Crest Nicholson H2 2024 Earnings Report

Crest Nicholson EPS Results

• Actual EPS: GBX 5.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Crest Nicholson Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Crest Nicholson Announcement Details

• Quarter: H2 2024
• Date: 2/4/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, February 4, 2025
• Conference Call Time: 4:00AM ET

Crest Nicholson (LON:CRST) engages in building residential homes in the United Kingdom. It develops and sells apartments, houses, and commercial properties. The company was founded in 1963 and is headquartered in Addlestone, the United Kingdom.

Crest Nicholson H2 2024 Earnings Call Transcript

Presentation

[Operator]

Hello and welcome everyone to the Quest Nicholson Plc Preliminary Results Full Year 'twenty four. My name is Becky and I'll be your operator today. I will now hand over to your host, Martin Clarke, Chief Executive Officer of Chress Nicholson to begin. Please go ahead.

[Martyn Clark, CEO at Crest Nicholson]

Thank you, Richard. Good morning, everyone, and welcome to my maiden full year results presentation as CEO of CRISPRS. It's good to see you all here today. I'm joined by Bill, our CFO. You all know well.

[Martyn Clark, CEO at Crest Nicholson]

In terms of structure of the meeting, I'll give a brief introduction, who will go through the numbers and then I'll spend some time taking you through my first impressions of the business and some of the initial actions that we have taken over the last 8 months. I'll also provide my views on the opportunities that exist at Crest and the changes that need to be made to strengthen the business so I can capitalize on these thereby delivering value to our shareholders and other stakeholders. Before I start, I just wanted to provide you all with a brief overview of my experience in the industry. I was taking almost 40 years in the housekeeping sector, 1st with Royal Homes and then with MacSinnen. As you might imagine, throughout that long career, I've had a wide range of operational and commercial leadership roles around the UK.

[Martyn Clark, CEO at Crest Nicholson]

That culminated with my most recent role where I was Group Chief Commercial Officer at Anderson. I really enjoyed getting to grips with things and I'm confident of a positive outlook for the business, but it's making most of that potential. There are some things that we need to change. I'll touch upon some of those today. We're also planning to hold Capital Markets Day on the 20th March when we'll provide more detail on the forward looking strategy request, which is based around 3 strategic pillars: building homes and exceptional quality, delivering our standard service to customers and optimizing the value within our land bank set and arms with sales and margins.

[Martyn Clark, CEO at Crest Nicholson]

Looking back at 2024 today, we've announced results which are in line with guidance issued at the start of my tenure. Whilst disappointing and not where I want them to be in the future, we've delivered these results within the context of the challenging macro environment, the change in CEO and CFO and more impactfully addressed having been in an offer period for some months over the summer. As I'm sure you all understand, this offer period was a big distraction, but that's big thanks now, and I'm encouraged by the traction we've been getting with some of our changes I've brought in. But of course, as the results demonstrate, there's a lot more to do. Legacy Fire related provisions have hung over the entire industry for some time, and Crest has not been immune to this.

[Martyn Clark, CEO at Crest Nicholson]

It was a priority for me when I joined to provide more clarity on those issues. Can you see if any announcement you've made on that? It's critical for everyone inside and outside the business to accelerate the completion of the surveys, which in turn inform the cost reviews. With this information, we can ensure that we have the financial resources to meet our commitments, and it means everyone can start to now look forward. Legacy non fire exits also weighed heavily on Crest performance over the last few years.

[Martyn Clark, CEO at Crest Nicholson]

Our most notable site, Farnam, Barnum achieved Praxwood build completion in September. This has been a very challenging and costly development where many important lessons have been learned by the business. However, the majority of residential units are now occupied with less than 13% of remaining of 100 to sell over the next 12 to 18 months. There remains a number of low margin sites in the portfolio that are still to be trading through, but they are going to be replaced with new more profitable sites. A couple of other points I'd like to make by way of summary.

[Martyn Clark, CEO at Crest Nicholson]

It's fundamental that the home of the build and the customer experience we provide reflects our branding. We're on track to deliver a 5 star rating for last year, which is great, but I see significant opportunities to enhance the overall performance, so overall customer experience going forward, while of course pertaining a rest of the focus on controlling costs and enhancing our margin. Some that occurred for me in the period was the improved cash position of the business, but there's still more to do at Crest regards to our work in progress management, and we'll give some more sense of our plans of how we are going to improve on that today and at the Capital Markets Day. Linked to that, one of the things we spoke about when I arrived was the reduction from planned margin to operational margin. That is the margin we expect to achieve at the point we acquire the site versus the margin we achieve when we go down the site.

[Martyn Clark, CEO at Crest Nicholson]

This is due to a combination of strategic decisions and weak oversight of key commercial and operational controls. We need to change that and I've introduced a range of initiatives to vet manage this and hold our team to account. This will underpin our margin forecasting going forward. We enter 2025 cautiously optimistic. We've all had the challenges faced in the industry over recent years and we've worked with a new government rhetoric around housing delivery targets.

[Martyn Clark, CEO at Crest Nicholson]

What I would say from my mix into government is that some of the early signs are encouraging, but the enormity of the challenge should not be underplayed. Planning consents are never easy to obtain, requests have had some long overdue successes recently. Sites that have been slow to progress have obtained positive resolutions at local commences. Shortly after the change of government, a number of sites within our strategic land bank will proceed the draft allocation. Build cost inflation has moderated to near 0, which means we have a better visibility of our cost base.

[Martyn Clark, CEO at Crest Nicholson]

But the most critical factor is customer confidence. It is obviously very early days, but the anecdotal signs for 2025 are encouraging. So when this is how room maintenance is going to be, means we enter 2025 before momentum, albeit other work still today. We expect 2025 as a year of transition, aimed to reset the business on solid foundations with a strategy that focuses on the customer whilst embedding strict commercial and financial controls in order to leverage the strengths within the land bank. Successful execution of that strategy will deliver sustainable shareholder value.

[Martyn Clark, CEO at Crest Nicholson]

So I'll hand over to Bill and then come back after he's gone through the numbers with you.

[Bill Floydd, CFO at Crest Nicholson]

Thanks, Martin. Good morning, everyone. This morning, I'll take you through financial summary of the year, give you some more detailed insights into the combustible materials charge and provision, and then take you through the guidance for FY 25. Here you can see the key financial headlines. At the back of the presentation is the full income statement as well as the balance sheet, the cash flow and some other analysis you might find helpful.

[Bill Floydd, CFO at Crest Nicholson]

Overall, this was a disappointing year, but given the distractions and challenges, we're pleased to have reported adjusted profit before tax within the guidance range and better than expected outcome on net debt. Revenue for the year was £618,200,000 down by 6% on FY2023. I'll have no sales metrics for you on the next slide. Gross margin fell from 16.1 percent to 14% substantially as a result of £7,300,000 of completed excise charges, but also reflecting broadly flat sales prices across the year and some further NRV provisions, although on a much reduced level to previous years. As a result, the adjusted profit before tax was £22,400,000 Exceptional items were £106,100,000 and I'll take you through these on a separate slide.

[Bill Floydd, CFO at Crest Nicholson]

And £66,100,000 and I'll take you through these on a separate slide. Adjusted basic earnings per share was 5.6p. On the dividend, the Board has proposed a final dividend of 1.2p per share, bringing the total to the year to 2.2p per share. And the PVA from policy in FY 'twenty three to maintain the same level of distribution as FY 'twenty two, the Board of Assets expected reverted to a stated dividend cover of 2.5 times adjusted earnings. We were pleased to beat our guidance on net debt, with the year end coming in at £8,500,000.

[Bill Floydd, CFO at Crest Nicholson]

This reflects a combination of close to management of WIP and some deferral of land payments as planning slipped. On sales metrics, average outlets were 44, down from 47 in the previous year, with the pace of new outlets continuing to be impacted by the challenges of obtaining planning. The open market sales rate was 0.48% compared to our planning assumption of 0.45%. On completions, we delivered 1873 of which 238 were at the joint venture sites. After the seasonal lull in reservations around Christmas and the New Year, we've been encouraged by the volume of inquiries, appointments and reservations in recent weeks.

[Bill Floydd, CFO at Crest Nicholson]

Sales for FY 'twenty five as of the end of last week stood at 10.51 across all unit categories. The details of the exceptional items are as follows: The combustible materials charge, including imputed interest, was £137,800,000 Separately, we recovered £4,400,000 from the subcontractor and have multiple other claims in progress. We do not recognize any recoveries until the cash is received. There has been little substantive progress on the legal claim against the group in respect to an apartment block that was damaged by fire in 2021. As such, the only change to the provision is legal fees.

[Bill Floydd, CFO at Crest Nicholson]

I do expect the case to progress in FY25, either through mediation or the case coming to court. This assessment does not include any recovery the group may make from insurance subcontractors, but does include an assessment of various work we believe the plan is overstated. On completed sites, we've concluded the work that we commenced in H1. In aggregate, the charge in the year was £32,300,000 compared with our estimates of a half of £31,400,000 with £25,000,000 included as an exceptional charge. These costs are included in the balance sheets in either accruals or provisions depending on the nature of the cost and I would expect the cash to be spent over 4 to 5 years.

[Bill Floydd, CFO at Crest Nicholson]

The Group has also written off this remaining freehold inventory as we await the outcome of the government's review on ground grain practices. This charge is £5,700,000 The tax credit on exceptional items was £48,200,000 and as such I do not expect the Group to pay any cash out on tax until FY27. We've made good progress in our assessment of the overall obligations that the Group has on combustible materials and are now in a position to estimate the expected costs across all 9 buildings. Overall, there are 291 buildings in scope. We have an initial assessment on the vast majority of these buildings.

[Bill Floydd, CFO at Crest Nicholson]

But more importantly, we've completed 211 detailed FR AEW surveys, which relate to the external walls and are carried out by independent qualified fire engineers. Where we are not satisfied with the initial survey, we undertake a second survey. Using the experience gathered on these surveys, we have been able to estimate the expected cost for unsurveyed buildings. We expect to complete the remaining external surveys by June 2025 ahead of our commitment to governments in the remediation acceleration plan. Included in the provision are all the costs for all known buildings, internal and external work, build cost inflation, project management costs and our best estimate of no risks.

[Bill Floydd, CFO at Crest Nicholson]

Moving on to the balance sheet, we're now aiming to give you greater color on the makeup of the inventory balance, which reflects that close to 60% of the balance is land. This is a higher proportion than a business at Presque Isle requires, with too much of the land on large and capital intensive sites. Work in progress has reduced from £361,300,000 to £334,100,000 This reflects the completion of some of our low margin apartment schemes, but also the early benefits of tighter control on-site commencements and materials on-site disciplines. Our stock of completed units has increased from £89,600,000 to £102,900,000 This is largely a result of completing build programs on our partner schemes, which we will now progressively sell over the next 2 to 3 financial years. We've made some good progress in cleansing the parts exchange portfolio and are now starting to see this balance reduce.

[Bill Floydd, CFO at Crest Nicholson]

Parts exchange is an important lever for our sales teams and with better controls now in place, I would expect to see further improvements. As a reminder, the Group's committed debt facilities are an RCF of £250,000,000 the maturity of which we've extended by 12 months to October 2027 and an £85,000,000 private placement with the next repayment being £20,000,000 in August 2025. Overall, we're getting sharper focus into the business on the importance of cash and return on capital employed. And I would expect us to continue to improve the efficiency of the balance sheet to support the Group's Committed cash outflows. Overall, we've made some good improvements in the year on our cash management.

[Bill Floydd, CFO at Crest Nicholson]

We've improved our forecasting process and accuracy as well as starting to improve our WIP controls. The key benefits have come through in working capital with a reduction in land and whip balances and given the Group's profitability position, we've recovered all over pay tax. So in summary, FY 2024 has been an extremely challenging year for the Group. I'd like to thank everyone at Prestus for the hard work and resilience in getting through the year. Having now made substantial progress in closing out the build of most of the legacy sites and providing full loan costs on the completed sites and on fire remediation, business can now move forward with a stable baseline.

[Bill Floydd, CFO at Crest Nicholson]

Finally, turning to our guidance for FY 'twenty five, and here I'm giving you our high level planning assumptions. We're targeting an uptick in over market sales volumes with the benefits of our sales training program, specification upgrades and a modest improvement to the market all supporting this growth. Conversely, we're less focused on PRS and affordable volume and as a result, overall volume will be slightly lower to flat. The forward order book for FY 'twenty five stood at 10 51 units at the end of January and planning is in place for almost all units. We're starting to see some sales price improvements, but it's hard to say at this point how much is from our own initiatives and how much is market driven.

[Bill Floydd, CFO at Crest Nicholson]

On gross margin, I anticipate site margin mix improvements with a reduction in revenue from low and 0 margin sites from around £100,000,000 to around £50,000,000 Given our seasonality and the profile of unit delivery, I expect around 30% of EBIT to be delivered in H1. The interest charge will increase to between £10,000,000 £12,000,000 with the group being in net debt through a fair year. We're guiding adjusted PBT to between £28,000,000 £38,000,000. On cash, I expect a year end net debt position in the range of £40,000,000 to £90,000,000 with the peak being of a half year. The key assumptions on cash for the year are land payments around 120,000,000 pounds offset by some land disposals as we start to reshape the portfolio to focus on smaller sites and then improvements in wind.

[Bill Floydd, CFO at Crest Nicholson]

We expect to spend around £70,000,000 on delivering the combustible remediation program and a hard level of interest payments, but no tax payments at night and a return to the group's stated dividend cover of 2.5 times adjusted earnings. With that, I'll hand you back to Martin.

[Martyn Clark, CEO at Crest Nicholson]

What I'd like to start with is an objective to answer my impressions of our progress in Bristol and to outline what we have to work with and what we can make better. I'll then touch upon some of the actions we've already taken among our analysis for 2025. Within that, I'll also talk through the changes I've made, how we are managing fire remediation work, how we've accelerated it. Positive starting point is that we have a strong land portfolio. I've spent some time working to understand what a good site of site request and the characteristics of sites that have delivered an appropriate margin and reseller cost are employed.

[Martyn Clark, CEO at Crest Nicholson]

The majority of the land portfolio is well aligned and there is no doubt that it can underpin the growth of Crest over the medium term. However, some of those sites are very large, impacts on our work in progress, our return capital and our ability to grow balance. We need to objectively review the options available to us on each of those sites, maximizing the potential within our land holdings. We also have strong brands. Well, the first things I did was turn the second program of customer research, both with our own customers, but also the market more widely on how customers perceive threats.

[Martyn Clark, CEO at Crest Nicholson]

I was really encouraged by the brand awareness being high and consumers having positive perceptions of the brand, including this more premium proposition. We can certainly leverage that and lean into it more and we have some exciting plans around that. We're currently in the process of taking this research one step further with a view to understanding what customers want to ensure this incorporates it into our house type and layout designs. Crest position it in the market and the product we deliver is a key operational product in mind. I've been encouraged by the dedication shown by the teams within Quest over what has been a difficult year for them.

[Martyn Clark, CEO at Crest Nicholson]

Uncertainty at Brandymont is clearly an unwelcome distraction. So through my regular engagement meetings, I'm confident that we will have a team of people that are embracing the changes needed as we reshape our strategic goals. There's a big opportunity to improve the efficiency and level of control across the business. We've started to bring in new processes and a higher degree of rigor in how we do things. But there is much more to be done.

[Martyn Clark, CEO at Crest Nicholson]

And frankly, some of this needs to go hand in hand with cultural change. These changes cover the entire process from how we identify our buy lines, how we design and size efficiently, the controls and standards to which we build our homes, how we work with suppliers and rigorously monitor and control costs through the journey our customers experience. These changes will close the gap co pay that we have between the products and brand value. I describe it as an opportunity because I know what we need to do and how to do it, but we still need to execute and this will take some time. Ultimately what it comes down to is a requirement for a clear and distinct strategy which reflects Crest's valuable land and brand, the opportunity of the market and current operation environment.

[Martyn Clark, CEO at Crest Nicholson]

We all know that the recent years have been very challenging for the industry, from COVID through to the macro. But I'm here to look forward. I know the strengths of the business and I know what we need to work on. We've made some encouraging progress already, but there is more to do. And we're going to this Capital Markets Day in March to talk you through that in more detail.

[Martyn Clark, CEO at Crest Nicholson]

In the meantime, let me talk you through the direction of travel. It can sound a little obvious, but I really mean this, delivering a seamless customer journey is fundamental to building a successful house building company. If there's one thing which I've reiterated over and over again and where I've really focused my time and energy, it is on making sure everyone associated with the business understands how much importance are based on this, and then by default maintain a 5 star rating and underpinned strong demand for Crest products. We have made some internal organizational management changes and introduced clear metrics and measurement processes in order to develop a proper understanding of our customers, their needs and preferences and ensuring that our proposition matches these. This ranges from robust inspections at every stage of the build process through to having dedicated site teams to promptly address customer issues, with a dedicated system to track and enhance response times.

[Martyn Clark, CEO at Crest Nicholson]

Ultimately, we want to support and showcase our proposition for our customers from the first contact and beyond. And we're improving how we operate to do just that. We talked a bit earlier about our brand's positioning and the gap between that and the specification to which we're clearly post. In recent times, frankly, I don't think we're always selling a product that matched those expectations, which impacted sales and values achieved. What are we doing about that?

[Martyn Clark, CEO at Crest Nicholson]

Going forward, we have upgraded our core specification offer based on feedback along with more flexible options that will meet those customer demands and reflect our brand position. These revised specifications to our open market homes are aimed at driving value and hence profitability and improved sales rates. We have already carried out lots of internal training with our sales teams and changed their incentivization packages to reflect the customer experience we want buyers to have. And in the process this will also enhance the profitability of the business. Principally though, it's not just that touch point with the customer.

[Martyn Clark, CEO at Crest Nicholson]

We've done a lot of work on the whole customer journey. From the moment we go into the website, I made an initial inquiry through to the sales journey and then the post purchase care. We all know word-of-mouth can be very powerful and we want our customers to feel proud to supporting them through what is one of the largest financial commitments they will ever made. Therefore, build quality is a fundamental pillar to my growth strategy. I thought about the disconnect between the brand and what we are producing and how we are going to address that gap.

[Martyn Clark, CEO at Crest Nicholson]

We've already put in place monitoring processes and methodologies, which means our overall build program will be more controlled and measured going forward. We are investing in our IT infrastructure and business information tools. We now have available systems that provide better visibility on performance and issues covering everything from customer service to production to quality reporting and our financial functions. Alongside that, we have also strengthened and will continue to do so our reporting tools and refocused our senior team to actively manage this. We've also increased the focus on fiscal build quality and the education of science teams and our supply chain.

[Martyn Clark, CEO at Crest Nicholson]

And finally, we've externally benchmarked our work against independent NHP student instruction quality reviews, providing both challenge and confidence to our colleagues. I see that as an important part of the cultural evolution we're driving at CrossCrest. I am encouraged and appreciative of the family who have responded so far. To date, solid progress for the game this morning. I touched upon the land bank a little earlier in my presentation.

[Martyn Clark, CEO at Crest Nicholson]

We have a strong land bank and I can see how it will underpin sustainable growth for Crest over the medium term. However, it is also important to understand where Crest is today. Some of the land purchases in the past might have been very good deals considered in isolation, but I'm not sure that it will fit into the cohesive strategy that Crest needs to help a sustainable profitable future. 1 or 2 of the sites are in the wrong location. For example, they might be too far away from any of our divisional offices, which means oversight is difficult.

[Martyn Clark, CEO at Crest Nicholson]

Well, the size of the site might mean the cash requirements are too large for a business of that current scale. We're going to review all of that and almost certainly restart some of that language that doesn't fit with our forward looking strategy. Equally going forward, we're going to have a cohesive land acquisition strategy which aligns with our overall strategy, reflective of our brand, our customer needs, building a product we know we can build and locate it in areas where we can deliver commercial and operational excellence, rather than think about land on a more ad hoc basis and then trying to, or assuming we can, make these individual elements work. Fire remediation. One of the areas, of course, some uncertainty around Crest relates to the legacy fire provision.

[Martyn Clark, CEO at Crest Nicholson]

Well, my first action was creating a dedicated central team, which is company owned sites on everything that we are doing on the remediation. Previously, it was done with a mix to improve that initiatives which were delivered and controlled by the divisional businesses. This central governance regime has allowed us to be more efficient and we've accelerated the rate of assessments, which has allowed a review of the fire provision, which covers all 291 buildings in scope. The result is that our internal program aligns closely with the government requirements, assets out and the joint planning. Centralization of this important area will also enable divisional businesses to focus on new home delivery

[Martyn Clark, CEO at Crest Nicholson]

and do that well.

[Martyn Clark, CEO at Crest Nicholson]

The other point to make is that whilst CREST has taken its obligations seriously, we expect others to do the same. We will diligently pursue all claims against any third party that has contributed to any of the deficiencies found within these buildings. I talked a lot about building homes for customers and putting Crest on a long term profitable and sustainable footing. Obviously, there are different connotations to sustainability from fiscal to social. Ultimately, I'm committed to creating great places for our customers, communities and the environment.

[Martyn Clark, CEO at Crest Nicholson]

In 2024, we achieved good progress in key areas of our sustainability strategy, positioning us well for future challenges. First, we continue to take action to reduce our greenhouse gas emissions. We've introduced Scope 1 and Scope 2 emissions by 18% compared to 2023, making mark for the 63% reduction since 2019. We made significant progress in reducing emissions from site operations, including a reduction in our reliance on generators by the use of alternative fuels. Additionally, Scope 3 emissions in intensity dropped by 9% this year and 6% against our 2019 baseline.

[Martyn Clark, CEO at Crest Nicholson]

This will continue to decrease as more homes align with the future home standard. Secondly, on waste, we exceeded our target by cutting waste intensity by 35% versus 2023. This was driven by better waste management processes and policy compliance. Finally, we plan for future regulations. Exelts heat pumps have been introduced across several developments, preparing us well for the forthcoming future home segments.

[Martyn Clark, CEO at Crest Nicholson]

Biodiversity net gain, which came in force in 2024, is embedded early in our land acquisition and planning processes. In the effort we look ahead, we remain focused on reducing carbon emissions, enhancing biodiversity and delivering high quality energy efficient homes that our customers design. So a couple of slides for me to finish summarising 2024 and then reminding you of our future focus through 2025 and beyond. I'm encouraged by the traction and results that some of our initial changes have generated and it confirms to me that we can make the rest of the better, more sustainably profitable business. And as importantly, significant progress has been made on the legacy issues.

[Martyn Clark, CEO at Crest Nicholson]

They're obviously difficult subjects but we've provided within the fire provision for all known buildings in scope and then have clarity on other site provisions. I know that we walked some of you around our farm development in November and you can see how that's finally come together. All of this means that we can start to look to the future and what does that hold for Crest. I'm just going to take months in the business now. I think the path for Crest to have a successful, sustainably profitable future is pretty clear.

[Martyn Clark, CEO at Crest Nicholson]

And we know that we can deliver that, and in doing so, deliver value for our shareholders and other stakeholders. It requires leadership, strategic clarity, better controls and processes, consistency and execution and a customer first culture based on accountability and transparency. And as I say, I think we've made a fair start, but it will take time before I'm satisfied that all dealers are being able to effectively. Our success is going to be based on excellence in each of our strategic pillars. That means having a first class customer experience from the initial inquiry through to when they're becoming the owner of 1 of our homes.

[Martyn Clark, CEO at Crest Nicholson]

And we have a product that is built to an exceptional quality that appeals to our customer and reflects our brand and our product that we can be proud to serve. It is important to continue to improve our operations and processes and intend to make the business far more sophisticated in terms of how it leverages data and systems to drive positive commercial and operational outcomes. And finally, we need to optimize the potential within our quality landline, ensure that it shapes, flex the need of the business and supports sustainable growth. The combination of all those things is that ultimately will make a better margin on the house we sell, combined with better sales rates and less operational inefficiencies, all aimed at driving profitable and sustainable growth at Maximos and shareholder returns. We look forward to continuing the momentum that we have started to build through the second half of twenty twenty four.

[Martyn Clark, CEO at Crest Nicholson]

We have argued to our Capital Markets Day on the 20th March, so you can see in practice what I'll get through to them. And with that, I'd like to turn it over to questions.

[Analyst]

Firstly,

[Analyst]

elaborate a bit more on kind of recent trading, interesting comments, maybe sales rates over the last couple of weeks, how pricing incentives sort of evolved during the kind of, over the start of the year. And then secondly, March, just going back, I think you were saying that there's been a kind of problem with the planned margins and then the kind of delivery of the operating margin. Just want to clarify that. Is that more just control over build costs and general controls delivering products at the margin that have started. But the actual land bank, the land was bought on a sensible margin, and you can deliver that if you kind of, in grid state product controllers or in the build cost.

[Analyst]

And then thirdly, on the ASP, with your guidance, roughly 25, should we expect to up in the blended ASP given it would be less kind of bold sense?

[Bill Floydd, CFO at Crest Nicholson]

Okay. So I'll just first confirm. Yes. So recent trading, multiple weeks, sales rate is 0 point 6 3. We are achieving better than budgeted sales prices on average.

[Bill Floydd, CFO at Crest Nicholson]

We've done a lot of work over the last 6, 9 months to trade on the sales team, make some specification changes to that, to the homes. So I feel like there's a lot of self help in this. It's really hard to tell when the market does feel more positive. We are getting more inquiries through. So how much is us and how much is the market?

[Bill Floydd, CFO at Crest Nicholson]

It's too early to tell at this point, basically. On the ASP, yeah, I mean, I respect the overall blended ASP to shift up a bit because we'll do more over market private homes and less affordable than BRS. There's still also quite a lot of apartments to go through in there. So it's going

[Bill Floydd, CFO at Crest Nicholson]

to be tackled a bit by that.

[Martyn Clark, CEO at Crest Nicholson]

Okay. Thanks. The latter part of your question, no, I don't see any problem with the embedded margin within the high bank. What I've seen is that we tend to start sites perhaps a little bit too early, appointing contracts that maybe haven't been fully tendered, had all the issues closed out, and we then expose ourselves perhaps to claims that could have been solved early.

[Martyn Clark, CEO at Crest Nicholson]

We tend to do things more than once too often that cost money. We need to build better in the 1st place. So it's a combination of making sure that we can tender right, build right first time, we'll pay the margin that we expect. Okay.

[Analyst]

Thank you. First, Johnson, Jefferies board, if I may. First one, just in terms of those level margin completions regarding to 'twenty five, how much of that stack of the apartments? Is it 400 apartments where I can side back?

[Bill Floydd, CFO at Crest Nicholson]

Yeah. It's not as funny as that because there's obviously houses in there as well. But, yeah, the low margin site revenue is going to go from about 50 up and down to 50, the bulk of these apartments.

[Analyst]

And the apartments in the next going forward, excluding those that are built already?

[Bill Floydd, CFO at Crest Nicholson]

Excluding those that are built already, there are very few that are going to be built from here that are not affordable.

[Analyst]

The second one is in terms of the shift in terms of doing less bulk selling or private. Are you talking about selling the units that were originally bought and planned to be bulk as private? And Is that possible? Is the spec right or does it require extra cost at these lower margin?

[Bill Floydd, CFO at Crest Nicholson]

This is more of the past about bulk units in a hurry to either generate cash

[Bill Floydd, CFO at Crest Nicholson]

or generate profit. We're going to be a bit more thoughtful

[Bill Floydd, CFO at Crest Nicholson]

about that going forward. Yeah. About that going forward.

[Analyst]

Very much. Just in terms of peak net debt, you said in the first half, is peak net debt in that guide or is peak net debt above that?

[Martyn Clark, CEO at Crest Nicholson]

It's a bit higher.

[Analyst]

Okay.

[Analyst]

And then just the last one. Land value, you take your land value that you first, thank you very much. And I bet it comes out to 48,000 give or take. Seems quite low actually, given your relatively Southern exposure. Is that land value clearly more of the 13,000 blocks are they all owned on the balance sheet?

[Analyst]

And is there a big skew between big sites and what you might see as your sites going forward in terms of sites?

[Bill Floydd, CFO at Crest Nicholson]

That was a lot. It's a question. No. No. 4th question.

[Analyst]

You can send a land bank or some are not yet posed.

[Bill Floydd, CFO at Crest Nicholson]

So much now, some of them.

[Analyst]

And is there a big skew in terms of the price, the plot cost between the big sites that you have and what might be going forward the type of size of site you might be looking for.

[Bill Floydd, CFO at Crest Nicholson]

But there's half a dozen sites which carry a big WIP number.

[Analyst]

Land WIP number.

[Martyn Clark, CEO at Crest Nicholson]

Land WIP number. Land. But yes.

[Analyst]

Plots?

[Martyn Clark, CEO at Crest Nicholson]

Yes.

[William Jones, President at Atlantic Concrete Contractors]

Thanks. Will Jones at Rep Atlantic. I'll try 3, please. What was, I guess, just extending the last one around the land bank and I suppose 40,000 plots ish, 6.70, do you or 7 or 8 years of supply? I mean, which of those you think will change going forward?

[William Jones, President at Atlantic Concrete Contractors]

Do you think maybe hold the plot cap and grow it it, but maybe the pound sterling is

[William Jones, President at Atlantic Concrete Contractors]

down?

[Martyn Clark, CEO at Crest Nicholson]

I think we need to look at the whole portfolio that's something that we're doing at the moment. It's mathematically, it looks like you've got a 2nd year book, a plan, 14,000 divided by 2, 2,000. But in reality, some of those sites are very long and have a very long tail. So we need to reshape it to make sure that if we're going to have 6 100 and 100 of land, we've actually delivered over, say, 6 or 7 years.

[Martyn Clark, CEO at Crest Nicholson]

Not some of it over the next 20 years. Some of them may be over 20 years. So the whole thing is looking at

[Martyn Clark, CEO at Crest Nicholson]

the shape.

[William Jones, President at Atlantic Concrete Contractors]

Okay. So just around the cost of strategic initiatives and we talked about investing in service force and build quality, just wondering whether there are any costs associated with that and how that might shape up versus what may be overhead? So, you can make the other way.

[Martyn Clark, CEO at Crest Nicholson]

Yes. I don't think it's costing us anything to train either the sales or the teams. Now, I think where we've been not very successful is we've been selling properties based on achieving a target number of homes rather than the best of them. And I think debt running into and have refocused the sales team to achieve closer to the discount level that they can go to. And similarly, the build costs, what I've looked at is the amount of money we're actually spending on doing things all at once.

[Martyn Clark, CEO at Crest Nicholson]

And it's quite significant. If I can drive that cost down and drive the customer care cost down, then that will improve.

[William Jones, President at Atlantic Concrete Contractors]

The last one just about net debt potentially year to April, October 26. Do you think basically given the 75 or so fire outflows, the net debt rise again that year? And just what generally is there anything around fire safety organizations that you think will be in the end of the strategy you might otherwise have undertaken?

[Bill Floydd, CFO at Crest Nicholson]

From not giving guidance on medium term, but I would expect us to keep that debt in a range medium term of plus 50 to minus 50. I think we've got adequate resources to live within that range. Obviously, go up a bit during the course of the year with the growth of capital flows, but keeping in that range of close to 0. The assets we've got more than enough opportunities to keep it in that range, keep buying the land. But have that all land, but we can certainly quickly rather than what we'll balance sheet for 10 years.

[Analyst]

Mark, so UBS. I've got 3 questions as well. Should I get one, what not? In terms of land bank margins, you say good at the end. You said great.

[Analyst]

Can you give us a number? In terms of strategy execution, you said it would take some time. Is this 6 to 3 years, 6 to 5 years? Also, when should we start seeing some sort of level of results? And then in terms of the last matches, capacity per division, Where do you see this?

[Martyn Clark, CEO at Crest Nicholson]

Okay. If I get 2 and 3 first and then think about the land bank margin. The strategy execution times down, it depends on which area we're looking at. So some of it might take 3 years, some of it might take 6 months. There are many things that we've got to look at.

[Martyn Clark, CEO at Crest Nicholson]

If I refer back to my comment on sales training, making sure we're trying to achieve the maximum we can for our homes, then one of the factors of that was making sure that we're building right and specifications right. And that we've already implemented. And I've seen progress on that already. The land bank, we've identified some sites that we've considered arguably don't fit our current strategy. So we've got to work and plan out whether to sell those or sell parts of those.

[Martyn Clark, CEO at Crest Nicholson]

And that will take a bit longer. And then other things like half type design or whatever we look at, obviously, they've got to work their way through the planning system, so that would take a number of years long. So depending on which metric you look at and which area you need to focus on the outside. Yeah. I'm sorry to give you.

[Martyn Clark, CEO at Crest Nicholson]

In terms of capacity for each operating division, I mean, look, it's I've worked in areas, businesses that are definitely 7 plus from a division. That's that's okay. And I've worked in some that are doing 300. It depends on the product. But as an average, 500.

[Martyn Clark, CEO at Crest Nicholson]

And again, depending on the location of the site, which is what we need to address and depending on the product they build.

[Bill Floydd, CFO at Crest Nicholson]

Okay. Blackbaud margin is 23

[Martyn Clark, CEO at Crest Nicholson]

No, off the top of my head. It's probably going to take probably 6 weeks. It'll give you some plans that show where they are, what the more size they are that make a bit of sense rather than sort of unit.

[Analyst]

Well, it's just sticking along those lines. And then secondly, on quality and product, how do you square that with standard house types? Can you keep standard house types and maximum quality of homes?

[Martyn Clark, CEO at Crest Nicholson]

Absolutely, you can.

[Martyn Clark, CEO at Crest Nicholson]

And to a degree, there is, if the more we standardized, the more consistent quality. But I think what we need to do is ensure that there's 2 things, really, that our products is what our customers want to buy. So that's half time design. And once you've then got a set range of half time, just make sure you execute that consistently. And we're not to improve.

[Martyn Clark, CEO at Crest Nicholson]

That's why we will 4 star the ADVF survey in the evening. This year, we're training a 5 star. Hopefully, when the results come out, we'll get it. We are 5 star in 2024.

[Analyst]

So, do you think we have to have another look at the standard house types you've got, just the range there?

[Martyn Clark, CEO at Crest Nicholson]

Yes. I mean, I spent quite a bit of time getting some external market research done and seeing what customers want. So I now need to look at the house types we're building to make sure that they match the service that we receive, where there are gaps, we're going to use new house types, where there are obvious house types that were within our range at the moment that we don't use, they don't need to be in our range. So arguably going from 20 to 25 house types doesn't mean I'm going to go up to 50 or 60 or 70. It just means that that core range will change in shape.

[Analyst]

Thanks. It's Duncan from Peel. Just got one follow-up, Brian. You said 6 larger, let's say, on mobile. Can you tell me how profitable they are relative to the

[Analyst]

the rest of the group and more or less profitable in margin sales?

[Bill Floydd, CFO at Crest Nicholson]

On average, slightly better. But probably kind of not to that, but narrow it for the margin, but narrow it more risk. Yeah.

[Analyst]

Any more questions? Operator, can we see if there are any further questions, miss?

[Operator]

Please? We currently have no further questions, so I'll hand back to Martin.

[Martyn Clark, CEO at Crest Nicholson]

Okay. Thank you very much for taking the time to come and see you this morning. 20 March is only 6 weeks away. We're still seeing you then. Thank you.

Participants

Executives

• Martyn Clark, CEO
• Bill Floydd, CFO

Analysts

• Analyst
• William Jones, President at Atlantic Concrete Contractors