crest nicholson holdings annual report (2012)

8/9/2019 Crest Nicholson Holdings Annual Report (2012)

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KEY PERFORMANCEINDICATORS

Financial and business

Return on capital in the last twofinancial years

20% +Operating profit

73.3m2011: 56.4mGross profit margin

27.4%2011: 28.6%

Net profit

63.9m2011: 40.5mNet debt

30.3m2011: 42.8m

Short term land bank units

16,9592011: 14,772Strategic land bank units

12,6232011: 14,259

Land bank grossdevelopment value

6,799m2011: 6,256m

Sustainability

Homes delivered to Code forSustainable Homes level 3and above

45%2011: 38%

Homes delivered to Code level 4

15%2011: 4%

Reduction in Annual Injury

Incidence Rate since 2008

48%2011: 63%

Waste diverted from landfill

94%2011: 89%

Homes built on brownfield land

82%2011: 82%

Customer service(independent rating)

5 STAR2011: 5 star

People would recommendCrest Nicholson to a friend(independent survey)

9/102011: 9 out of 10

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To deliver that ambition, which remains as true today as when the Group was formed

nearly 50 years ago, we have been on a journey of innovation and transformation toposition the Group for profitable growth.

Whether carrying out systematic scientific research into low carbon housing solutions,re-inventing how we work with our supply chain, or developing our product for a rapidlyevolving market, the focus is delivery, generating quality and choice for our customersand sustainable business value for our shareholders. For Crest Nicholson, this is avision that inspires.

Crest Nicholson is a leading developer of

sustainable housing and mixed-use communities.We aim to improve the quality of life for individualsand communities by providing better homes,workplaces, retail and leisure spaces in whichpeople aspire to live, work and play now andin the future.

Key Performance Indicators

A Vision that Inspires... 1

Our Group at a Glance 4

Group Structure 5

Key Facts 5

Chairmans Statement 7

Chief Executives Review 8

The Crest Difference 16

Group Strategy for Growth 18

A Snapshot of our Developments 20

2012 Key Facts 21

Financial Review 24

Risks and Uncertainties 28

Sustainability Review 32

Managing Sustainability 33

Sustainability Strategy 33

Keeping the Customer atthe Heart of the Business 36

Partnering to DeliverSustainable Communities 37

Where Good DesignMeets Low Carbon 38

A Responsible and Ethical Business 39

Independent Auditors Report 57

Consolidated Income Statement 58

Consolidated Statementof Comprehensive Income 59

Consolidated Statementof Changes In Equity 59

Consolidated Statementof Financial Position 60

Consolidated Cash Flow Statement 62

Notes to the ConsolidatedFinancial Statements 63

Company Balance Sheet 86

Notes to the CompanyFinancial Statements 87

Board of Directors 42

Holdings Board 44

Operating Board 44

Directors Report 46

Corporate Governance 48

Statement of DirectorsResponsibilities 55

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A VISIONTHAT INSPIRES

Noble Park, Epsom


5/854 DIRECTORS REPORT & ACCOUNTS 2012

LONDON

Devon

Cornwall

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Glamorgan

Herefordand Worcester

Shropshire

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Lincolnshire

DerbyshireCheshire

GreaterManchester

Bedford-shire

Essex

Berkshire

Oxfordshire

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Leicestershire

Warwickshire

Wiltshire

Dorset

Somerset

BristolKent

East SussexWestSussex

Isle ofWight

SurreyHampshire

Suffolk

Cambridgeshire

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Gwynedd

ConwyDenbighshire

& Flintshire

NorthLincolnshire

of Yorkshire

WestYorkshire

SouthYorkshire

Lancashire

SOUTH WEST

SOUTH

EASTERN

Norfolk

Gloucestershire

Lambeth

TowerHamlets

Greenwich

Newham

Wandsworth

Hackney

Southwark

Camden Islington

City ofLondon

City ofWestminster

Kensington& Chelsea

Hammersmith& Fulham

Lewisham

LONDON

WestMidlands

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OUR GROUPAT A GLANCE

Our operational focus remains concentrated in thesouthern half of England with an emphasis on creatingwell designed homes in sustainable communities.

Our portfolio meets the needs of a wide range ofpurchasers, from first time buyers to investors, witha product range that includes houses, apartmentsand commercial units on mixed-use developments.

Active sites

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GROUP STRUCTURE KEY FACTS

FURTHER INFORMATIONWWW.CRESTNICHOLSON.COM

Privately ownedGroup with50 years of heritage.

Previously listedfor 39 years on theLondon Stock

Exchange(19682007).Four regional housebuilding divisions

EASTERN, SOUTH, SOUTH WEST, LONDON

MAJOR PROJECTS DIVISION(CREST NICHOLSON REGENERATION)specialising in larger scale partnership developments with public and private vendors,including residential and mixed-use schemes.

STRATEGIC LAND DIVISIONfocusing on sourcing large land sites for medium to long term developmentby the Groups other divisions.

THE CREST NICHOLSON GROUP OPERATES THROUGHITS HOLDINGS BOARD

DAILY OPERATIONSare directed by the Operating Board of Crest Nicholson PLC.

ALL DIVISIONS OPERATEthrough their own local management boards, each of which is accountable to theGroup Operating Board.

For full details of our corporate governance standards and processes,please see page 48.

Bath Riverside, Bath Rowan Park, Mitcham Bolnore Village, Haywards Heath

DISTINCTIVE POSITIONin the UK housing market with astrong open market average sale price(230,000) and higher sales per outletper month.

PROVEN TRACK RECORDof delivering award winning,

well designed, high qualityresidential communities.

STRONGstrategic and short term land bankswith a high proportion of consented land.

Eastern South South WestMajorprojects(CNR)

Strategicland

London

CREST NICHOLSON

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Rosewood, Colchester

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The Groups excellentperformance demonstrates

the health and strength of ourbusiness model and ultimatelythe delivery capability, skillsand longstanding experienceof our people.

This year the Group has delivered increased output,sales volume and operating margin in a housingmarket that has altered significantly since 2008,and that is still suffering the effects of the globalcredit crunch and restricted mortgage availability.

One of the main drivers of these excellent resultsis Crest Nicholsons own workforce, who have onceagain demonstrated resilience and adaptabilityin implementing the Groups strategy for growth.I thank them wholeheartedly for their contribution.

Allied to this strength of talent is theCrest Difference the Groups ethos and deliveryof high quality design and sustainable developmentfocused on the needs of customers andcommunities. This is a valued heritage theGroups DNA and the Board has continuedto emphasise its constant renewal to meet the

demands of an evolving market, technologychallenges, and the ever changing complexitiesof regulation that are part of the Governmentszero carbon timeline for new housing.

While the operating environment remainschallenging, I believe that this focus on customers,design and sustainability creates the right cultureof innovation for delivering the new homes in whichtodays purchasers and those of tomorrow willwant to live.

On a foundation of secure finances and withthe full support of our shareholders, the

Boards priority has been to build on last yearsrobust performance. The continuing drive hasbeen to deliver business value through theacquisition of sites in prime areas; consensual,

community focused planning outcomes; andwell designed, viable, sustainable developments.In addition, the Group has successfully partnered

with the public and private sector to bring forwardsites and projects in its operating regions acrossthe southern half of the country.

In this light, we have welcomed the Governmentspresumption in favour of sustainable developmentand the measures taken not only to kickstarthousing development, but also the intentionto simplify planning processes and reduce theregulatory burden. In the Boards view, thestreamlined planning framework currentlyproposed is much needed. We are not calling forderegulation, but rather for clarity on the standardsthat should apply and a means to a resolution of

conflicting regulations that can affect the quality,viability and delivery of residential development.

While acknowledging that the Group hassuccessfully negotiated significant financialhurdles over the last two years with the helpof its shareholders and lenders, the Boardremains alert to economic uncertainty in theEurozone and globally. In addition, consumerconfidence continues to fluctuate and mortgageavailability still constrains the market. The Boardcontinues to exercise effective control through arobust governance framework that provides the

necessary oversight of decision making in landacquisition, planning and project delivery.The outcome is an extremely strong land bankand development pipeline.

I am grateful to the Board for their continuedsupport and effectiveness. The senior managementhave great depth of experience in the sector andhave successfully led the Group through severalfluctuating economic cycles. Armed with thisknowledge and experience, I am confident inthe Boards ability not only to respond to futurechanges in the business environment but, also toexploit to the full the opportunities that an evolving

market will bring.

William RuckerChairman

CHAIRMANSSTATEMENT

Our focus oncustomers, designand sustainabilitycreates the rightculture of innovationfor delivering the newhomes in whichtodays purchasersand those of tomorrow

will want to live.

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As the Group approaches its 50thanniversary in 2013, it remainson a trajectory of steady growth based on strong results andunderlying business performance.

STRONG FINANCIAL RESULTS

FROM SOLID FUNDAMENTALSThis has been a very good year for Crest Nicholson,

driven by a 24% increase in housing legal completionsin the year. This growth reflects both stronger ratesof sale and our rising number of sales outlets.

Commercial revenues were broadly level with 2011,generated from the sale of a significant commercialpremises at Bristol and a partnership with a majorsupermarket retailer at Milton Keynes.

This strong operational performance is reflected inthe financial results, with revenue at 408m, up 28%on 2011, and operating profit at 73m, up 30%.Operating margins at 18.0% have improved againstthe 17.7% achieved last year.

Equally pleasing was the growth in our consentedland bank, which rose from 14,772 plots to 16,959plots at October 2012. A significant part of this growthcame from the conversion of plots from the strategicland bank, having secured planning consent on fourstrategic land sites in the year.

In parallel with investment in the future of ourbusiness, we generated positive cash flow throughthe year and are going into the next financial yearconfident that our southerly geographic positioning,distinctive design and sustainability credentials, and

strong partnering approach will enable us to continuedelivering good business returns in the year ahead.

THE MARKETDespite a difficult economic backdrop, which has putreal incomes under pressure, the housing market hasproved to be very resilient through the year. Indeed,

our overall sales rates were stronger this year than in2011, notwithstanding some softness around the timeof the Jubilee celebrations in June and again duringthe London Olympics in the summer.

As a developer in the southern half of the country,Crest Nicholson has its operations in regions thattypically have better employment prospects andhigher earnings than the national average, and thiscorrelation serves the business well in more difficultmarkets. In these parts of the country the greatestimbalance exists between housing demand andsupply, which, all other things being equal, should

provide support for prices.

The constrained level of mortgage lending continuesto be the greatest barrier to an improved level ofparticipation in the housing market. As a group,we have done much this year to engage with theGovernment and government sponsored schemes totry to stimulate house building and house purchases.We remain hopeful that such support will be effectivein improving access to the housing market for thosewho aspire to own their home.

Stephen StoneChief Executive

CHIEF EXECUTIVESREVIEW

At Crest Nicholson

we believe thatcreating successfulsustainablecommunities is notabout bricks andmortar, but people.

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PARTNERING FOR GROWTHOur business model, page 17, is underpinnedby our 50 year heritage and capitalises on ourkey strengths in targeted land acquisition,

consensual planning success, outstandingdesign and quality delivery.

The fact that the Group has traded very well inthe current market is evidence of the trust we havebuilt with both public and private sector partnerswho, I believe, recognise the long term value thatflows from our approach. It has been anoutstanding year for our land bank (especiallystrategic plots), and we have also achievedplanning permissions and milestones on anumber of key developments.

Among these is Bath Riverside, which is animportant regeneration site in the heart ofa UNESCO World Heritage city. After a longerplanning stage than we would have wished for,we have moved well into delivery at Bath, with142 unit completions this year. We are currentlyworking to create the supporting infrastructure,including leisure spaces, roadways and bridges.Other notable milestones include permissionsobtained for 274 units at Wokingham, Berkshireand 1,695 units at Tadpole Farm, Swindon.

At Crest Nicholson we believe that creatingsuccessful sustainable communities is not aboutbricks and mortar, but people. At centre stage arenot only our customers, but also local authoritiesresponsible for delivering new housing and local

people, including those for whom newdevelopment may not always be welcome.Our approach has always been based on clearinteraction with all relevant groups to understandthe spectrum of opinion and interests.

Industry leading knowledge in planning,design, sustainable construction and regulatorycompliance is not enough on its own. We alsobring the mindset and skills to facilitate honestengagement, which requires a commitment tobuild relationships; to listen and respond genuinelyand to help create and implement a shared vision

in tune with local needs and expectations alwaysaccepting that not everyone can be satisfied.

We take great pains to go the extra mile by openlysharing our senior talent and expertise with localauthorities and other stakeholders often inperson, with sleeves rolled up, helping to workthrough possibilities and challenges. In April weheld one such Vision Workshop with planningofficers, local members and county councillorsfrom Runnymede to invite their input in identifyingthe key themes for a new community at our site atLongcross. This is part of an ongoing process andwe will present the progress we have made to

them early next year.

UNIT COMPLETIONSTHIS YEAR ATBATH RIVERSIDE

Bath Riverside, Bath

142

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SUPPORTING AND

INCREASING DELIVERYIt is the strength and depth of talent from seniormanagement to apprentice level that inspiresconfidence in the Groups capacity to deliver astrategy for growth, and a managed increase

in output over the next three to four years.

Cost effective, quality delivery is essential.The Government itself recognises the socialimperative for new housing, as well as the economicimpetus that comes from it. The Home BuildersFederation (HBF) reports that every home builtcreates 1.5 full time jobs, plus up to four times

that number in the supply chain, meaning that forevery 1 spent, an estimated 2.84 of wider economicactivity is generated.

As a group, we have welcomed central and localgovernment commitment on the housing growthagenda and have successfully bid for opportunities

including Get Britain Building, which has enabledus to bring forward seven schemes representing709 new homes. We have also remained steadfastin helping first time buyers by supporting governmentbacked shared equity schemes including FirstBuyand HomeBuy Direct, and remain committed tosupporting the joint industry government initiativeNewBuy, helping to bridge the deposit gap.

IS ALSO THEFIRST INGREDIENTIN CREATINGA LEGACYOF VALUE

GOODDESIGN

Kings Gate, Birmingham

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OPERATIONAL HIGHLIGHTS

AND CHALLENGESDesign excellence is a key differentiator forCrest Nicholson and a notable example isRowan Park, Merton which was Project Winnerin the Housing Design Awards 2012. Good design

is also the first ingredient in creating a legacyof value. I am reminded of this when I look atPort Marine, Portishead where the masterplan wefirst developed 10 years ago has delivered delightfulhomes and high quality public space enhancedby distinctive sculpture, proving that good designstands the test of time. It is equally true that urbanplanning and design must continue to moveforward, and for this reason, we are pleased to beworking in collaboration with the Town and CountryPlanning Association to explore how we embedGarden City principles into our future developments.

We are applying our ethos equally in London.Our London operations are based on a model ofprime site acquisition, an unwavering commitmentto quality design and build, and an ability to bring sitesforward efficiently through smart, lean processes.

A highly skilled team with a passion for the capitalis a significant factor in meeting the challengesand constraints inherent in London development.Quality and excellence are just as sought afterby buyers in the capital as anywhere and the veryrobust sales of our elegant, functional apartmentsat Ixia in Shoreditch are proof of this.

Our focus on customers has remained as strongas ever and in March 2012 we maintained our 5 starrating in the HBF industry wide independent survey.The results from our own customer satisfactionsurvey show we have maintained a high level ofperformance, but have scope to do more to reachour own stretching targets.

Sustainability is another core value that threadsitself through every part of our process. The Grouphas remained a consistent high performer in theNext Generation industry benchmark for the lastfive years, through our focus on high standards ofgovernance, sustainable delivery and transparentreporting to globally recognised standards.

Fundamentally, the sustainability of our businessand our developments centres on future thinkingand innovation, which are essential to meetingmajor environmental challenges including climatechange and resource depletion.

We continue to anticipate and prepare for theGovernments target for all new homes to bezero carbon by 2016. The award winning AIMC4Consortium homes built at Noble Park in Epsomhave taken us well along the road to deliveringwell designed low carbon homes cost effectivelythrough a fabric first approach that provides

highly energy efficient dwellings driven bycustomer needs.

This year we have challenged ourselves to lookeven further to the future by engaging with externalexperts to develop a 10 year sustainability strategyfor the Group. It will focus on long term valuecreation in the context of emerging trends andissues including evolving society, customer needsand product design. This will deliver a sustainablebusiness model, capable of delivering value nowand into the future for customers, wider societyand shareholders.

OF OUR CUSTOMERSSAID THEY WOULDRECOMMEND USTO A FRIEND

9/10 B

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Apprentice day at Noble Park, Epsom




APPRENTICESARE WORKINGWITH US

(7.6% OF OUR WORKFORCE)

45AWARDS AND RECOGNITION

Housing Design Awards Project Winner 2012: Rowan Park, Mitcham

Housebuilder Awards 2012 Best Low or Zero Carbon Development AIMC4 houses at Noble Park, Epsom

HBF Annual CustomerSatisfaction Survey

5 stars for customer service in March 2012,for the third consecutive year

Next Generation SustainabilityBenchmark

Second position among sustainability leadersin our industry, for the fifth consecutive year.

NHBC Health and Safety Commended and Highly Commended awardsfor our employees in health and safety leadership,engagement and on site management

NHBC Pride in the Job Six of our site managers achieved Quality Awards

NHBC Regional Regional award winner multi-storey category:Terry Huntingdon, Kaleidoscope, Cambridge

Pension Quality Mark The leading standard recognised by governmentand the HR/pensions industry

Apprentice day at Noble Park, Epsom

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AN EMPLOYER OF CHOICEWithout our people none of this would be possible

and I am grateful for their hard work and dedication,which has been recognised once again this yearin several external commendations in the NHBCawards, the industrys leading benchmark for sitemanagement and health and safety leadership.

We aim to be a responsible and ethical employerthat offers everyone the opportunity to excel in afair and safe environment. I am determined thatwe should maintain and strengthen our skillbaseat all levels across the Group and develop ourcapacity for the future. Once again, we havewelcomed graduates and apprentices to the Group

this year and invested in high quality training andcareer development. It is particularly pleasingto see one of our young female apprentices whocame on board in 2011 moving on with usto become a trainee site manager.

As the Board director responsible for occupationalhealth and safety, I am pleased that our AnnualInjury Incidence Rate has outperformed our sectorpeers and the construction sector as a whole.Disappointingly the reduction in 2012 has notmatched the exceedingly good performancewe have made annually since we base lined ourdata in 2008. We remain committed to continuous

improvement and to that end we have reinforcedour Group health and safety team with threeappointments. Each of these roles combinehealth, safety and environmental responsibilities,reflecting our integrated approach to preventingand managing risk on our sites.

OUTLOOKIn the near term, our business is in good shape

to continue growing volumes, as we open anincreasing number of sales outlets and the newLondon division delivers its first legal completions.

Public policy measures to support the housingsector and to help first time buyers are providinguseful support, but activity is likely to becomparatively subdued while mortgagelending remains constrained.

We will continue to work with all our partnersto deliver well designed and sustainable homesthat delight our customers. In the longer term, the

structural imbalance between supply and demandis likely to provide strong support for our business.

Nurturing existing talent within our workforceand developing the skillbase of people joiningour apprentice and graduate schemes will remaina fundamental part of our strategy to supportfurther growth.

With a high quality land bank and the team todeliver the schemes upon which Crest Nicholsonhas built a proud 50 year reputation, we lookforward to the future with confidence.


REDUCTIONIN ANNUALINJURY RATESINCE 2008

48%

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THE CRESTDIFFERENCE

Crest Nicholson has developed a focused businessmodel emphasising customer led design andsustainability in the planning and delivery ofschemes, irrespective of size and location.Our delivery encompasses major mixed-useprojects through to smaller housing developmentsin the southern half of England.

CUSTOMERSProviding an outstandingcustomer experiencefrom start to finish,delivering quality homesand high levels ofcustomer satisfaction.

DESIGNReinforcing an

aspirational, design ledapproach to createvibrant, mixed-usedcommunities wherepeople want to live,work, learn and play.

SUSTAINABILITYIntegrating the threepillars of social,economic andenvironmentalsustainability to deliver

a legacy of enduringvalue to communitiesand to the business.

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THE CREST

DIFFERENCE

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STRONG LAND BANK

Well located sites of qualityand variety

Our well located, quality land bank is made up of varied sites mainly across the southernhalf of England and in London (approximately 70% of the land bank) and selected primeareas in the southwest of England (approximately 25% of the land bank). The strategic landbank, representing 43% of the total, is an important factor in the Groups ability to generatesustainable, robust margins over time and has good prospects for obtaining planning consentin due course. 90% of the short term land bank has planning consent. The composition andquality of our land bank therefore provides the business with a stable platform for valuecreation both in the near and longer term.

SUCCESSFUL PLANNING OUTCOMES

Bringing developments throughplanning, offering excellence indesign and building consensuswith communities

Our track record of gaining community support and converting planning permissions is acritical factor in acquiring strategic land at a competitive price as landowners recognise theexpertise of our management team in successfully bringing land through the planning process.This has been a key part of the Groups industry leading operating margins of 18% and a ROCEof 20%+in the past two financial years.

PLANNING, DESIGN AND CONSTRUCTION EXCELLENCE

High quality, desirable homes

forming the platform for vibrantcommunities

Inspirational masterplanning, customer led design and high quality construction are essential

for creating new homes and sustainable places where people aspire to live. Customer demandfor Crest Nicholson homes is reflected in continuing strong sales and margins in 2012.

LEGACY AND LONG TERM STEWARDSHIP

Creating places of lasting valuewith sound infrastructure andprocesses for long termmanagement

As part of our mission to help create places in which vibrant, viable and sustainablecommunities can grow and thrive, we contribute to local public infrastructure, developmanagement strategies for maintaining buildings and public spaces, and, with our customers,we study how our homes are performing. This enhances the quality and desirability of ourevolving designs strengthening brand reputation and delivering value over the long term.

FINANCIAL STABILITY

Robust finances and a soundbalance sheet

Throughout and after the downturn, the Group has traded well and delivered strongoperational results.

APPROPRIATE SCALE OF BUSINESS

A scalable business platform thatsupports managed growth

The Groups business structure is scaled to deliver a strategy of steady growth which enablesthe management team to combine effective strategic leadership with a significant degree ofhands on involvement in day-to-day operations.

PARTNERING FOR SUSTAINABLE DEVELOPMENTBringing experience andknowledge to public sector,local authority andprivate partnerships

Our team has leading expertise in land acquisition, planning, high quality design and delivery,and customer care. Combining these with the expertise of our development and supply chainpartners provides unique opportunities to innovate and improve within environmental limits.

TALENT AND EXPERIENCE

Highly experiencedmanagement, strength in depthat all levels and continuousinvestment in skills

The Group has a highly experienced management team with a significant strength and depthof expertise in the property development sector.

INNOVATING AND INVESTING IN LOW CARBON DELIVERY

Long term supply chainpartnerships, innovations andresource efficiency to deliver newhomes for sustainable lifestyles

To futureproof our offering, we research emerging trends in customer needs, expectations andlifestyles, prepare for the challenges of adapting to climate change, and work closely with oursuppliers, partners and contractors to develop innovative, low carbon solutions which respondto the Governments zero carbon timeline.

HOW WE DELIVER

FOCUSED BUSINESS MODEL

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Park Central, Birmingham

GROUP STRATEGYFOR GROWTHA carefully managed growth strategy

while maintaining excellence in all areas.

CHOSEN FOROUR KEY STRENGTHSSustainable developments withan enduring positive legacy.

High quality planning, designand construction.

True partnering at all stagesof the development process.

Responsible, transparentoperations to safeguardpeople and the environment.

BY UNDERSTANDINGwhat our customers wantand considering societysemerging needs, thebusiness delivers value todayand invests in the future forall our stakeholders.

OUR GROUP AMBITIONcreating well designed,high quality and sustainablehomes and inspiring placesin which communities cangrow and thrive.

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REALISING OUR OBJECTIVES

KEY OBJECTIVES FOCUS AREAS PLAN OF ACTION

VALUED PARTNER

Continue to be apartner of choice

Be a partner of choice for the public and privatesectors in London and the south of England.

High quality, desirable homes andmixed-use buildings.

Well designed sustainable developments

in primary locations.

LAND SUPPLY

Selectively growthe land bank

Acquire appropriate number of well located,quality sites for short term land bank.

Strong shareholder returns andenhanced margins.

Secure strategic sites and seek viableplanning permissions.

A sustainable land supply.

Leverage the Groups significant track record andreputation in the land market to further increasethe number of larger development sites.

Future development pipeline.

DELIVERY AND OPERATIONS

Managed growthof the business

Leverage growth potential across the Group. Increased output per annum with aparticular focus on growth potential inMajor Projects and London divisions.

Continue to operate the business at anappropriate scale.

Optimum scale of business to enablecontinued strong governance through seniormanagement involvement in operationaldetail as well as strategy.

Continue to pursue

operational excellence

Maintain high standards of quality and efficiency

in all areas of operation.

Quality homes ready and defect free at point

of completion.Reinforce customer service culture. A stress free acquisition process for our

customers and timely, courteous servicepost-occupancy.

Continue to improve theGroups capital structure

Reduce levels of gearing in line with publiclyreporting peer group.

Deleveraged Group in due course.

CUSTOMERS, MARKET AND INDUSTRY

Anticipate and meetevolving market trends

Continue to research and develop innovativecustomer led products and services.

An offer that delights our customers andmeets tomorrows market expectations aswell as todays.

Show industry leadership inhousing policy development

Play an active role in shaping governmentfinancial, planning and regulatory policy.

Cost effective customer focused solutions,particularly in the area of zero carbon homes.

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A SNAPSHOT OFOUR DEVELOPMENTS

St Peters Place, London W6

The acquisition of a very well locatedresidential address between Chiswick andHammersmith and within a much sought

after conservation area.

A select and highly specified developmentof 41 luxury one and two bedroomapartments and exclusive three and fivebedroom townhouses.

Responding to the scarcity of new homesand significant pent up demand.

Optimising revenue and enhancing salesthrough a meticulous design process.

Kilnwood Vale, Crawley

A new 132 hectare community comprising2,500 homes west of Crawley.

Working in partnership with HorshamDistrict Council and Crawley Borough.

Original option signed in 2002 andpromotion through the Core Strategy andArea Action Plan followed. Planning wasgranted in October 2011 and the site wassubsequently purchased in October 2012.

One of the first schemes to start on sitefollowing successful 2.3m Get BritainBuilding funding allocation.

SECURING QUALITY SITES AND ASUSTAINABLE SUPPLY OF LAND

OBTAINING CONSENSUALPERMISSION

We focus on securing sites in good centrallocations, carefully tailoring every schemeto complement and enhance the local area.The homes we are creating at St PetersPlace are perfectly aligned to the localityand will appeal to sophisticated andexacting purchasers.

Trevor SelwynManaging Director

Crest Nicholson London

I am delighted to see this site being built up.It has been over six years since the firstproposals were initially considered. Peopledo not realise how long it takes to bring asite from the strategic level to construction.This is a good example of cooperationbetween neighbouring authorities.

Councillor Ian HowardHorsham District Councils Cabinet Member

for Living and Working Communities

Bath Riverside, Bath

A new urban quarter within a UNESCO WorldHeritage city on an 18 hectare brownfield site.

Delivering up to 2,281 private, rented andshared ownership homes, up to 675 studentrooms, and 50,000sq ft of non residential spaceincluding a doctors surgery and primaryschool (first occupations in 2012).

An open, transparent partnership with Bath& North East Somerset Council, Curo Group(former Somer Community Housing Trust), andHomes and Communities Agency has allowedthe scheme to evolve over many years and bedelivered with local and regional support.

DELIVERING PROJECTS THROUGHCOMMITMENT AND FLEXIBILITY

Regenerating the citys vital riversidecorridor has been helped to a great extentby Crest Nicholsons commitment to theproject over many years. We are now seeingthe results of their proactive and collaborativeapproach in partnership with us, as we see anew community spring up to provide housingfor a new generation of Bath residents.

Councillor Cherry BeathCabinet Member for Sustainable Development,

Bath & North East Somerset Council

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2012 KEY FACTS

1,882 2,145 16,959 12,62350PLOTS CONVERTEDFROM STRATEGICLAND BANK

SHORT TERM LANDBANK OF 16,959PLOTS ON 72 SITES

STRATEGIC LANDBANK OF 12,623PLOTS ON 26 SITES

50 SITES INPRODUCTION AT31STOCT 2012

NEW HOMESDELIVERED

Port Marine, Portishead

An integrated self sustaining mixed-useand tenure community located on a26.5 hectare brownfield site, in the former

industrial quarter of Portishead Quays.

Incorporating several residential characterareas designed to reflect the gradualhistorical growth of the community.

Public realm marked by its continuity,sense of space, attractiveness, comfort,safety, access for impaired mobilityand an integrated design approach.

Awarded Building for Life Gold.

DESIGNING QUALITYAND CREATING LEGACY

Throughout the life of this development,Crest Nicholson has demonstrated anexemplary approach to regeneration.Port Marine sets a new benchmarkfor residential development within theSouth West.

Noel EdwardsFormer Director of Planning,North Somerset Council

Noble Park, Epsom

A unique 6.3m research consortiumsupported by the Government backedTechnology Strategy Board.

Delivering low carbon homes throughinnovative materials and a fabric firstapproach without renewable energytechnologies.

Reduced costs for heating and carbonsavings embedded for the life of the home.

Delivering to advanced energyperformance Code level 4 (energy), anddriving out the cost differential betweenthese new designs and designs developedfor the 2010 Regulations.

INNOVATING TO DELIVER LOWCARBON HOMES THROUGH AIMC4

Aldermere,Cheshunt

Prime Minister David Cameron and DeputyPrime Minister Nick Clegg announced aseries of measures to support the growth

of the UK housing market at ourAldermere development in Cheshunt.

25% of buyers at Aldermere havepurchased through FirstBuy and othershared equity schemes, demonstratingthe need and ongoing demand forsupport schemes.

WORKING WITH GOVERNMENTTO HELP BUYERS

This research project was exactly thebold step needed to address reduction incarbon emissions from new homes.Stimulation of innovation in the UK supplychain will yield new, cost effective industrysolutions and the expertise of the partnerswill ensure a step change to underpin thedelivery of sustainable communities.

Stephen StoneChief Executive,Crest Nicholson

Owning my own home seemed animpossibility and I put it out of my minduntil I learned about FirstBuy. When Idiscovered that I could own my own homeafter all, I did some internet research andfound Aldermere in Cheshunt.

Jenny WoodsFirstBuy purchaser,Aldermere, Cheshunt

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The Laurels, Cedars Park



FINANCIALREVIEW

Port Marine, Portishead

INCREASE INHOUSING UNITCOMPLETIONS

24%

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RESULTSResults for the financial year ending 31stOctober2012 are strongly ahead of the prior year, drivenby a 24% increase in housing unit completions.

Sales revenues of 408m are up 28% on 2011,and operating profits up by 30% at 73.3m(2011: 56.4m). Operating margins of 18.0%are 0.3% ahead of the 17.7% achieved in 2011.

After financing costs and taxation, the Grouprecorded a profit of 63.9m (2011: 40.5m),up 58% on the prior year.

The business generated cash from operationsof 28.8m (2011: 8.9m) while continuing to

invest in land and work in progress. Inclusiveof 16.3m (2011: nil) of funding secured underthe Governments Get Britain Building scheme,cash and cash equivalents at the end of the yearamounted to 150.1m (2011: 121.9m).

TRADING ANALYSISThe business continues to operate in oneprincipal segment, which is residentialdevelopment. In addition to this core activity,the business has a portfolio of commercialdevelopment opportunities, principally on

mixed-use sites, which are delivered as partof a master plan for the overall development.

HOUSINGTotal Crest Nicholson housing completions in 2012were 1,882 units, up 24% on the 1,520 completionsachieved in 2011. The growth in volume over theprior year was driven by an improved rate of saleduring 2012, and aided by a stronger openingforward sales position. In addition, the Groupexpanded the number of sales outlets fromwhich it operated during the year, including itsBath Riverside development, which delivered

142 unit completions in its first year of operation.

Average selling prices for open market unitsin 2012 were marginally higher, at 230,000compared to 224,000 in 2011. This increase

included some mix effects but also incorporateda modest level of sales price appreciation.

Forward sales at 31stOctober 2012 for 2013 andlater years amounted to 129.6m (2011: 142.2m),which includes 19% of forecast 2013 open markethousing sales (2011: 23%).

MIXED-USE COMMERCIALCommercial revenues in 2012 of 26m wereprincipally derived from two of the Groupsmixed-use developments. At Bristol Harbourside,a 51,800ft2office block was completed and sold

with the benefit of partial occupation, while at theOakgrove development in Milton Keynes, a foodstore (let to a major retailer) and other ancillarycommercial units were purchased by a pensionfund and revenues have been recognised in linewith the stage of construction. Revenues in 2011of 30.6m primarily reflected the final accountin respect of the town centre redevelopment atCamberley, Surrey.

MARGINSGroup gross profit margin for the period was 27.4%

(2011: 28.6%), after sales and marketing costs,slightly lower than the prior year.

Administrative expenses have increased year onyear, as the business has invested in a new divisionto bring renewed focus to its activities in London.Notwithstanding this investment, administrativecosts as a percentage of sales have reduced from11.0% in 2011 to 9.5% in 2012, as levels of activityhave increased. Operating margins have thereforeimproved by 0.3% to 18.0% (2011: 17.7%).

SALES REVENUESOF 408M ARE UP28% ON 2011

28%

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FINANCE COSTS AND TAXATIONFinance costs and taxation in 2012 differ significantlyfrom the preceding year, where certain chargesand credits arose in connection with the conclusionof the financial restructuring of the Group in

September 2011.

Bank finance costs in the year are significantly lowerthan the prior year, comprising only bank interestcharges and other financial expenses. In addition tosimilar costs, bank finance costs in 2011 included a63.6m amortisation of bank debt fair value discount.

The 1.8m credit for taxation reflects furtherrecognition of a deferred tax asset, in respect of pasttrading losses, partially offset by the deferred taxexpense in the year and the reduction in asset valuearising from changes in the tax rate. In 2011,the Group recognised a deferred tax asset, of which65.0m was in respect of previously unrecognisedtemporary differences, on the grounds that the 2011financial restructuring of the Group made therealisation of the related tax benefit throughfuture taxable profits probable.

CASH FLOW

AND FINANCIAL POSITIONThe significant uplift in housing completions inthe year, combined with higher cash receipts from

Commercial sales, has enabled the Group to re-investin land and work in progress, while still generatingpositive cash flow from operations.

The value of inventories on the balance sheethas increased 19%, by 75.2m to 469.4m(2011: 394.2m), with land creditors also increasingfrom 58.3m in 2011 to 90.3m.

At 31stOctober 2012, the Group had term loan facilities

for 152.0m, which extended to September 2015.These loans were fully drawn and, along with 16.3m(2011: nil) of funding secured under the GovernmentsGet Britain Building scheme and other loans of12.1m, total borrowings totalled 180.4m.Cash and cash equivalents at the end of the yearamounted to 150.1m (2011: 121.9m).

At 31stOctober 2012, the Group had net debt of30.3m (2011: 42.8m) and a gearing ratio of 8.7%(2011: 14.9%). The Group continues to generatea strong return on capital employed, at 20.7%,down marginally from the 21.1% reported in 2011.

RE-FINANCINGAfter the balance sheet date, the Group re-financedan element of its bank loans, repaying 77m of termloans and entering into a new Revolving CreditFacility for 60m, which extends for four years,to December 2016.

The maturity date of 75m of the remaining termloans was also extended from September 2015to December 2016.

In addition to establishing broader banking

relationships, these changes will provide theGroup with a more flexible financing structure,closely matching drawn funds to the workingcapital requirements of the Group through theyear and will reduce financing costs.

Harbourside, Bristol

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LAND BANKThe Groups contracted land bank is summarised in terms of units and gross development value (GDV)1as follows:

2012 2011

Units GDV m Units GDV m

Short term housing 16,959 3,646 14,772 3,011

Short term commercial - 235 - 285

Total short term 16,959 3,881 14,772 3,296

Strategic land 12,623 2,918 14,259 2,960

Total under contract 29,582 6,799 29,031 6,256

1Throughout this document Gross Development Value (GDV) means the estimated total revenue from a development at currentvalues based on the Groups current development plans for the land.

DURING 2012THE SHORT TERMHOUSING LANDBANK HASINCREASED BY2,187 PLOTS

2,187

The short term housing land bank has increasedby 2,187 plots during 2012, principally driven by

the 2,145 plots converted from the strategic landbank. Other land acquisitions added 2,247 plots,while unit completions and the impact of re-plansaccounted for the balance of the movement.The estimated GDV of the short term land bankhas increased by 17.7%.

At the 2012 level of Crest Nicholson turnover,the short term housing portfolio represents9 years supply, although the growth intentionsfor the business would result in a lower figure.

The Group remains focused on ensuring that thebusiness has an appropriate number of sites open

for sales at any one time, although faster rates ofsale have resulted in outlet lives being shortened.

After a very successful year in which 4 planningconsents were gained on strategic sites and theresultant plot conversions, we were pleasedto add 5 new sites to the strategic land bank,to ensure that this important source of longerterm development value is maintained.

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RISKS ANDUNCERTAINTIES

PROACTIVE APPROACH

TO RISK MANAGEMENTCrest Nicholson operates a risk managementprocess with key risk matrices at Board and divisionalmanagement board levels. The risk matricesgenerated are reviewed and updated at least annuallyand at any time when significant new risks emerge.

The Groups approach recognises that managing riskis a core element of executive management and thatthe risk management framework must be proactiveand dovetail with normal business processes in orderto drive business benefits. Making it part of normalbusiness therefore means:

having a hierarchy of risk assessments;

focusing on key risks;

linking the assessment of risksto consequential actions;

monitoring controls

developing mitigating actions establishing ownership.

Risks are assessed in terms of their impact andprobability and given a high, medium or low inherentrisk ranking. Mitigating actions are considered anda residual risk rating is identified, which in turn helpsto establish whether further mitigations are required.

KEY AREAS OF FOCUSGroup and divisional assessments focus oninherent risks that could affect the achievement

of objectives. Divisions are instructed to make theirrisk assessments directly pertinent to their ownbusiness context and operations, leaving theGroup risk assessment to pick up broader themes,particularly in relation to external sources of risk.

Oakwood Gardens, Oxhey

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AREA RISK MITIGATION OWNERSHIP

The macro-economic climatecontinues to beuncertain, withslow growth andunresolved issuesin the Eurozone

Consumer confidence is underminedby a worsening of current economicconditions, leading to a rise inunemployment and/or pessimismabout employment prospects.

Keep economic environment under review,to ensure the business can respondappropriately to changes in trading conditions.

Board

Mortgage lendingcontinues to beconstrained,particularlyat higherLoan to value ratios

Mortgage availability will continueto be constrained, particularly for firsttime buyers requiring higher loan tovalue products.

Monitor lending product availability, work toincrease finance availability for developmentsand seek to assist purchasers through theuse of schemes such as the GovernmentsHomeBuy Direct and NewBuy.

Consider options for alternative tenures.

Executive

Planning changesincrease uncertaintyand, consequentially,delay

The introduction of the principles oflocalism to planning matters and theongoing debate in relation to the NationalPlanning Policy Framework (NPPF),are likely to cause uncertainty and delay,as local authorities weigh the benefitsof housing development againstother pressures.

Develop understanding of the new approachto planning, working closely with keyregulators and decision makers andincorporating planning environmentuncertainties into assessment of landopportunities.

Executive

Development costs Increases in build cost arising frominaccurate estimating, incompletetendering or failure to use businesssystems and/or comply withbusiness processes.

Regular cost reviews and analysis of projectedcosts to complete of projects. Use of panelsubcontractors for significant works. Monitorand drive compliance with core businesssystems and processes

Executive/GroupProductionDirector

Recruitmentand retention

Ability to recruit and retain staff withthe requisite skills to secure and deliversustainable developments that generateappropriate returns.

Ensure the Group is a desirable employer,with competitive packages, clear careerprogression, good communication, trainingand review processes.

Executive

Regulation Changes to Government Policy on housingand planning gain, increasing regulation,cost and delay will render schemes andland buying unviable.

Monitor closely changes/proposed changesin regulatory environment and makerepresentations as necessary.

Ensure financial appraisals include new

regulatory cost assessments.

Executive

Health, safety andenvironmental

Injury to persons, potential loss of life,serious damage to sites and environment.Reputational damage and costs.

Executive Board leadership and scrutinyof health, safety and environment.Risks assessed and integrated intomanagement processes from earliest stage(pre-acquisition). Dedicated teams in place,with comprehensive procedures and controls.

Board/CEO

Social and environmental risk is analysed in more detail in our 2012 Sustainability Report.

THE ROLE OF BUSINESS ASSURANCEThe business has a business assurance function that reports to the Audit Committee. The Audit Committeereports to the Board and the external Auditor perform controls work as part of the annual audit.

The business assurance work programme is designed (and flexed) to take account of the key risks identifiedby the Group, as an extension of the general remit of the function to support the achievement of the Groupsfinancial and operational objectives.

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Kaleidoscope, Cambridge



SUSTAINABILITYREVIEW

Our aspiration to deliver truly sustainable homes andcommunities requires us to balance economic, social andenvironmental factors on every scheme. High quality, low carbonhomes set in well designed places provide communities withopportunities for a more sustainable lifestyle.

At Crest Nicholson, we also emphasise sustainabilitythroughout our development process protecting andwhere possible enhancing local ecology and habitat,and continuously limiting our own operationalimpacts, with a focus on energy and carbon, wastereduction and resource consumption.

We remain focused on bringing forward projectsefficiently and responsibly in partnership with ourstakeholders. With this in mind we have continued tostrengthen our relationship with government, takingpart in constructive dialogue on further increasingsupply, both to meet housing needs and to fueleconomic recovery.

Our focus on innovation gives us a distinctive placein the housing market. We have continued to breaknew ground through our AIMC4 programme inreadiness for the 2016 zero carbon homesrequirement a key challenge for our sector.

We are now converting the learning and researchfrom AIMC4 into technical advances that stands usin good stead to meet the Governments zero carbonhousing agenda cost effectively, as well as deliveringcustomer benefits and yielding competitive advantagein the low carbon economy.

The Group maintains its leading position in theNext Generation Benchmark, achieving secondposition with a significant improvement on our 2011score. This is an independent assessment of sectorperformance across a range of indicators, fromgovernance to climate change. Our sector leadershipin sustainability is a key differentiator in securingpublic and private sector opportunities, borne outby our excellent record in acquiring land andplanning permissions.

We are well equippedto deliver sustainable

communities throughour key strengths inhigh quality planningand design,partnerships, andconsensus buildingat local level.

Chris TinkerRegeneration Chairman

Blenheim Square, Epping

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SUSTAINABILITY STRATEGYThis year, we embarked on a review of our

Sustainability Strategy to ensure that we stayahead of emerging trends over the next five to tenyears. With a team of 30 employees from differentlevels and disciplines across the business, weidentified and considered a whole range of factorswhich include:

Increasing customer expectations forhigh quality design, product and service

Societal demand for transparency overresponsible business practices

The impact of changing demographics

Supply chain skills and capacity

Impacts of climate change and naturalresource constraints.

We are developing a strategic framework inresponse to these issues, to stretch our thinkingand help ensure that we have a sustainablebusiness model capable of delivering valuenow and into the future.

As part of this process, we are engaging inconstructive dialogue with key stakeholdersincluding local authorities, development partnersand suppliers, to invite insight and comment.

While we continue to develop this strategyour priority remains unchanged: to embedsustainability further into our business and

processes to deliver stakeholder value atthe same time as socio-economic andenvironmental benefits.

The rest of this section briefly outlinesperformance under the following themes,through which we continue to progress oursustainability agenda:

Keeping the customer as the focusof the business

Partnering to deliver sustainablecommunities

Where good design meets low carbon

A responsible and ethical business.

For full details of our performance in these areas,please see the Crest Nicholson SustainabilityReport 2012.

Chris TinkerRegeneration Chairman and Board directorwith responsibility for sustainability

MANAGING SUSTAINABILITY

OPERATIONALCARBONFOOTPRINTFURTHERREDUCED FROM5.5 teq TO 4.9 teqPER PERSON

TARGETING A

25% REDUCTIONBY 2020(baseline: 2007)

*Tonnes equivalent carbon

4.9teq*

Operating Board Drives sustainability strategy and reviews performance.

Sustainability BusinessImprovement Workgroup (BIW)

Chaired by the Operating Board Member responsible for Sustainability.Comprising two Board Members plus senior managers. ProvidesGroup level thought leadership, strategy and policy development,and implementation support to the other BIWs: Production,

Customer, Experience, Development.

Sustainability Team Develops strategy, leads and facilitates implementation.

Projects Operational personnel

Sustainability goals are delivered as part of the developmentprocess and embedded in everyday operations, with partners,on site and in offices.

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Elements, Epsom



KEEPING THE CUSTOMER AT THE HEART OF THE BUSINESSWe have an unwavering commitment to excellentcustomer service. This year, to achieve our ownstretching targets we created a new role of Headof Customer Experience to oversee the customer

journey and drive tangible improvements incustomer satisfaction.

As well as high expectations of design and service,customers are increasingly looking for support tosmooth the buying process. Our goal is to ensure thatevery one of our customers is always fully supported

and delighted with their new home.

To deliver this we must ensure that the customer isat the heart of everything we do, from detailed design,product selection and build quality to sales andmarketing and of course once they have moved in.

Elements, Epsom

FOCUS 2012 KEY ACHIEVEMENTS

Delivering excellence in customer service 5 star rating in the HBF Customer Satisfaction Surveyfor the third year.

9 out of 10 of our customers say they wouldrecommend us to a friend (2011: 9 out of 10).

Introduced a more personalised service by ensuringthat every customer who reserves a new homereceives a personal communication froma Crest Nicholson Managing Director.

Understanding our customers needs Planned research with occupants of ourgroundbreaking AIMC4 homes in Epsom and atCentenary Quay, Southampton, to obtain qualitativefeedback from our customers in respect of design,

layout, comfort and low carbon heating technologies.Continued to use learning from previous customerresearch to inform product and service developments.

Helping our customers get on the housing ladder Helped over 200 first time buyers to buy their newhome through EasyBuy (our own shared equityscheme) and through government backed schemesincluding FirstBuy and HomeBuy Direct.

WE HELPED OVER200 FIRST TIMEBUYERS TO BUYTHEIR NEW HOME

THROUGHEASYBUY ANDTHROUGHGOVERNMENTBACKED SCHEMESINCLUDINGFIRSTBUY ANDHOMEBUY DIRECT

200 B

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PARTNERING TO DELIVER SUSTAINABLE COMMUNITIESDelivering successful sustainable communities requires a commitment to working in partnershipover the lifecycle of the development, from initial masterplanning to delivery and beyond.

We engage continuously with our key partners in development including local authorities, residentsand interest groups, with whom we work closely to develop proposals and build good relationshipsat every stage of the process.

We have built a true partnering culture with our suppliers, and developed interactive learning circlesto ensure that benefits are generated for our business, our suppliers and ultimately our customers.

FOCUS 2012 KEY ACHIEVEMENTS

Partnering to bring developmentsforward responsibly

Delivered 1,882 new homes and worked withlocal authorities to secure a number of keyplanning permissions.

Bid successfully for Get Britain Building Onefunding, to kickstart seven developments,six of which started in the year.

Contributing to public policyon the future of housing

Members of the Operating Board and managementteams have been actively working with government

departments to help shape future policy.

Supported the Town and Country PlanningAssociations work on Garden City principlesas the basis of creating high quality sustainablecommunities.

Developing innovative approacheswith the supply chain

Continued to develop a ground breaking frameworkpartnership for delivering low carbon distributedheating with a major utility provider.

Grew and deepened our partnering with suppliersto achieve cost effective innovation in products anddelivery processes.

Increased our requirements on suppliersfor resource efficiency and environmentalrisk management.

Promoting sustainable procurement Continued to implement our SustainableProcurement Policy.

Continued our commitment to auditing our timbersupply as legally sourced and assured (working withthe WWF Forest and Trade Network) and to focuson procurement of FSC certified supply.

NEW HOMESDELIVERED

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WHERE GOOD DESIGN MEETS LOW CARBONWe have continued to invest in customer led innovation to develop cost effective delivery of well designed,low carbon homes.

A key priority for our sector is preparing for anticipated changes in regulation to help achieve stretching targetsin home energy standards, and we have continued to drive innovation in cost effective low carbon homes via theAIMC4 consortium. The UK Government has maintained the commitment that all homes sent to planning in2016 must be zero carbon, but have yet to confirm the price of carbon and full compliance mechanisms.

FOCUS 2012 WHAT WE ACHIEVED

Designing for sustainability Assessed all our new schemes against Building forLife (BfL), with 100% achieving a minimum of 14/20,equivalent to a Silver under the original Standard.

Began planning how best to embrace BfL12,the new BfL assessment tool.

Delivering low carbon homes 276 (15%) were to Code 4 (2011: 58, 4%).

544 (30%) of homes delivered were to Code forSustainable Homes level 3 (2011: 535, 34%).

324 (18%) to EcoHomes standards (2011: 429, 27%).

Innovating and learning Delivered five exemplar AIMC4 homes atNoble Park, Epsom. Using the learning, successfullytendered designs on two HCA sites to the new FabricEnergy Efficiency Standard.

A range of fully tested cost effective technicalinnovations are now being deployed across our

low carbon housing designs.

Clarifying zero carbon regulation Continued to contribute to the Zero CarbonHub workgroups to find solutions to zero carbonchallenges. As part of contributing to the newbuilding regulations, shared our knowledge fromthe AIMC4 project and the Building PerformanceEvaluation/Post-Occupancy Evaluation studieswith the Government.

8 OF OURSITES HAVEACHIEVED THEGOLD STANDARD*UNDER BUILDINGFOR LIFE, THELEADINGBENCHMARK OFSUSTAINABLEDESIGN

GOLD

*BfL criteria subsequentlyrevised in 2012 as BfL12.

Elements, Epsom

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A RESPONSIBLE AND ETHICAL BUSINESSWe are proud of the talent, commitment and energy of our employees, and in turn we ensuretransparency, openness and investment in skills, with a commitment to engaging our peoplein the vision and direction of the Group.

We continued to invest in skills development for our sales, customer service and management teams,grew the number of apprentices working with us, and maintained our graduate trainee intake.

Health and safety remains paramount and once again we recorded an Annual Injury Incidence Rateof below our HBF peer group and the construction sector average.

As part of reducing our operational impacts, we continue to report annually on our carbon footprint,and set long and medium term targets to reduce our carbon emissions, partnering with our suppliersto eliminate waste.

FOCUS 2012 WHAT WE ACHIEVED

Engaging with our employees New company wide bonus scheme.

Regular communication of business strategyand achievements.

Developing expertise 12.8 hours of training per employee (2011: 8.5).

Number of apprentices increased from 44 to 45,a further six being recruited.

Six graduate trainees (2011: 5).

Driving health and safety for all

Managing environmental risk

48% reduction in annual injury incidence ratesince 2008.

Committed to HBF Health and Safety Charter.

Zero prosecutions and fines (2011: 0)and 172 days of training (2011: 200).

Reinforced the Group health and safety team withthree further members and integrated environmentalsite management into the roles.

Refreshed best practice standards for environmentalsite management.

Measuring and continuously improvingoperational impacts

Reduced our office energy use by a further 2.5%(2011: 7.5%).

Reduced our operational carbon footprint from5.5 teq to 4.9 teq per person. We report our carbonfootprint annually according to The GreenhouseGas Protocol and our data is externally assured.

Targeting a 25% reduction by 2020 over 2007 levels.

Conserving resources Further reduced waste sent to landfill 2012: 6%(2011: 11%).

Partnered with our groundworkers to maximisere-use of spoil targeting zero spoil to be takenoffsite where possible.

Set up Waste Reduction Panel with suppliers,

independently chaired by the National IndustrialSymbiosis Programme (NISP).

SUPPORTING THEHOPE BUILDERCAMPAIGN PARTOF HABITAT FORHUMANITY CHARITY

IN 2013, WE WILLBE FUNDRAISINGTO HELP FINANCETHE CONSTRUCTIONOF 50 NEW HOMESFOR PEOPLE INEXTREME NEEDIN DEVELOPINGCOUNTRIES

50

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AIMC4 at Noble Park, Epsom


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43 DIRECTORS REPORT & ACCOUNTS 201242 DIRECTORS REPORT & ACCOUNTS 2012

RESPONSIBILITIES OF THE BOARD

The Crest Nicholson Group operates through

its Holdings Board with day-to-day executivemanagement delegated to the Operating Board.

The Holdings Board is responsible for setting and monitoring Group strategy,reviewing performance, protecting the business from reputational damage,ensuring adequate funding, formulating policy on key issues and reportingto its shareholders. The Board has oversight of the Operating Board, whichhas responsibility for the day-to-day operation of the business and developingstrategy for the Holdings Boards input and approval.

The Board has three Non-Executive Directors and two Executive Directors.

The Board refers to the main board of the Company, also known as the Holdings Board.

BOARDOF DIRECTORS

01 02 03 04 05 06 07 08 09

01 Kevin Maguire Company Secretary

02 Steve Evans Group Production Director

03 Robin Hoyles Group Land and Planning Director

04 William Rucker Non-Executive Chairman

05 Stephen Stone Chief Executive

06 Pam Alexander, OBE Non-Executive Director

07 Chris Tinker Regeneration Chairman

08 Malcolm McCaig Non-Executive Director

09 Patrick Bergin Group Finance Director

YEARS OFEXPERIENCEIN UKHOUSEBUILDING

100+

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OPERATINGBOARD

HOLDINGSBOARD

William RuckerNon-Executive Chairman

Malcolm McCaigNon-Executive Director

Pam Alexander, OBENon-Executive Director


Patrick BerginGroup Finance Director

Stephen StoneChairman



Steve EvansGroup Production Director

Robin HoylesGroup Land and Planning Director

Kevin MaguireCompany Secretary

A Audit Committee

N Nomination Committee

R Remuneration Committee

Stephen Stone N RChief Executive

Stephen Stone joined the Group in 1995.He was appointed to the Board in 1999,becoming Chief Executive on 1stNovember2005. Stephen is the Board memberresponsible for health and safety. He isa Chartered Architect with over 30 yearsexperience in the construction and housebuilding industry and in 2011 he joined theHome Builders Federation (HBF) Board asa Non-Executive Director.

William Rucker A N RNon-Executive Chairman

William Rucker was appointed as Chairmanin September 2011. He is a charteredaccountant and CEO of Lazard in the UK,Chairman of Quintain Estates &Development PLC and Non-ExecutiveDirector of Rentokil-Initial PLC.

Malcolm McCaig A N RNon-Executive Director

Malcolm McCaig joined the Board in April 2009.He is Chairman of Kent Reliance ProvidentSociety and Chairman of Caley Limited. Healso holds a number of other independentnon-executive director roles, includingLondon Capital Group, Unum, RenaissanceCapital and Jubilee. He is a former partnerwith Deloitte, as well as Ernst & Young andis a technical specialist in risk management,finance, corporate governance, regulatorycompliance, IT, strategic businessdevelopment and change management.

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Pam Alexander, OBE A

Non-Executive Director

Pam Alexander, the former Chief Executiveof the South East England DevelopmentAgency (SEEDA), joined the Board ofCrest Nicholson on 5thDecember 2011.Pam has more than 35 years of experiencein the public, private and not-for-profitsectors, having worked closely with boardsand government ministers on strategicpolicy and direction across numerousareas including regeneration and housing,innovation, growth and economicdevelopment. Pam is also a Non-ExecutiveDirector of the Design Council CABE, theAcademy of Urbanism and a trustee ofthe Brighton Dome and Festival Ltd.


Patrick Bergin joined the Group in 2006.He was appointed as Group FinanceDirector in 2011. He is a CharteredAccountant with 18 years experience andhas worked in a range of industries andcompanies including Touche Ross (nowDeloitte), Reed Elsevier and The BOCGroup, in various finance roles.


Chris Tinker, a Chartered Builder, joinedCrest Estates in 1988. Throughout the1990s he was instrumental in theacquisition and master planning of severalof the Groups major residential projects,leading to his appointment in 2002 asManaging Director of Crest NicholsonDevelopments. Chris joined the executivemanagement team in 2007 and is nowRegeneration Chairman and is alsoresponsible for sustainability strategy.He is also a Director of the Enterprise M3LEP and advisor to the HCAs Design andSustainability panel.

Steve EvansGroup Production Director

Steve Evans was appointed to the executivemanagement team in January 2011. Hehad previously served with the Group from1995 for nine years. He is currently GroupProduction Director and was previouslyManaging Director of the Eastern Region.Prior to rejoining the Group in 2009 he wasChief Executive of the Anderson Group.

Robin HoylesGroup Land and Planning Director

Robin Hoyles joined the Group in May2011 and was appointed to the executivemanagement team in December 2011.He was previously with CountrysideProperties for more than 17 years asManaging Director of their Special Projectsdivision. He is a solicitor and prior to

joining Countryside was in privatepractice in London.


Kevin Maguire joined the Group inMarch 2008 and became CompanySecretary in January 2009. Having a legalbackground, he is a Chartered Secretaryand previously held roles in retail,pensions and technology.

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DIRECTORSREPORT

PRINCIPAL ACTIVITY

AND BUSINESS REVIEWDuring the year to 31stOctober 2012, the principalactivity of the Group was the design and delivery ofsustainable housing and mixed-use communities.The Chairmans statement, the Chief Executivesreview and the Financial Review discuss theperformance and position of the Group along witha more detailed commentary on the future outlookof the Company. The Company is incorporatedin England and Wales.

RESULTS AND DIVIDENDThe Groups consolidated profit after taxation for thefinancial year ending 31stOctober 2012 was 63.9m(2011: profit 40.5m).

No dividends were declared or paid in the financialyear and the Directors do not propose a dividend.

SHARE CAPITALThe Company has 10,000,000 ordinary shares,

65,000 A shares, 5,750 B shares, 6,957 C shares,28,125 D shares and 18,000 deferred shares in issueat 31stOctober 2012. Movements in the share capitalof the Company are shown in Note 18 to theconsolidated financial statements.

ARTICLES OF ASSOCIATIONThe Articles of Association regulate the internalaffairs of the Company and cover such matters asBoard and shareholder meetings, powers and dutiesof Directors, borrowing powers and the issue andtransfer of shares.

The Articles may only be amended by specialresolution of the shareholders.

DIRECTORSThe Directors during the year were:

Non-Executive Chairman

Mr WJ Rucker

Non-Executive Directors

Mr MG McCaig

Ms PE Alexander OBE (Appointed 5thDecember 2011)

Executive Directors

Mr S Stone

Mr PJ Bergin

Biographies of the Directors are detailed on pages44-45. There were no contracts of significance duringthe financial year in which a Director of the Companyis, or was, materially interested.

DIRECTORS INDEMNITIESIt is the Companys practice to indemnify its Directorsand Officers to the extent permitted by law and theArticles against all costs, charges, losses, expensesand liabilities incurred in connection with anynegligence, default, breach of duty or trust and anyother liability incurred in the execution of their duties.

In addition the Company maintains Directors andOfficers liability insurance for the Directors andCompany Secretary.

DONATIONSDuring the year the Group made donationsto charities of 3,000 (2011: 2,000).

Employees have continued to support the Groupsnominated charity, Variety, the Childrens Charity andhave raised 67,000 (2011: 57,000) to support thiscause during the year.

There were no political donations made.

The Directors present their annual report with the consolidated

accounts of the Company for the year ended 31st

October 2012.

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EMPLOYMENT POLICYThe Group maintains and operates an EqualOpportunities Policy. The Group seeks to ensure at alltimes that all employees and prospective employeesand individuals receive equal and proper treatmentregardless of sex, marital status, sexual orientation,religious belief, colour, race, nationality, ethnic origin,age or disability. The Group values diversity andequality, and selects employees based on theiraptitude and abilities.

SUSTAINABILITYThe Group publishes a Sustainability Report, which itsubmits to external benchmarking. A summary of theGroups Sustainability Report can be found earlier inthis Annual Report and Accounts and on the Groupswebsite. Sustainability is at the core of the Groupsstrategy and product, and the Group embedssustainability in all its activities and operations.

HEALTH AND SAFETYThe Group believes and acknowledges that health and

safety is a critical part of managing our business andstaff. Policy management, inspection and training arecarried out by the Groups health and safety teamunder Stephen Stone, who is the Director responsiblefor health and safety. The Groups health and safetyteam work with Divisions and the Group to encourageand develop high quality practice and education toensure that everyone on our sites remains as accidentand incident free as possible. The Group embracesappropriate health and safety policies and practicesthroughout its operations.

ESSENTIAL CONTRACTSThe Group does not have any contracts that areconsidered alone to be essential to the business of theGroup. The Group does on occasion make significantpurchases of goods and services in a particulardiscipline from a sole supplier where this is necessaryfor efficiency, practicality or value. However, it does soonly after a detailed tender or appropriate selectionprocess and in the context of the level of risk suchsole supply might bring.

DISCLOSURE OF INFORMATIONTO AUDITORThe Directors who held office at the date of approvalof this Directors Report confirm that, so far as theyare each aware, there is no relevant audit informationof which the Companys auditor is unaware; and eachDirector has taken all the steps that he ought to havetaken as a Director to make himself aware of anyrelevant audit information and to establish that theCompanys auditor is aware of that information.

AUDITORPursuant to section 487 of the Companies Act 2006,the auditor will be deemed to be reappointed andKPMG Audit Plc will therefore continue in office.

By Order of the Board


Crest HousePyrcroft RoadChertsey

SurreyKT16 9GN

Registered no: 6800600

16thJanuary 2013

Papermill Walk, Ingress Park

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CORPORATEGOVERNANCE

CHAIRMANS INTRODUCTIONGood corporate governance is at the heart ofsuccessful business. The Board is committed to highstandards of corporate governance. It has establishedand operates a practical risk based framework basedon core values and standards.

As a private limited company, Crest NicholsonHoldings Limited is not bound by the UK Corporate

Governance Code but the Board believes that byseeking to comply with best practice it has contributedtowards shareholder wealth and the future successof the Company.

The Board is ultimately responsible for the activities,successes and any failings of the Groups operation.However, it delegates day-to-day operationalresponsibility to the Operating Board, a properlyconstituted and skilled team of senior management.

Reflecting the Holdings Company governancestructure, the Board of the Company focuses on theoverall oversight of the Group and its strategic andcorporate direction. The Board has overallresponsibility for the conduct of the Groups business,ensuring that the obligations to its shareholdersand other stakeholders are understood and met.Each Board Director is aware of his/herresponsibilities, individually and collectively,to promote the long term success of theCompany and as such the Group.

William RuckerChairman

BOARD OF DIRECTORS

STRUCTURE OF THE BOARDThe composition of the Board is designed toensure effective management and control of theGroup. The Board has an appropriate balance ofNon-Executive and Executive Directors consistingof a Non-Executive Chairman and two Non-ExecutiveDirectors together with the Chief Executive andGroup Finance Director.

The Boards Non-Executive Directors demonstratea range of experience and professional backgroundsthat enables them to make a valuable contribution tothe Group and to provide independent judgement andchallenge to the Board. They present a balance offinancial, corporate and risk skills together withdesign, property and commercial knowledge thatsupplements and complements the ExecutiveDirectors and Operating Boards combinedindustry experience.

Biographies of the members of the Board and

the Operating Board are set out on pages 44-45.

BOARD EFFECTIVENESSThe Board regularly reviews the Groups strategyand engages with its stakeholders and shareholdersas part of this process.

The Board recognises that its material asset is itsland bank. Whilst the Board delegates an appropriateauthority to the Operating Board to undertakeacquisitions of the majority of new sites as it deemsnecessary, the Board retains oversight of allacquisitions through regular reporting and

approval of all material acquisitions.

Good corporategovernance is atthe heart of

successfulbusiness.

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The Board receives regular management reports.Additional briefing material is provided to the Boardas required by operational events. The ability for theBoard to respond dynamically to requirements is akey part of its operational efficiency and success.

Within the Board, there is a clear division betweenthe role of the Chairman and Chief Executive. TheChairman is primarily responsible for overseeingthe working of the Board. He leads the Board in the

determination of strategy, overseeing the conductof Board meetings to ensure appropriate involvementfrom each Director in order to contribute to aneffective decision making process.

The Directors have access to the CompanySecretary for any corporate or Group mattersincluding legal and regulatory information, andensuring good information flows within the Boardand its committees and between the executive teamand Non-Executive Directors.

Directors may, at the Companys expense,

take independent professional advice and receiveadditional training. All new Directors participatein a customised induction training programme andreceive the necessary policies and preparationrequired to carry out their duties, spendingappropriate time with the Operating Boardand any other members of management thatare appropriate.

The Board reviews its own performance and evaluatesits effectiveness in providing strategic direction to theGroup and maintaining appropriate relationships withshareholders and other stakeholders.

The Board held six meetings during the year,with the following attendance by Directors:

MeetingsNov2011

Jan2012

Apr2012

Jun2012

Jul2012

Sept2012

Attendance 4/4 5/5 5/5 5/5 5/5 5/5

Further, all members of the Board and Operating

Board attended a strategy meeting in February 2012.

Hunts Grove, Gloucester

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COMMITTEES OF THE BOARDThe Board devolves certain other areas ofresponsibility to Board Committees. The termsof reference of the Committees cover such issuesas membership, the frequency of meetings,requirements of any quorum for and the right

to attend meetings, and duties and reportingresponsibilities of the respective Committee.The terms of reference also set out the authorityof that Committee to carry out its duties.

Audit Committee

The Audit Committee comprises:

Malcolm McCaig (Chairman)

William Rucker

Pam Alexander

The Audit Committees role is to assist theBoard with the discharge of its responsibilitiesin relation to internal and external audits andcontrols, including reviewing the Groups financialstatements, monitoring their integrity, and anyformal announcements relating to the Groupsfinancial performance.

The Committee reviews the scope of the annual auditand the extent of the non-audit work undertaken byexternal auditors, advises on the appointment andremuneration of external auditors and reviews theauditors independence and the effectiveness of theaudit process.

The Auditors independence is ensured through a

crest nicholson holdings annual report (2012)

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