crest nicholson holdings annual report (2009)

8/9/2019 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

T2009

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02

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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03

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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04

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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05

FROM LEFT

Kings Warren, Suffolk
http://www.crestnicholson.com/aboutus/sustainability/policies.aspxhttp://www.crestnicholson.com/aboutus/sustainability/policies.aspx


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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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06

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

DIRECTORSREPOR

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07

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


Mr N C Tinker


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

DIRECTORSREPOR

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08

FROM LEFT

Mr S Stone

Cromwell Park, Tetbury


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DIRECTORSREPOR

T2009

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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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09

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

|

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


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

|

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

|

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)



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CONSOLIDATEDBALANCE SHEET

ACCOUNTS

2009

|

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



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ACCOUNTS

2009

|

15

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


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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ACCOUNTS

2009

|

16

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.



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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.



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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).



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9

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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ACCOUNTS

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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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ACCOUNTS

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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


Impairment charge (18.7)

At 31stOctober 2009 (18.7)

Carrying value

At 31stOctober 2009 29.0

Total Plant, Vehicles &Equipment

2009m

Cost



Additions 0.2

Disposals (0.5)


Accumulated depreciation



Charged in the period 0.7

Disposals (0.3)


Net book value



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ACCOUNTS

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23

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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ACCOUNTS

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24

12. AVAILABLE FOR SALE ASSETS

13. INVENTORIES

2009m



Additions 6.0Disposals (0.1)

Change in fair value 0.4


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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ACCOUNTS

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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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ACCOUNTS

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26

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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ACCOUNTS

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27

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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ACCOUNTS

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28

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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ACCOUNTS

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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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ACCOUNTS

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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


Current service cost 0.5

Interest cost 4.0

Employee contributions 0.2

Actuarial losses 36.1Benets and expenses paid (4.1)


2009m


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)


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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ACCOUNTS

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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

ACCOUNTS

2009

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36


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Shares in and loans to subsidiary undertakings


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

crest nicholson holdings annual report (2009)

Documents