicholson PLC Holding company
Crest Nicholson Operations Limited Residential and commercial property development
Crest Nicholson Residential (London) Limited Holding company
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12. AVAILABLE FOR SALE ASSETS
13. INVENTORIES
2009m
At start of period -
Acquired through business combination 8.3
Additions 6.0Disposals (0.1)
Change in fair value 0.4
At 31stOctober 2009 14.6
2009m
Work in progress: land, building and development 338.2
Completed buildings including show houses 47.8
386.0
Crest Nicholson operates an Easybuy scheme, under which up to 25% of the purchase price of selected properties is funded through
a loan from the Group, secured on the property. The Group retains a percentage interest in the market value of the property equal to the
initial percentage of the loan provided. These loans are repayable at the relevant percentage of the market value of the property upon sale
or transfer of ownership of the property or within 10 years, whichever is sooner. The purchaser also has an option to repay the loan earlier
than would otherwise be required, subject to a market valuation of the property. Interest is payable on the outstanding balance from thefth anniversary of the purchase.
Crest Nicholson has also participated in the governments Homebuy scheme, under which up to 30% of the purchase price of selected
properties was funded through loans of up to 15% each from the Group and from the Homes and Communities Agency, secured on the
property. The Group retains an interest in the market value of the property equal to the initial percentage of the loan provided. These loans
are repayable at the relevant percentage of the market value of the property upon sale or transfer of ownership of the property or within
25 years, whichever is sooner. The purchaser also has an option to repay the loan earlier than would otherwise be required, subject to a
market valuation of the property. Interest is payable on the outstanding balance from the fth anniversary of the purchase.
Available for sale assets are held at fair value. The Directors believe that there is sufcient relevant expertise within the Group to perform
this valuation.
Included within inventories is 235.7m expected to be recovered in more than 12 months.
Inventories to the value of 185.3m were recognised as expenses in the period.
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14. TRADE AND OTHER RECEIVABLES
15. INTEREST BEARING LOANS AND BORROWINGS
16. TRADE AND OTHER PAYABLES
2009m
Current
Trade receivables 10.1
Recoverable on contracts 23.3
Due from associate 0.1
Other receivables 5.3
Interest rate cap 1.5
Prepayments and accrued income 1.2
41.5
2009m
Non-current
Term loans 349.3
Other loans 12.6
Loan notes 5.6
367.5
2009m
Non-current
Land payables on contractual terms 32.1
Accruals 4.5
36.6
CurrentLand payables on contractual terms 40.7
Other trade payables 19.6
Payments on account 22.7
Due to associates 0.2
Other taxes and social security costs 1.0
Other payables 33.9
Accruals 77.0
195.1
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17. DEFERRED TAX ASSETSDeferred tax assets are recognised to the extent that the realisation of the related tax benet through future taxable prots is probable.
The company did not recognise deferred tax assets of 74.1m in respect of losses amounting to 264.5m that can be carried forward
against future taxable income. The company did not recognise other deferred tax assets of 15.1m, in relation to retirement benet
obligations 12.9m, and 2.2m other timing differences
18. PROVISIONS
Rental and otherobligations in respect of
vacant properties
Future losseson joint venture
(note 11)
Total2009
m
Non-current
At start of period - - -
Acquired through business combination 3.2 12.3 15.5
Charged to the income statement 2.4 - 2.4
At 31stOctober 2009 5.6 12.3 17.9
Current
At start of period - - -
Acquired through business combination 2.1 2.9 5.0
Credit to the income statement (0.9) (0.7) (1.6)
At 31stOctober 2009 1.2 2.2 3.4
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19. CAPITAL AND RESERVES
Share capital
m
Cash owhedgingreserve
m
Retainedearnings
m
Total
m
Loss for the period - - (50.5) (50.5)
Shares issued (100) - - - -Actuarial loss on pension scheme - - (27.3) (27.3)
Cash flow hedges: effective portion of changes in fair value - 0.2 - 0.2
Balance at 31stOctober 2009 - 0.2 (77.8) (77.6)
SHARE CAPITAL 2009
Authorised
10,000 shares of one penny each 100
Allotted and fully paid
10,000 shares of one penny each 100
At 31stOctober 2009 there were no options outstanding to subscribe for ordinary shares.
Cash ow hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash ow hedging instruments related
to hedged transactions that have not yet occurred.
20. ACQUISITION OF SUBSIDIARYOn 24thMarch 2009, the Group acquired all of the ordinary shares in Castle Bidco Limited for a total consideration of 1, as part of a
nancial restructure of the Crest Nicholson property development business. The transaction has been accounted for using the purchase
method of accounting.
Acquirees net assets at the acquisition date Book valuem
Fair valuem
Goodwill 109.6 -
Property plant and equipment 5.5 5.5
Investment in jointly controlled entities 4.7 (10.8)Available for sale nancial assets 8.3 8.3
Inventories 669.4 467.4
Cash 15.4 15.4
Bank borrowings and other loans (1,166.5) (334.0)
Other receivables, payables and provisions (158.9) (178.6)
Retirement benet obligations (20.9) (20.9)
Net identiable assets/(liabilities) (533.4) (47.7)
Goodwill on acquisition 47.7
Consideration paid (including costs) - 1, satised in cash -
Net cash and cash equivalents acquired (15.4)
Net cash inow in the period (15.4)
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Inventories were valued by comparing forecast revenues with estimated costs to complete, after making appropriate allowance for an
appropriate prot margin. Inventories held in joint ventures were fair valued in the same way and where the group was under a legal
or constructive obligation to continue with construction, provision was made for future losses. Following the fair valuation of inventory,
provision was made for the onerous element of future land purchase commitments from which the group was not able to exit.
The fair valuation of bank loans comprised two elements. As part of the nancial restructuring of the Crest Nicholson group, 648m of
bank borrowings and interest accruals were written off or converted into equity. The remaining, restructured debt of 518.5m included
350m of performing debt upon which interest would be paid in cash and 150m of non-performing debt upon which interest would
accrue, to be paid at the facility termination date.
The 350m of performing debt was fair valued at 315.5m, having regard to the below-market coupon on this restructured borrowing
for a group in Crest Nicholsons position. Market sector evidence at the time of acquisition indicated that lenders would require a margin
over cost of funds of 4% and the fair valuation of this debt was calculated assuming this required level of return. The fair value of the
non-performing debt was established by considering the debt-free enterprise value of the group at the acquisition date and deducting
debt repayments that would rank ahead of this debt. As a consequence, the non-performing debt was fair valued at nil. 18.5m of other
loans were fair valued at their face value.
Goodwill arising on the acquisition is attributable to the intrinsic value within acquired strategic land holdings, which is realised upon
the receipt of satisfactory planning permission being obtained and the development or sale of the land.
Castle Bidco Limited contributed 238.2m of revenue, 33.0m of gross prot and (50.5)m loss after taxation for the period between the
date of acquisition and the balance sheet date. Had the acquisition taken place on the rst day of the nancial period, the contribution torevenue would have been 315.6m, 43.7m of gross prot and (87.1)m loss after taxation.
21. FINANCIAL INSTRUMENTS & RISK MANAGEMENTGroup operations are nanced through net borrowings, comprising bank and loan facilities which are secured by xed charges over land
and work-in-progress. The Group has hedged a substantial portion (260 m) of its oating rate interest exposure by the use of a nancial
instrument (cap), which caps the LIBOR rate paid by the business to 3%.
Fair values
Financial assets
The carrying amount of nancial assets equates to their fair value. Financial assets of the Group at 31 stOctober 2009 consisted of sterling
cash deposits of 101.9m, with solicitors and on current account and 14.6m of available for sale assets.
Financial liabilities
The fair value of the facilities and their related hedging instruments is determined by discounting risk-adjusted expected future cash ows
with application of current market interest rates.
The fair values of the facilities determined on this basis are:
Nominalinterest rate
Facevalue2009
m
Carryingvalue2009
m
Fairvalue2009
m
Year ofmaturity
Facility B Term loan 12 mth LIBOR + 0.50% 343.5 315.6 317.6 2012
Facility C Term loan 12 mth LIBOR + 0.50% 0.9 0.9 0.9 2012
Facility E Term loan 6 mth LIBOR + 2.50% 153.7 32.8 25.9 2012
Loan notes 3 mth LIBOR - 0.50% 5.6 5.6 5.6 2012
Other loans 6.75% 12.6 12.6 12.6 2012-13
Total non-current and currentinterest bearing loans
516.3 367.5 362.6
The difference between the face value and the carrying value of the term loans of 27.9m and 120.9m respectively (148.8m in total) is
being charged as interest over the life of the facilities.
The carrying amount of the nancial liabilities equates to their fair value, with the exception of the Term loans. The Facility B term loanhas a fair value of 317.6m, valued on a discounted cash ow basis, taking into account the margin over cost of funds that would ordinarily
be payable by companies in the groups market sector. The Facility E term loan has a fair value of 25.9m. This has been calculated by
assessing the debt-free enterprise value of the group at the balance sheet date and deducting from this value debt repayments that would
rank ahead of this debt.
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Land purchased on extended payment terms
When land is purchased on extended payment terms, the Group initially records it at its fair value with a land creditor recorded for any
outstanding monies based on its fair value assessment. Fair value is determined by using the effective interest method. The difference
between the nominal value and the initial fair value is amortised over the period of the extended credit term and charged to nance costs,
increasing the value of the land creditor such that at the date of maturity the land creditor equals the payment required.
Undrawn borrowing facilities
The Group had undrawn committed borrowing facilities of 40m at 31stOctober 2009. The repayment terms of the facilities are set out
below. In addition there were undrawn guarantee facilities of 6.7m.
Credit risk
Credit risk is the risk of nancial loss to the Group if a customer or other counterparty fails to meet its contractual obligations.
Surplus cash is placed on deposit with banks with a minimum credit rating, or in accordance with group policy. The security and suitability
of these banks is monitored by treasury on a regular basis.
Trade and other receivables are mainly amounts due from housing associations and commercial property sales, which are within credit
terms. Management considers that the credit ratings of these various debtors are good and therefore credit risk is considered low.
The maximum exposure to credit risk at 31stOctober 2009 is represented by the carrying amount of each nancial asset in the balance
sheet. The Group has no substantial exposure to any individual third party.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its nancial obligations as they fall due.
Cash ow forecasts are produced to monitor the expected cashow requirements of the Group against the available facilities. The principal
risks within these cashows relate to achieving the level of sales volume and prices in line with current forecasts.
The following are the contractual maturities including estimated cash ows of the nancial liabilities of the group at 31stOctober 2009:
Carryingvalue
Contractualcash ows
Within 1 year 1-2 years 2-3 years More than3 years
Facility B Term loan 315.6 362.6 5.4 9.7 347.5 -
Facility C Term loan 0.9 0.9 - - 0.9 -Facility E Term loan 32.8 166.4 - - 166.4 -
Loan notes 5.6 5.8 1.0 1.0 3.8 -
Other loans 12.6 16.4 - - - 16.4
At 31stOctober 2009 367.5 552.1 6.4 10.7 518.6 16.4
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the
Groups income or the value of its holdings of nancial instruments.
Interest rate risk
The group is exposed to interest rate risk due to borrowing funds at oating interest rates. Interest rate caps are used to manage this
volatility. At the balance sheet date, the Group has hedged a substantial portion (260 million) of its oating rate interest exposure by the
use of a nancial instrument (cap), which caps the LIBOR rate paid by the business to 3%. The remaining borrowing requirement is funded
principally through term loans which are subject to variable interest rates which remain unhedged.
The cap was deemed an effective cash ow hedge at the balance sheet date and was recognised at fair value of 1.5m. The fair value was
the estimated amount that the Group would receive if the instrument were sold at the balance sheet date. The movement in the fair value
during the period of 0.2m gain has been recognised directly in equity.
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|3
0
Sensitivity analysisA change of 100 basis points in interest rates at the balance sheet date would have increased (decreased) equity and prot
or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had
been applied to risk exposures existing at that date.
This analysis assumes that all other variables remain constant and considers the pre-tax effect of nancial instruments
with variable interest rates.
The oating rate nancial liabilities are subject to interest rates referenced to LIBOR. These rates are for a period between one and twelve
months.
For nancial liabilities which have no interest payable but for which imputed interest is charged, consisting of land creditors, the weighted
average period to maturity is 39 months.
The maturity of the nancial liabilities is:
Interest rate risk
At 31stOctober 2009, the interest rate prole of the nancial liabilities of the Group was:
Capital management
New operating policies and procedures were approved by the board as part of the nancial restructuring agreed in March 2009. The group
has also agreed new covenants with the lenders as part of the terms of the restructure.
The groups policies seek to match long term assets with long term nance and ensure that there is sufcient working capital to meet the
groups commitments as they fall due, comply with the loan covenants and continue to sustain trading.
Management will continue to monitor actual cash ows against the approved cash ow forecast.
2009Equity
m
2009Income statement
m
Increase in rates (5.0) (5.0)
Decrease in rates 5.0 5.0
Carrying amount
Sterling Floating ratenancial liabilities
m
Fixed ratenancial liabilities
m
Financial liabilitiescarrying no interest
m
Totalm
Bank borrowings, loan notes and
long term creditors
367.5 - 149.0 516.5
2009m
Repayable within one year 116.9
Repayable between one and two years 12.2
Repayable between two and ve years 378.8
Repayable after ve years 8.6
516.5
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24th March2009%pa
31stOctober2009%pa
Discount rate 6.6% 5.5%
Salary escalation 3.5% 4.4%
Price ination 2.5% 3.4%
Pension increases on benet increasing in line with 5% or RPI if lower 2.5% 3.0%
Expected return on invested assets 6.2% 6.1%
Expected return on insurance annuity contracts 6.6% 5.5%
The expected return on assets reects the weighted average return on the categories of scheme assets shown below.
Mortality assumptions are as follows:
Mortality before retirement: PNMA 00 medium cohort (year of birth) 1.5% minimum improvement p.a. and PNFA 00 medium cohort(year of birth) 1.5% minimum improvement p.a.
Mortality after retirement: PNMA 00 medium cohort (year of birth) 1.5% minimum improvement p.a. and PNFA 00 medium cohort
(year of birth) 1.5% minimum improvement p.a.
The major categories of scheme assets as a percentage of the total fair value of Scheme assets are as follows:
The amounts recognised post 24th March 2009 are as follows:
22. EMPLOYEE BENEFITS
RETIREMENT BENEFIT OBLIGATIONS
Dened contribution scheme
The Group (through Crest Nicholson PLC) operates a dened contribution scheme for new employees. The assets of the scheme are held
separately from those of the Group in an independently administered fund. The service cost of this scheme for the period was 0.3m.
At the balance sheet date there were no outstanding or prepaid contributions.
Dened benet scheme
The Group (through Crest Nicholson PLC) operates a contributory dened benet pension scheme which is closed to new entrants.
The assets of the schemes are held separately from those of the Group, being invested in managed funds. The most recent funding
valuation of the scheme was carried out as at 1stFebruary 2007 by a professionally qualied actuary using the projected unit method.
The assets of the dened benet scheme have been calculated at fair value and the liabilities, at the balance sheet date under IAS 19
(Revised), using the Projected unit method and based on the following nancial assumptions:
2009%
Equities 50.8%
Bonds 28.4%
Property 2.1%Cash 4.9%
Secured annuities 13.8%
Total 100.0%
2009m
Current service cost recognised in administrative expenses 0.5
Interest cost recognised in nance costs 4.0
Expected return on scheme assets recognised in nance income (3.5)
Total 1.0
Actuarial loss 27.3
Total dened benet scheme costs recognised in the period 28.3
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2009m
Expected return on scheme assets 3.5
Actuarial loss on scheme assets (27.3)
Actual return on scheme assets (23.8)
2009m
Present value of dened benet obligations 136.4
Fair value of scheme assets (90.3)
Dened benet liability recognised in the balance sheet 46.1
2009m
At 24thMarch 2009 20.9
Total expense (as shown above) 28.3
Company contributions paid in the period (3.1)
At 31st
October 2009 46.1
2009m
At 24thMarch 2009 99.7
Current service cost 0.5
Interest cost 4.0
Employee contributions 0.2
Actuarial losses 36.1Benets and expenses paid (4.1)
At 31stOctober 2009 136.4
2009m
At 24thMarch 2009 78.8
Expected return on scheme assets 3.5
Actuarial gain on scheme assets 8.8
Employer contributions 3.1
Employee contributions 0.2
Benets and expenses paid (4.1)
At 31stOctober 2009 90.3
Changes in the present value of the dened benet obligation were as follows:
Changes in the present value of the dened benet obligation were as follows:
The cumulative debit to the SORIE since the adoption of IAS 19 (Revised) is 27.3m post 24th March 2009.
The actual return on plan assets is:
The amounts included in the balance sheet arising from the Groups obligation in respect of its dened benet scheme are as follows:
No deferred tax asset has been recognised on the balance sheet in relation to the net pension obligation as realisation of the related tax
benet through future taxable prots is not considered probable in the foreseeable future.
Movements in the liability recognised on the balance sheet were as follows:
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23. CONTINGENT LIABILITIESThere are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinary
course of business from which it is anticipated that no material liabilities will arise.
24. OPERATING LEASESAt 31 October 2009 total outstanding commitments for future minimum lease payments under non-cancellable operating leases were:
2009m
Land and buildings
Within one year 3.8
Less: minimum sub-lease income (1.6)
Between two and ve years 13.8
Less: minimum sub-lease income (2.7)
After ve years 13.4
Less: minimum sub-lease income (0.7)26.0
Other
Within one year 0.6
Between two and ve years 1.0
1.6
2009m
Present value of dened benet obligation 136.4
Fair value of scheme assets 90.3
Decit in the scheme 46.1
Experience adjustments on scheme liabilities 35.7
Percentage of scheme liabilities 26.2%
Experience adjustments on scheme assets 8.5
Percentage of scheme assets 9.4%
A history of experience adjustments is as follows:
The expected employer contributions to the dened benet scheme during 2010 are 4.9m.
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In addition, the syndicate lenders provide a 66.3m bank guarantee facility. Guarantees of 59.6m had been given by the lenders at 31st
October 2009.
Borrowings of the Group are secured against the value of stock and work in progress.
(iii) Compensation of key management personnel is disclosed within Note 5. Key management also hold 8% of the shares in the company,
with a further 2% held by other senior Crest employees.
25. RELATED PARTY TRANSACTIONSThe group has entered into the following related party transactions:
(i) Transactions with joint ventures, which are disclosed in Note 11. The group has provided book-keeping services to certain JVs which
have been recharged at cost.
(ii) On 24thMarch 2009, the company acquired Castle Bidco Limited, the parent company of Crest Nicholson PLC, pursuant to a nancial
restructuring of the Crest Nicholson group. 90% of the shares in Crest Nicholson Holdings Limited are owned by the syndicate of lenders
who have made Term loans to the business.
At 31stOctober 2009, the interests of the syndicate lenders in the nancial instruments of the Group were as follows:
26. ACCOUNTING ESTIMATES & JUDGEMENTSManagement considers the key estimates and judgments made in the accounts to be related to the valuation of Goodwill, WIP
and pension liabilities.
Goodwill
The carrying value of goodwill is substantially dependent on the ability of the Group to successfully progress its strategic land holdings.
Changes to the planning regime could undermine current assumptions about the sites which are expected to be successfully developed.
Carrying value of land and work in progress
Inventories of land, work in progress and completed units are stated in the balance sheet at the lower of cost and net realisable value.
Due to the nature of development activity and in particular, the length of the development cycle, the Group has to allocate site-wide
development costs such as infrastructure between units being built and/or completed in the current year and those for future years.
It also has to make estimates of the cost to complete such developments.
There is a degree of inherent uncertainty in making such estimates. The group has established internal controls that are designed to
ensure an effective assessment is made of inventory carrying values and the costs to complete developments.
Pensions
Management has employed the services of an actuary in setting these estimates; however, they recognise the risk that both expected
investment returns and ultimate scheme payments may differ substantially from current forecasts.
m
Term loans (500m face value) 349.3
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COMPANYBALANCE SHEET
Note 2009
Fixed assets
Investments 4 -
Current assets
Cash at bank and in hand 99
Net current assets 99
Total assets less current liabilities -
Net assets 99
Capital and reserves
Called up share capital 5 100
Prot and loss account 6 (1)
Equity shareholders funds 6 99
Approved by the Board of Directors on 29th January 2010 and signed on its behalf by:
S Stone
D P Darby
Directors
There are no recognised gains and losses other than the loss for the period.
As at 31st October 2009
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DIRECTORSREPOR
T2009
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00
1. ACCOUNTING POLICIESThe following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
nancial statements.
Basis of preparation
The Company nancial statements have been prepared under the historical cost accounting rules and in accordance with applicable UK
Accounting Standards.
Under section 408 of the Companies Act 2006 the company is exempt from the requirement to present its own prot and loss account.
Under FRS 1, the company is exempt from the requirement to prepare a cash ow statement on the grounds that its consolidated nancial
statements, which include the Company, are publicly available.
The principal accounting policies adopted are set out below.
Investments
Investments in group undertakings are included in the balance sheet at cost less any provision for impairment.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing differences between
the treatment of certain items for taxation and accounting purposes.
Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and
accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.
Dividends
Dividends are recorded in the Companys nancial statements in the period in which they are paid.
2. STAFF NUMBERS AND COSTSThe Company has no employees.
3. DIVIDENDSDetails of the dividends recognised as distributions to equity shareholders in the period and those proposed after the balance sheet date
are as shown in Note 8 of the Consolidated nancial statements.
NOTES TO THE COMPANY FINANCIALSTATEMENTS FOR THE PERIOD TO31stOCTOBER 2009
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Shares in and loans to subsidiary undertakings
At start of period -
Additions 1
Capital contribution to subsidiary undertaking 397,615,000
Impairment (397,615,001)
At 31stOctober 2009 -
Authorised
10,000 Ordinary shares of 1p each 100
Allotted, called up and fully paid
10,000 Ordinary shares of 1p each 100
4. FIXED ASSET INVESTMENTS
5. SHARE CAPITAL
6. RECONCILIATION OF SHAREHOLDERS FUNDS
The subsidiary undertakings which are signicant to the Group and traded during the period are shown in Note 11 of the Consolidated
nancial statements.
The loss dealt with in the books of the company was 397,615,001. On acquisition of Castle Bidco Limited, the company became a
guarantor to the senior facilities agreement and the mezzanine facilities agreement of the Castle Bidco group. Lenders under these
facilities made a partial demand under this guarantee amounting to 397,615,000. This was treated as a capital contribution to Castle Bidco
Limited, with the corresponding receivable from Castle Bidco being subsequently waived. The initial investment of 1 was impaired to nil.
The lenders also agreed to exchange their debt of 397,615,000 for equity in the company, resulting in a gain on equitisation.
7. CONTINGENT LIABILITIESThere are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinary
course of business from which it is anticipated that no material liabilities will arise.
In addition, the Company is required from time to time to act as surety for the performance by subsidiary undertakings of contracts entered
into in the normal course of their business.
Under the terms of the bank facilities, each company within the group is a guarantor of the bank facilities of other group members that
have acceded to the senior facilities agreement.
8. RELATED PARTIESAs 100% of the Companys voting rights are controlled within the Crest Nicholson group, the Company has taken advantage of the
exemption contained in FRS 8 and has therefore not disclosed transactions or balances with entities which form part of the group
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