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Description of nature of entity's operations and principal activities
1 Nov 2022 to 31 Oct 2023
Disclosure of authorisation of financial statements [text block]
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Fact Summary
Total Facts:
448
Tag Summary
Namespace |
Primary Items |
Dimensions |
Members |
Total |
|---|---|---|---|---|
| crestnicholsonholdingsplc | 11 (5%) | 1 (50%) | 2 (40%) | 14 (6%) |
| ifrs-full | 214 (95%) | 1 (50%) | 3 (60%) | 218 (94%) |
| Total | 225 (100%) | 2 (100%) | 5 (100%) | 232 (100%) |
Validation results
| Severity | Code | Message |
|---|
Calculation details
| Concept | Reported value | Minimum | Maximum | ||
|---|---|---|---|---|---|
+
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+
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Strong
foundations
for the future
Annual Report and financial statements 2023
Built for
the future
2023 has seen challenging trading conditions for UK
housebuilders. Our attractive land portfolio means
that we are well positioned for the future and our
purpose remains unchanged. We build great places
for our customers, communities and the environment.
Our focus on placemaking means that we create
sustainable communities where people and nature
can thrive.
Cautionary statement
The Annual Report and financial statements
for the year ended 31 October 2023 as
contained in this document (Annual Report),
contains information which readers might
consider to be forward looking statements
relating to or in respect of the financial
condition, results, operations or businesses
of Crest Nicholson Holdings plc (Company).
Any such statements involve risk and
uncertainty because they relate to future
events and circumstances. There are many
factors that could cause actual results or
developments to dier materially from
those expressed or implied by any such
forward looking statements. Nothing in this
Annual Report should be construed as a
profit forecast.
Approval
The Strategic Report for the financial year
ended 31 October 2023 as presented on
pages 1 to 52 was approved by the Board of
Directors on 23 January 2024 and signed on
its behalf by:
Penny Thomas
Company Secretary
Ackender Hill, Alton, Hampshire
Front cover image:
Kilnwood Vale, Horsham, West Sussex
Crest Nicholson
Strategic Report
Our year in review 1
Crest Nicholson at a glance 2
Chairman’s statement 4
Chief Executive’s statement 6
Our strategy 10
Market overview 12
Business model 14
Stakeholder relations 16
Sustainability review 20
Protect the environment 21
Make a positive impact on
our communities 25
Operate our business responsibly 26
Safety, Health & Environment 27
Our People 28
Key performance indicators 30
Financial review 32
Principal risks and uncertainties 35
Task Force on Climate-related
Financial Disclosures 43
Non-financial and sustainability
information statement 51
Viability statement and Going Concern 52
Governance
and Directors’ Report
Corporate Governance Report 54
Nomination Committee Report 70
Audit and Risk Committee Report 74
Directors’ Remuneration Report 81
Directors’ Report 99
Financial Statements
Statement of Directors’ Responsibilities 102
Independent auditors’ report 103
Consolidated income statement 111
Consolidated statement
of comprehensive income 111
Consolidated statement
of changes in equity 112
Consolidated statement
of financial position 113
Consolidated cash flow statement 114
Notes to the consolidated
financial statements 115
Company statement of financial position 156
Company statement of
changes in equity 157
Notes to the Company financial statements 158
Alternative performance
measures (unaudited) 161
Historical summary (unaudited) 163
Shareholder services and Glossary 164
Sales
1
£692.1m
FY22: £955.8m
Our year in review
We have responded proactively to dicult trading
conditions and maintained our financial position.
Revenue
£657.5m
FY22: £913.6m
Adjusted profit before tax
1
£41.4m
FY22: £137.8m
Profit before tax
£23.1m
FY22: £32.8m
Adjusted operating profit margin
1
6.7%
FY22: 15.4%
Operating profit margin
4.5%
FY22: 4.2%
Return on capital employed
1
6.3%
FY22: 22.4%
Net cash
1
£64.9m
FY22: £276.5m
Customer satisfaction
4 star
FY22: 5 star
1 Sales, adjusted profit before tax, adjusted operating
profit margin, return on capital employed and net cash
are non-statutory alternative performance measures
(APMs) used by the Directors to manage the business
which they believe should be shared for a greater
understanding of the performance of the Group.
The definitions of these APMs and the reconciliation to
the statutory numbers are included on pages 161 to 162.
Crest Nicholson 1 Annual Report and financial statements 2023
Strategic Report
Crest Nicholson at a glance
We are building strong foundations
for the future.
Our purpose
Our culture
We have an open, welcoming, values-
based culture.
We create a positive, eective and
collaborative working environment to deliver
continued performance that contributes to
our success.
Our values
Our values underpin how we implement our strategy,
defining who we are and how we operate.
Integrating sustainability
We recognise the social responsibilities
we have as a Group to support the natural
environment, human and social capital we
engage with. Sustainability is an integral
part of our strategy and culture. We embed
responsible practices throughout all aspects
of the Group, enabling us to contribute
positively to society and create long-term
value for our stakeholders.
Our sustainability strategy is focused on
three priority areas:
Elmsbrook, Bicester, Oxfordshire
3
Doing the right thing
The safety and wellbeing of
our employees, partners and
communities is our number one
priority. Everything we do is built on a
foundation of integrity, quality and care.
4
Championing our people
We invest in the wellbeing and
development of our people.
We provide them with the tools and
support to be the best they can be.
1
Working together
We are one Crest. We value our
diverse and inclusive workplace
and support each other. We
collaborate closely to build fair
and rewarding relationships.
2
Being the best we can be
We improve and inspire each other
to get things done. We have passion
for what we do and pride in how we
accomplish it.
5
Leaving a positive legacy
We care passionately about the
natural environment. We create
beautiful homes and places
that deliver lasting benefits to our
customers and communities.
Protect the environment
Make a positive impact on communities
Operate our business responsibly
See pages 20 to 26
Crest Nicholson 2 Annual Report and financial statements 2023
Our strategy
Our strategy seeks to build on
our strengths and address the
challenges we face. Our five Strategic
Priorities are underpinned by
four Foundations.
Divisional structure
We have five established divisions
predominately in Southern England. In FY22
we opened a new division in Yorkshire.
We have a dedicated Partnerships and
Strategic Land (PSL) division.
Partnerships and Strategic Land
The division has two primary functions: the first
of these is building and establishing strategic
relationships with Registered Providers and
the Private Rented Sector to enable delivery
of Crest Nicholson homes through dierent
tenures. The second function is to acquire,
secure and progress strategic land through
key planning stages.
The PSL division maximises value through
scheme design and placemaking principles
while demonstrating broad expertise in housing,
land and planning. The team has secured
land deals on promising sites in a challenging
market. The existing strategic land portfolio is
actively promoted, with several sites advancing
through key planning stages, including new
Local Plan allocations and draft allocations in
emerging plans. Additionally, the team has
been at the forefront of addressing regional and
national planning challenges, such as emerging
environmental legislation and proposed
changes to the planning system.
1
South West
2
South
3
Chiltern
4
5
Midlands
6
Yorkshire
6
5
3
1
2
4
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Eastern
Crest Nicholson 3 Annual Report and financial statements 2023
Strategic Report
Chairman’s statement
During our financial year ended 31 October
2023 the UK continued to experience
challenging and changing economic
conditions. The first period followed the
Mini-Budget in late September 2022,
which triggered instant turmoil in financial
markets and a sharp spike in interest
rates. This volatility immediately impacted
confidence in the housing market as
transaction numbers deteriorated. As we
moved into the spring, we saw some stability
and confidence return. However, as interest
rates continued to rise to combat stubborn
levels of inflation, the market weakened again
over the summer as the aordability of new
homes came under increasing pressure.
The planning environment has become more
complex. Local authorities face challenges to
process approvals eectively due to limited
resources within planning departments and
we have to navigate increasing regulatory
and environmental constraints.
In the first half of our financial year the
Group purchased several high quality sites
at attractive terms. These sites are in various
stages of planning and will be progressed at
pace when market conditions improve.
The Board has carefully considered the
impacts of the uncertain macro-economic
environment and the more onerous
planning system on our current strategy
and outlook. During the year we took the
dicult decision to restructure the Group’s
operations to reflect our expectations of
the weaker demand environment persisting
into FY24. In our Yorkshire division, which
is now operational and expected to deliver
completions in FY24, we have lowered our
expectations of volume growth over the
medium term. In addition, we have decided
to consolidate our new East Anglia division
into our existing Eastern division and this
Iain Ferguson CBE
Chairman
Confident for
the medium
term
Crest Nicholson 4 Annual Report and financial statements 2023
our values, as well as have the skills and
capabilities to perform their role, in order to
fulfil our purpose. The Board has made visits
to several of our developments during the
year. This gave us the opportunity to meet
with our colleagues at their places of work
and to hear from them at first hand which
provides important feedback to the Board.
Sustainability and future homes
Our sustainability strategy represents an
ambitious programme of change and we are
pleased to report that we are making good
progress against our targets. We continue
to focus on reducing emissions, delivering
high quality and energy ecient homes.
We partner with and engage closely with
our supply chain to procure materials in
a responsible manner. In June 2023 the
Group successfully implemented the interim
update to Part L of the Building Regulations.
Our future focus includes biodiversity and the
Future Homes Standard while we continue
to influence and prepare for other emerging
regulatory changes.
Dividend
The Board announced at the HY23 results
that it expected the dividend for FY23 to be
at the same level as the FY22 total dividend
paid. I am pleased to announce that the
Board is recommending a final dividend at
11.5 pence per share (FY22: 11.5 pence per
share). Subject to shareholders’ approval, this
will be paid on 23 April 2024. This will make
the total dividend for FY23 in line with the
prior year at 17.0 pence per share.
Board changes
In December 2023 Duncan Cooper, Group
Finance Director, left Crest Nicholson after
four and a half years to pursue his career in
another listed company. During his tenure,
Duncan has played a critical role in the
development and transformation of the
business and has been a valued member of
the Board. On behalf of the Board, I would
like to thank Duncan for his dedication,
professionalism and significant contribution
to our business.
After an extensive search, I am pleased to
announce that Bill Floydd joined the Board as
Group Finance Director in November 2023.
Bill is a highly experienced executive with a
strong track record of finance leadership in
a range of publicly listed companies. I would
like to express a warm welcome to Bill and
look forward to working with him.
I would also like to take this opportunity
to thank Lucinda Bell, who stepped down
from the Board in December 2023, for her
valued contribution to the Board over the
past six years as a Non-Executive Director.
Dr Maggie Semple OBE joined the Board as
Non-Executive Director in January 2024. I am
delighted to welcome Maggie to the Board.
She brings a breadth of experience across a
number of sectors and will complement the
range of skills and experience on the existing
Board. We look forward to working with her.
Outlook and future focus
The housing market is likely to remain
challenging in 2024 as the higher interest
rate environment continues to impact
aordability. In a year where a General
Election is likely, all political parties agree that
the planning system needs significant reform.
It is against this backdrop and expectation
that the Board fully supported management’s
decision to streamline the Group’s operations
and overheads. Maintaining a robust financial
position will always be a key priority for the
Board, and it is with this in mind that we
expect to return to our dividend policy of 2.5
times cover.
Despite the tougher trading conditions,
we remain focused on investing in our
colleagues to ensure they are well prepared
to navigate the current environment, can
implement the regulatory changes impacting
our sector and are ready to respond when
more positive market conditions return.
I would like to thank all my colleagues for
their dedication and commitment during
the year and for their understanding and
professionalism in delivering some of the
necessary changes we have made.
The Board remains confident in the medium-
term prospects of Crest Nicholson. The UK
continues to face an imbalance of housing
supply for the underlying level of demand.
While aordability and confidence have been
impacted this year, pricing has remained
stable, highlighting this market characteristic.
Our decision to remain active in the land
market, albeit on a selective basis, has
ensured that we have several strong sites
that will be ready to support a return to
growth at the right time.
Iain Ferguson CBE
Chairman
Despite the tougher trading
conditions, we remain focused
on investing in our colleagues to
ensure they are well prepared to
navigate the current environment
and are ready to respond for
whenmore positive market
conditions return.”
transition has now been finalised. Finally,
we have adjusted our growth expectations
in all our other existing divisions and
aligned the headcount and resourcing
requirements accordingly.
People and culture
The Board is committed to developing and
maintaining an eective culture that supports
the wellbeing and eectiveness of our
colleagues. During the year we undertook
an externally facilitated assessment of our
culture to understand perspectives from
across our business. The findings were
illuminating and insightful, allowing us to
develop an action plan which seeks to build
on the Group’s existing areas of strength,
while identifying new ideas and ways of
working. The Board recognises that our
culture never stands still. We recognise
that our colleagues need to understand
Crest Nicholson 5 Annual Report and financial statements 2023
Strategic Report
Chief Executive’s statement
Introduction
The past financial year proved to be one
characterised by significant uncertainty in the
housing sector. In contrast to the previous
year, which experienced robust market
conditions despite supply chain challenges
aecting home delivery, FY23 saw a reversal
of this trend. The sales market weakened
and supply chain pressures gradually eased,
leading to a reduction in inflationary impacts.
While we have encountered challenging
conditions, and performance was more
disappointing than anticipated, the Group
remained profitable, concluding the year with
a strong balance sheet which facilitated a
dividend payout at the same level as FY22.
The economy and housing market
The housing market showed signs of
weakening during late summer and early
autumn of 2022. This downturn was
triggered by the poorly received Mini-Budget
from the Truss-Kwarteng Government in
September 2022, leading to a significant
and rapid increase in interest rates, causing
a temporary collapse in housing sales.
Confidence gradually returned with the
establishment of a more stable Government
and the subsequent easing of mortgage
rates, resulting in more steady sales rates by
late winter and early spring 2023.
Great homes,
strong
foundations
Peter Truscott
Chief Executive
Crest Nicholson 6 Annual Report and financial statements 2023
Nevertheless, the market faced additional
challenges, including a rise in interest rates
due to persistently high inflation, renewing
concerns of declining house prices. The Bank
of England continued to raise interest rates to
control these inflationary pressures.
While there was initially an expectation of
significant price reductions, prices remained
stable, followed by modest declines through
autumn. Factors such as high mortgage
rates, buyer concerns regarding potential
future decreases in house prices, and the
customary summer slowdown contributed
to a period of very low sales rates. As overall
economic conditions stabilised, sales rates
slowly improved.
Multi Channel Approach
One of our strategic priorities is the
Multi Channel Approach. This approach
serves as a counter-cyclical element
during volatile trading environments,
oering increased visibility of revenue
in the business. This provides the Group
with resilience and a diversified income
stream. Leveraging our highly experienced
Partnerships and Strategic Land (PSL)
division, over the past few years, we have
cultivated strategic relationships with
institutions and Registered Providers
(RPs). Consequently, we have successfully
negotiated and delivered 273 units
for FY23, as well as further units for
future developments.
Build programme
We diligently manage our build programme
and work-in-progress. However, due to
supply chain issues in the second half of
FY22, we commenced the new financial year
with a lower build position than originally
planned. Despite the challenging sales
environment, we seized the opportunity
to maintain our planned production output
during the first half of the financial year as
more labour and materials became available.
This enabled us to restore a normalised build
activity by the end of FY23.
Build cost inflation remained elevated in
the first half of our financial year. This was
due to high energy costs and competitors
finishing homes for their financial year-ends.
A positive outlook for housebuilding in the
spring created additional pressure on building
supplies. The lagged eect of the dramatic
increase in energy costs from the previous
year continued to abate, and with labour costs
moderating, build cost inflation in the second
half of the financial year started to reduce to
mid-single digit percentages. We anticipate
this trend will continue into FY24.
Farnham and other legacy sites
As announced in our November trading
statement Brightwells Yard, Farnham
recorded c.£11m incremental build costs
in the year. The Group has subsequently
conducted a comprehensive review of
the costs to complete this project as well
as our other legacy and low margin sites.
Consequently, further additional costs of
£5.5m have been identified, including £2.5m
at Farnham, which have impacted FY23
adjusted profit before tax (APBT). The Group
has commenced a thorough plan to improve
commercial processes and controls to
mitigate the risk of future cost overruns.
Construction at the Farnham scheme is now
in its final stages.
Land and planning
The supply of land continued to tighten due
to the Government’s decision to eliminate
top-down housing targets, resulting in delays
to new site allocations. This situation is
compounded by broader issues within the
planning system, including challenges related
to nutrients, water neutrality, recreational
impact zones and air quality constraints.
Additionally, there is an under-resourced and
inecient development control function at
the local authority level.
Against this challenging backdrop, and in
the aftermath of a period of acute economic
uncertainty, many of our housebuilding
peers signalled their intention to reduce
land activity and withdraw from some land
deals. In contrast, we took the opportunity
to acquire several highly desirable sites in
attractive locations, thereby strengthening
our land portfolio and securing favourable
economic terms. Our decision to remain
active in the land market positions us to
mitigate planning delays, ensuring a higher
number of outlets are in place when market
conditions improve. Our land acquisition
programme will remain at a reduced level
during FY24.
Accordingly, the Group’s year end cash
position reduced to £64.9m from £276.5m in
the prior year, reflecting both this investment
and work-in-progress, as referred to earlier.
Streamlining Group operations
In response to the deterioration of trading
conditions experienced in the second half
of the year, we have conducted a thorough
and diligent review of all activities within
the Group to reduce overheads. It is never
easy for employees during dicult trading
conditions, and I would like to thank my
colleagues for their dedication and hard work
during these times.
Reduced pace of geographical
expansion
In October 2021 we outlined a growth plan
for our business involving geographical
expansion, with the aim of increasing the
number of our housebuilding divisions.
However, this plan was devised in a
stable, normalised trading environment.
Since then, the housebuilding industry has
encountered acute economic challenges
and a deteriorating trading environment.
As responsible management, it is necessary
to review our business plan to align with
prevailing market conditions.
Yorkshire will remain unaected given it
is now a fully operational, and will now
be expected to grow at a reduced pace,
targeting 300 to 350 units per annum by
FY26, instead of 500 units. East Anglia
is now covered by our existing Eastern
division and the geographical boundaries
have been revised. The Eastern division is
based at Brentwood in Essex and we will
retain East Anglia’s satellite oce in Bury St
Edmunds. As previously announced, we have
postponed the opening of the additional
new division.
The revised footprint allows for wider overall
coverage and enhanced volumes and reflects
the dicult market conditions in the short
term and the constrained land and planning
environment in the medium term.
Costs and overheads
The Group has taken proactive steps to
reduce the cost base at the end of FY23
with the revised growth plan as outlined
previously and will continue to seek ways to
operate more productively. As announced
in our November 2023 Trading Statement,
we have reduced overheads to align with
worsening market conditions and aim to
reduce annualised administrative expenses
by circa. £3m in FY24. Consequently, a
restructuring charge of £0.5m has been
included in our FY23 results.
There continues to be a significant imbalance in the
supply and demand of housing in the UK, and this
undersupply is particularly acute in Southern England,
where Crest Nicholson principally operates.”
Crest Nicholson 7 Annual Report and financial statements 2023
Strategic Report
Combustible materials
On 13 March 2023 the Group entered into the
UK Government’s Developer Remediation
Contract. This incorporated into contractual
arrangements the commitments made by
the Group under the Building Safety Pledge,
signed in April 2022. This agreement
regulates a method of building remediation
going forward and sets out the basis of the
timing and phasing of the recovery of funds
expended by the Building Safety Fund.
It also positively set out a more balanced
and consistent method in assessing
building remediations.
During the year we continued to focus on the
remediation of aected buildings, building
risk assessments, scoping and design.
We have received some recoveries from
subcontractors and suppliers which has
mitigated the impact and our overall fire
safety provision remains broadly unchanged
despite the high build cost inflation we
have experienced.
Customer experience
In 2022 our customer service standards
fell below the level to which we aspire and
understandably, our customers reflected this
in lower NHBC Customer Satisfaction Survey
ratings. Following significant investment in
FY23, in people, processes and systems,
there are encouraging signs that quality and
customer service standards are improving,
and for legal completions from February
2023, in excess of 90% of customers have
said they would recommend Crest Nicholson
to a friend. Sustaining this level and building
on the ongoing eorts to enhance customer
experience, positions us well to regain our
HBF five-star status in 2025.
Sustainability progress
Our sustainability strategy is split into three
priority areas – protect the environment,
make a positive impact on our communities
and operate the business responsibly.
These three priority areas guide our
commitment to drive positive action across
our activities and value chain.
We made positive progress against our
sustainability targets in FY23, including a
reduction in our greenhouse gas emissions.
We also became a Living Wage Employer and
we continued to collaborate with our supply
chain and industry peers on sustainability
initiatives and to prepare for future
regulatory changes.
Current trading
We entered FY24 with a forward position
at 19 January 2024 of 1,732 units at £434.9m
GDV, reflecting the current challenging
environment. We expect trading conditions
will improve towards the second half of 2024
with a strong pipeline of private rented sector
and RPs.
Summary
The last financial year has been amongst
the most challenging for the Group
since the Global Financial Crisis in 2008.
Against a backdrop of a dicult market, with
significantly reduced housing sales activity
and modest low single digit price falls, our
focus and priorities for the future are centred
on supporting our growth strategy. This will
preserve and maintain a robust balance sheet
and continue to control our overheads and
administrative costs eectively.
With a highly attractive asset base,
experienced management and a
strong balance sheet we remain
confident in our future growth
prospects.”
During FY23 we increased investment in
work-in-progress and strategically acquired
high quality land to strengthen our land
portfolio, supported by our balance sheet.
This strategic move positions the Group to
capitalise on growth when the market returns
to a more normalised level. There continues
to be a significant imbalance in the supply
and demand of housing in the UK, and this
undersupply is particularly acute in Southern
England, where Crest Nicholson principally
operates. With a highly attractive asset base,
experienced management and a strong
balance sheet we remain confident in our
future growth prospects.
Outlook
We expect the housing market will remain
challenging in 2024 with elevated interest
rates remaining in place until inflation falls
to its target level. In addition, the absence
of any Government support for first time
buyers, coupled with higher borrowing costs
continues to impact aordability.
However, there are reasons to be optimistic
with year-on-year inflation now halved
and real wage growth starting to be felt in
households across the UK. We have acquired
some excellent sites that are at advanced
stages in the planning process, leaving us
well positioned to trade in whatever market
conditions emerge.
Peter Truscott
Chief Executive
Brightwells Yard, Farnham, Surrey
Chief Executive’s statement continued
Crest Nicholson 8 Annual Report and financial statements 2023
Manor View, Milton Keynes,
Buckinghamshire
Enhancing our product
The external materials and elevations of
our Legacy Collection can be designed to
match the local vernacular. Additionally, our
development layouts are designed to have
impact, creating places that our customers
are immediately drawn to.
The homes oer an attractive, competitive
product and are more energy ecient
than the previous 2020 Housing Portfolio.
Enhancements include improved insulation,
the introduction of solar photovoltaic panels
and waste water heat recovery systems.
More ecient ventilation fans continuously
extracting moist air from the property will result
in improved heat retention within the home.
Our house types are designed to complement
each other, creating street scenes that fit
together maintaining the same depth, without
eecting their kerb appeal. This limits the
potential of heat loss form junctions, and
coupled with improved air tightness in excess
of building regulations, further enhances the
building’s ability to retain heat.
We have maximised the eciency of space,
creating opportunities for additional double
bedrooms. We feature utility rooms and
studies in many of our four bedroom homes.
Our kitchens provide flexibility and room for
both dining and family space, which delivers
on customer aspirations for this key area of
the home.
We are proud of the product we deliver to
our customers and have a continued focus
on the future development of this range.
We develop high quality, attractive, thriving communities.
We aim to create developments that our customers are
proud to live in.
Our Legacy Collection provides the Group with the tools
to do this in a consistent and eective manner. The Legacy
Collection comprises a core range of house types and
provides our people with a toolkit of standardised product
with variations and adaptations alongside a range of
aordable house types.
Case study
The
Legacy
Collection
Lancaster Park, West Malling, Kent
I am extremely pleased
to have worked on the
development of our Legacy
Collection, creating a
product that our people are
proud of and homes that
truly benefit our customers.
Our 360 degree feedback
model allows continuous
improvement in an ever
changing landscape,
enabling us to adapt to our
customers’ needs while
retaining our focus on
eciency and buildability.”
Graham Gribbin
Group Technical Director
Crest Nicholson 9 Annual Report and financial statements 2023
Strategic Report
Our strategy
Our strategy is embedded throughout our
operations delivering eciency and providing
strong financial performance. Our goal is to deliver
sustainable growth for our stakeholders.
Operational Eciency
Operational eciency is of paramount importance to our
success and competitiveness, especially in a challenging
economic environment. We focus on all aspects of our
operational process to utilise our resources in the most
ecient way possible, minimise waste and reduce our
environmental footprint.
Progress in FY23
— Implemented and integrated a new Enterprise
Resource Planning (ERP) system to improve
plot eciency and management oversight on
build progress
— Streamlined operations to align with current
market conditions.
Future focus
— Maintain strong oversight on incremental overheads
— Continue to remain agile and responsive to changing
market conditions and regulatory requirements.
Land Portfolio
Our land portfolio is primarily located in Southern
England where land supply is limited in desirable
locations where customer demands are high.
Our short-term land portfolio is approximately
five-years’ worth of supply which is appropriate for
our needs.
Progress in FY23
— Acquired several high quality sites which will
support future outlet growth
— Acquired land at or above hurdle rate
incorporating current sales and build costs.
Future focus
— Land acquisition will be reduced in FY24 as we
have sucient land in our portfolio
— Maintain discipline in retaining our land acquisition
hurdle rate.
Placemaking & Quality
We are renowned for our placemaking capabilities and we aim to create
aspirational developments that have a positive impact on our customers,
communities and the environment.
Progress in FY23
— Maintained our focus on investing
in desirable locations, acquiring
quality sites including in Windsor
and Oxford
— Adapted our homes in response to
the interim update to Part L of the
Building Regulations.
Future focus
— Incorporate biodiversity net
gain on new sites submitted for
planning from FY24
— Continue to prepare for the full
implementation of the Future
Homes Standard. See page 23.
Kilnwood Vale, Horsham, West Sussex
Fernhurst, Camberley, Surrey
Crest Nicholson 10 Annual Report and financial statements 2023
Five-Star Customer Service
We have a ‘right first time’ culture. We are committed to delivering high quality
homes and an excellent customer experience is at the heart of everything
we do.
Progress in FY23
— Processes have been aligned
to the New Homes Quality
Code and relevant training and
controls implemented
— Introduced a customer service
recovery plan to regain five-star
customer service rating
— Customer Relations Manager in
place in each housing division
— Strengthened handover and follow
up processes enhancing our
customer support
— Introduced standardised
upgrade options.
Future focus
— Develop an integrated approach
from first enquiry to after sales
— Enhance customer portal, for
example home demonstration
videos on the layout of houses and
self-serve information.
Multi Channel
Approach
Our PSL division sources land, develops partnerships
and manages strategic land. Their Strategic Land
team promotes and manages strategic land to
incorporate it into our short-term land portfolio.
Additionally, the division focuses on building
strategic relationships within PRS and RPs.
Progress in FY23
— 273 units were delivered in the year to PRS
and RPs
— Secured good sales pipeline for
future developments.
Future focus
— Develop Co-Purchase and Rent to Own models
with external institutions to enhance sales
— Commence sales under the Smart Own scheme.
Strategy for growth – geographical expansion
In October 2021 we outlined a growth plan for the
Group involving geographical expansion, with the
aim of increasing the number of our housebuilding
divisions. This plan was devised in a stable, normalised
trading environment. We opened Yorkshire division in
FY22 and East Anglia in HY23.
During the second half of FY23 the Group streamlined
its operations to align with current market conditions.
East Anglia is now covered by the existing Eastern
division and some of the geographical boundaries have
been revised, with Kent moving to the South division.
Yorkshire is fully operational and is expected to grow at
a revised pace.
Our Foundations
Our Strategic Priorities are underpinned by
our Foundations:
Safety, Health & Environment
See page 27
Financial Targets
See pages 32 to 34
Sustainability & Social Value
See pages 20 to 26
People
See pages 28 to 29
We knew we wanted to buy a new build
Crest Nicholson home again for many reasons.
Ultimately, we enjoy having a modern property
with high quality appliances and having access to
the benefits of purchasing from Crest Nicholson,
including an energy ecient home, a fantastic
sales team and schemes that made our move
so much easier.”
Nicola and Jon Gigg
Crest Nicholson customers
Nicola and Jon Gigg, Waterman’s Gate, Arborfield, Berkshire
Crest Nicholson 11 Annual Report and financial statements 2023
Strategic Report
Market overview
Housing is a cyclical industry and sensitive to market
sentiment and the macro-economic environment. With our
experienced team the Group will navigate through these
challenging trading conditions and position the Group to
capture growth when the market improves.
Structural imbalance
Demand outweighs the supply of housing.
The medium to long-term fundamentals of
the housing market remain strong. This is
based on data on UK population growth
which is projected to increase by 3.2% in
the next 10 years to 67.1m in mid-2020 and
to 69.2m in mid-2030. The undersupply
is also evidenced by the high growth of
property prices to income ratio as well as
rising rental rates. New housing supply
is currently lower than the Government’s
ambition of 300,000 new homes per year.
Around 237,000 new homes were built in
2022/23, 21% less than the target.
Housing supply and demand imbalances
vary greatly across dierent regions of the
UK. London and the South East have the
most acute shortages and this results in
people being concentrated in areas with
high demand, which further intensifies the
pressure on housing supply.
Our response
— We are predominantly based in Southern
England and have an attractive land
portfolio of approximately five years in
desirable locations to support future
outlet growth and demand. See page 3
— We build attractive communities
in locations with good transport
and infrastructure.
Link to Strategic Priorities
and Foundations
Placemaking & Quality
Land Portfolio
Five-Star Customer Service
2
Sustainability & Social Value
UK economy
The UK economy continues to be impacted
by a variety of macro-economic and political
factors. According to the National Institute
of Economic and Social Research, GDP is
projected to grow by 0.3% in 2024, with
the outlook remaining highly uncertain.
Latest GDP figures released in December
2023 by the ONS stated the economy
contracted by 0.5%. Stubborn inflationary
pressures are being exacerbated by limited
labour availability and resulting labour
cost inflation.
Consumer confidence plays a crucial
role in the housing market and can
significantly influence the dynamics of
buying and selling homes, house prices
and the overall health in the economy.
While the housing market is cyclical by
nature, the current surging mortgage and
rental rates, a slowing jobs market and the
uncertainties posed by conflict in the Middle
East, have all contributed to a decline in
consumer confidence.
After improvements in the previous couple of
months, the latest GfK Consumer Confidence
Index released in October 2023 fell by nine
points, which underlines the economy is still
exerting acute pressure for many consumers
and that confidence remains low.
Our response
— Continue to preserve our financial position
— Operational review to align the Group with
the current environment
— Adjust the pace of planned growth in our
new and existing divisions.
Link to Strategic Priorities
and Foundations
Multi Channel Approach
Land and planning
Land is the key component for a
housebuilder so the availability of
land suitable for development and the
eectiveness of the planning system have
a major eect on the medium to long-term
development of the industry and the supply
of homes.
The planning environment continues to
be challenging with delays to new site
allocations in 2023 and beyond with
resource pressures impacting the supply
of land for housing. Uncertainty on the
application of nutrient neutrality guidelines
has had further negative impacts on the
housebuilding industry and poses significant
challenges to planning applications for both
local authorities and developers. This causes
delays and tightens the supply of land
for development.
In August 2023 the Government announced
that it would amend the Habitats Regulations
which underpin nutrient neutrality through
the Levelling-up and Regeneration Act 2023.
The proposed amendments were rejected
by the House of Lords in September 2023.
Overall the long-term backdrop is uncertain
for planning and is likely to reduce land
supply in the medium term.
Our response
— We have a short-term land portfolio
of approximately five years which is
appropriate for our size
— We acquired several high quality sites
in FY23 which will mitigate the planning
delays and support future outlet growth
— Quality strategic land portfolio which we
can utilise at a higher gross margin.
Link to Strategic Priorities
and Foundations
Land Portfolio
2
Sustainability & Social Value
Crest Nicholson 12 Annual Report and financial statements 2023
The biggest direct influence on the housing
market are interest rates. A significant series
of interest rate hikes since December 2021
have had a profound impact on the UK
mortgage market and the aordability of
borrowers. Mortgage approvals decreased
by 35.1% in September 2023 compared to
prior year. This has led to a slowdown in the
housing market with transactions year-on-year
decreased by 13.4%.
Based on Bank of England data, mortgage
borrowing costs for new mortgages declined
for more than 12 years to a low of 1.51% in
November 2021. During the last two years
there has been a sharp reversal, with the
average cost of new mortgages tripling
(September 2023: 5.01%). Mortgage rates have
since stabilised and a five-year fixed rate with
a 75% LTV is approximately 4.4%.
Housing aordability is challenging across
the UK housing market. The UK new build
house price to earnings ratio in 2022 was at
eight times, below its peak in 2021 at above 10
times, when sales price inflation was high due
to pent-up demand after the pandemic.
Our response
— Adjusted the pace of our build
programmes and land acquisitions to
reflect tougher market conditions
— Launched the new Smart Own shared
ownership scheme in conjunction with
Legal & General Aordable Homes
— Introduced new sales products such as
Smart Own and Family Cashback.
Link to Strategic Priorities
and Foundations
Land Portfolio
Five-Star Customer Service
Multi Channel Approach
Environmental regulations
The housebuilding industry faces several
forthcoming regulatory changes including
the Future Homes Standard and biodiversity
net gain.
The Future Homes Standard, set to be
enforced from 2025 presents a substantial
challenge, mandating a minimum 75%
reduction in carbon emissions compared to
the 2013 Building Regulations. We continue
to actively collaborate with our energy
assessors, supply chain and industry
partners so that we are well prepared to
meet the requirements.
Biodiversity net gain, which is expected to
come into force in early 2024, will require all
new developments submitted for planning to
deliver a biodiversity net gain of at least 10%
compared to a pre-development baseline.
Our response
— Evolving our house types and
collaborating with our energy assessors,
suppliers and wider industry to prepare for
the Future Homes Standard
— Reducing greenhouse gas emissions in
line with our science-based targets
— Engaging with ecologists and landscape
architects early in the planning process to
deliver biodiversity net gain.
Link to Strategic Priorities
and Foundations
Placemaking & Quality
Operational Eciency
2
Sustainability & Social Value
Wycke Place, Maldon, Essex
Mortgage market and housing aordability
Link to Strategic Priorities
Placemaking & Quality
Land Portfolio
Operational Eciency
Five-Star Customer Service
Multi Channel Approach
Link to Foundations
1
Safety, Health & Environment
2
Sustainability & Social Value
3
People
4
Financial Targets
Average UK mortgage rate 2010 – 2023 (%)
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q1 Q3
2010
Q1 Q3
2011
Q1 Q3
2012
Q1 Q3
2013
Q1 Q3
2014
Q1 Q3
2015
Q1 Q3
2016
Q1 Q3
2017
Q1 Q3
2018
Q1 Q3
2019
Q1 Q3
2020
Q1 Q3
2021
Q1 Q3
2022
Q1 Q3
2023
Crest Nicholson 13 Annual Report and financial statements 2023
Strategic Report
Focused
divisional
businesses
— Regional housebuilding operations
with local expertise and relationships,
enabling eective and ecient delivery
ofnew homes
— A dedicated PSL division developing
multiple channels to market and promoting
strategic land.
Design, planning
and placemaking
— Energy ecient house type range with
interior andexterior flexibility, to cater to a
range of customers and adaptable to local
design policies
— Placemaking expertise to create a strong
legacy of vibrant communities with a
mixture ofhomes and tenures.
Land
— Operational eciency programme and
reputation for placemaking supports
landacquisition at appropriate margins
— Strategic land capability allows us
topromote sites through to approval
andearnsuperior returns
— Partnerships developed with land owners
and local authorities to secure planning
permission in a timely manner.
Construction
— Championing best practice in build, choice
of materials and waste management, with
cross-team functional forums embedding
and sharing best practice including safety,
quality and energy eciency.
Selling our homes
— Highly trained, passionate sales executives
delivering high quality service, supported
by focused marketing channels to reach
customers in the most targeted way
— Our PSL division bring forward a range of
ownership tenures including aordable,
shared ownership and PRS.
Quality and
customer
experience
— Aiming to provide the best customer
experience throughout the home-buying
process, with a ‘right first time’ approach
to the quality of homes, sales support
andafter care.
Business model
Our business model is centred on our purpose
to buildgreat places for our customers,
communities andthe environment. Guided by
our strategy, wecarefully select resources and
partners to create value for all stakeholders
bybuilding qualityhomesindesirable locations.
People
— Experienced, dedicated
anddiverse workforce
— Robust Safety, Health &
Environment processes to keep
everyone safe.
Natural and
manufactured
resources
— High quality building materials
— Commitment to reducing waste
and carbonemissions throughout
ourvalue chain.
Partnerships
— Carefully selected business
partners and projects
— Close relationships with regulatory
andindustry bodies to help shape
thefuture of housing
— Relationships with landowners
and engagement throughout the
development process.
Customers
— Commitment to delivering
five-star customer experience
— Focus on customers’ needs
to ensurefirstclass service is
provided atevery stage of the
buying process.
Design and
innovation
— Attractive and flexible design
of our Legacy Collection
house type range to improve
qualityandoperational eciency
— Investment in innovative sales
andmarketing tools
— Modern technology to support
safety,quality and service.
Financial
resources
— Supportive shareholders
— Diverse capital structure and
aprudentapproach to risk.
Our resources
and relationships
What we do
Crest Nicholson 14 Annual Report and financial statements 2023
Our investment case
Our investment case emphasises our ability to weather economic uncertainties while continuing
to deliver value to investors and stakeholders, focusing on adaptability, resilience and long-term
sustainability of the business model.
1
Resilient fundamentals for the UK housing market
— Despite economic challenges, the UK housing market
benefits from a growing population and a persistently
limited housing supply
— The complex planning system, while challenging, favours
experienced housebuilders with a broad range of
capabilities and deep knowledge of the local market
— The lending environment remains functional and the
supply of mortgages remains stable and available, albeit at
a higher interest rate.
4
Diversified income streams to counter cyclicality
— The Multi Channel Approach oers resilience by
diversifying income sources and capital streams to
withstand market fluctuations
— In the face of challenges, the PRS provides dependable
yields and stability within our diversified income streams
— The dedicated PSL division maintains strong relationships
with Registered Providers and PRS partners, providing
additional stability in uncertain market conditions.
2
Adaptive land portfolio
— We maintain a high quality land portfolio, primarily
concentrated in Southern England, with new
developments strategically added in regions that are well
placed to capture growth when the market improves
— Our extensive strategic land portfolio, primarily held under
option, represents an ecient use of capital, allowing for
flexibility in land development decisions
— Our financial position with a five-year land bank enables
the Group to stay selective in acquiring land in a
tightened market.
5
Commitment to sustainability
— We remain committed to our sustainability goals, including
reaching net-zero emissions by 2045
— In a challenging market, the emphasis on reducing
greenhouse gas (GHG) emissions, waste and natural resource
consumption remains crucial to both cost eciency and
environmental responsibility
— We make a positive impact in our communities, providing
attractive, high quality new homes and investing in
infrastructure that delivers lasting benefits to the
local area.
3
Brand synonymous to quality and placemaking
— Established brand name with strong heritage associated
with quality and customer experience
— Reputation for placemaking and creating attractive,
vibrant communities can be leveraged to navigate
market challenges
— The Group can extend its reputation and oer more
customers the chance to own a home across a wider range
of regions in the UK.
6
Robust balance sheet and margin recovery plan
— Our balance sheet, with a year end net cash position
of £64.9m and a £250m revolving credit facility (RCF),
provides financial stability
— We maintain a disciplined and selective approach to land
acquisition and capital allocation
— The sustainable dividend cover of two and a half times is
evidence of a well considered financial strategy that can
withstand adverse economic conditions.
and for society
We are committed to creating a positive
legacy and long-term value for society by
building quality homes in desirable locations.
The value we create
for our stakeholders
Investors
— Compelling investment proposition
settingouthow we realise value
from ourhigh quality portfolio
of assets.
Customers
— Five-star customer experience
withquality products in
desirable locations.
Our people
— Investing in people to develop the
skillsthatwe need and enhancing
our reputation as an employer
of choice.
Suppliers
— Being a long-term and
trusted partner tosuppliers
and subcontractors.
Communities
and the
environment
— Creating a positive environmental
and social legacy through strong
community relationships and
investment in social infrastructure.
Government
and other bodies
— Regular engagement with
Government to understand its
priorities and to shareour expertise
to support eective regulation.
See pages 20 to 26
Crest Nicholson 15 Annual Report and financial statements 2023
Strategic Report
Section 172 statement
We work hard to understand and meet the
needs of our dierent stakeholder groups,
engaging with them, adapting our service
and creating value for them.
The Board acknowledges that we may
have to take decisions that aect one
or more stakeholder groups negatively.
In challenging markets it is even more
important to reflect upon the need to
act fairly and with integrity. The Section
172 statement, contained within the
Companies Act 2006 (Act), provides the
Board with the foundations for its decision-
making processes.
The Company should act in good faith
in order to promote the success of the
Company for the benefit of its members
as a whole and in doing so, have regard
(amongst other matters) to:
— The likely consequences of any decision
in the long term
— The interests of the Company’s employees
— The need to foster the Company’s
business relationships with suppliers,
customers and others
— The impact of the Company’s operations
on the community and the environment
— The desirability of the Company
maintaining a reputation for high
standards of business conduct
— The need to act fairly as between
members of the Company.
How we consider stakeholders
We have a comprehensive programme of
stakeholder engagement and feedback
mechanisms to support us in making
balanced decisions.
How our Board engaged
Board site visits
The Board visited two sites in the
Midlands and South, where they
met the divisional boards, sales
and site teams
Employee Voice meetings
Louise Hardy, our Non-
Executive Director responsible
for employee engagement,
facilitated our Employee Voice
meetings and met a cross-
section of our employees
Stakeholder relations
Engagement is essential for our growth and
for delivering long-term positive outcomes
to our stakeholders.
Stakeholder engagement and decision making
Annual
strategy and
budget review
Board
Committees
with key
focus areas
A SHE Committee
and Sustainability
Committee providing
updates to the Board
Board oversight
of the Group’s
purpose, values
and culture and
alignment with
our strategy
External feedback
on market perception
and shareholder
engagement
Regular updates from
senior management
Risk review
Board decision making
The following pages comprise our Section 172 statement, setting out how the Board has, in
performing its duties over the course of FY23, with regard to the matters set out in Section
172(1) (a) to (f) of the Act, alongside examples of how each of our key stakeholders have been
considered and engaged. Further information can also be found throughout the Strategic
Report and in the Governance Report.
Crest Nicholson 16 Annual Report and financial statements 2023
What matters
to them
How we
have engaged
Key outcomes
Link to KPIs
Our employees require a safe and healthy working
environment which is complemented by a supportive,
diverse and inclusive culture. Our employees value
challenging and rewarding work that is enhanced by
professional development and career opportunities.
Our people
Board engagement
— The Board received updates on employee matters at
each of its meetings and regularly discussed employee
turnover, engagement, succession planning, appraisals,
training and development
— The Chief Executive attended employee forums
and divisional roadshows to provide strategic and
trading updates
— The Board encouraged management to engage an
external consultant to assess the Group’s culture, and
was kept informed of both the process and output of
this review.
Group engagement
— The Group’s Anity Groups responded to diversity and
inclusion matters
— Focused regular engagement with charity partners,
including the Group-wide charity challenge
— Health and wellbeing training and the ability for
employees to enhance their mental health fitness
through online resources
— The Sharesave scheme enables employees to save and
purchase shares in the Group
— Operated formal talent development
training programmes.
— Increased involvement in the FY23 Sharesave scheme
with 41% participation
— Six Employee Voice meetings were held during the
year which took place across all the divisions
— 22% of employees received formal training or were in
trainee positions in FY23
— Achieved Gold accredited membership of The 5% Club
— The average number of training days per employee in
FY23 was 4.75 days
— There were 61 internal promotions in FY23.
Individuals who are directly
employed by us.
— Voluntary employee turnover
— Annual Injury Incidence Rate (AIIR)
Our investors have a strong and eective relationship
with the Board and senior management. We understand
that our ability to navigate the current market challenges,
while maintaining sustainable returns, is important for
our investors.
Investors
Board engagement
— The Chief Executive, Group Finance Director and Head
of Investor Relations met regularly with investors and
analysts to convey an understanding of the housing
market, the Group’s strategy and its operations
— The Chairman and the Senior Independent Director
held an annual governance roadshow
— Consulted with investors on the Directors’
Remuneration Policy which was proposed for a
shareholder vote at the 2023 AGM
— All Directors attended the AGM and were available to
answer shareholder questions.
Group engagement
— Discussions were held during the year with investors
and analysts on the Group’s operational review and
streamlining our operations to align with the current
market conditions
— Meetings were held to provide insight on our response
to the impacts of climate change and progress against
our sustainability targets.
— The Chief Executive and Group Finance Director
attended 62 investor meetings during FY23,
representing over half the issued share capital
— We remain a constituent of the FTSE4Good Index
Series and achieved a B rating in the CDP climate
change disclosure
— The Directors’ Remuneration Policy received
shareholder support with 94% votes in favour.
Both individual and
institutional investors.
— Return on capital
employed (ROCE)
— Earnings before interest
and tax (EBIT) margin
— Net cash
— Unit completions
— Land creditors as a
% of net assets
— GHG emissions intensity
— Waste intensity
Crest Nicholson 17 Annual Report and financial statements 2023
Strategic Report
What matters
to them
How we
have engaged
Key outcomes
Link to KPIs
Our customers expect quality homes in beautiful places
that are safe, delivered on time and which oer good
value for money. Customer engagement enables us to
understand our customers’ needs and how we respond.
Board engagement
— The Board considered initiatives undertaken
by the Group to deliver high levels of customer
experience, enhance placemaking and create
sustainable developments
— The National Housebuilding Council (NHBC)
customer satisfaction survey scores were considered
at each Board meeting and the approach for
improving performance
— Regular updates to the Board on relationships with
our partners
— The Board approved the Group joining the Department
for Levelling Up, Housing and Communities (DLUHC)
Responsible Actors Scheme which was launched in
July 2023
— Reviewed the sales strategy to enhance the
sales process
— Received regular updates on the Group’s progress
supporting those living in buildings impacted by the
Developer Remediation Contract.
Group engagement
— Divisional marketing events were held for customers
to provide information on our homes, the local area
and development
— The Group allocated additional resources to support
delivery of improving customer experience
— The divisional boards reviewed and monitored
customer service feedback and satisfaction
— All employees received training on the New Homes
Quality Code (NHQC).
— Customer experience plan implemented to restore the
Group’s five-star satisfaction score
— Additional customer service roles were created
to enhance the relationship between site teams
and customers
— Processes were put in place for build teams to support
customers throughout their purchasing journey.
Customers
— Unit completions
— GHG emissions intensity
— Customer satisfaction
— PRS/Aordable unit completions
It is important to our suppliers and subcontractors
that projects are delivered safely and on time.
Mutually beneficial working relationships that share
risk and reward alongside operational eciency are
important for eective relationships. Suppliers expect us
to preserve our financial position and to pay them within
agreed timescales.
The people and organisations who
purchase our homes. These can be
private individuals or larger institutions
that we work in partnership with.
Board engagement
— The Board regularly discussed the Group’s
responsibility to its suppliers and subcontractors
and its impact on the local housebuilding and
construction industry
— Regular updates were provided to the Board on the
Group’s supply chain, including payment practices,
material costs and availability, and the prevention of
modern slavery
— The Board received regular updates on the
supply chain, including quality and safety
performance statistics.
Group engagement
— Maintained relationships with key suppliers with a
particular focus on safety, costs and sustainability
— Feedback on supplier performance was considered at
divisional board meetings
— Expected commitment to our Supply Chain Code
of Conduct including anti-slavery and human
tracking policies
— Launched the ‘Crest Nicholson Introduction to
Sustainability’ learning pathway with the Supply Chain
Sustainability School which was issued to all suppliers
— Became an accredited Living Wage Employer
— Partnered with the Supply Chain Sustainability School
and industry peers to lead a packaging optimisation
project with major suppliers
— Engaged with suppliers on their GHG emissions data to
support our whole life carbon analysis.
— 56% of Group suppliers actively engage with the
Supply Chain Sustainability School
— 35% of suppliers have completed the sustainability
learning pathway since it was launched in early
October 2023
— Engaged with subcontractors on their compliance with
paying the real Living Wage
— 36 days was the average time taken to pay suppliers.
Suppliers
— Net cash
— Unit completions
— GHG emissions intensity
— Waste intensity
— AIIR
The suppliers that provide the
materials for our homes and the
skilledsubcontractors for our
construction activities.
Stakeholder relations continued
Crest Nicholson 18 Annual Report and financial statements 2023
What matters
to them
How we
have engaged
Key outcomes
Link to KPIs
Our neighbours in the local communities want engaged
two-way communication with us. We seek to provide
well-designed quality homes with character that are
competitively priced for local residents. Investment in
infrastructure including transport, school and health
facilities is important. We also seek to protect the local
environment, reduce emissions and waste and help
support sustainable lifestyles.
Board engagement
— The Board considered sustainability and environmental
impacts in relation to the development of sites
— Reviewed product development changes for
the mandatory compliance with the Future
Homes Standard
— Considered the energy and water eciency of
household appliances in our homes
— Monitored the Group’s overall sustainability
performance in line with published targets.
Group engagement
— Regularly engaged with the local community, planning
authorities and environmental regulators, which
enabled us to respond to concerns and incorporate
feedback into the development process
— Regularly reviewed sustainability performance and
implemented action to reduce GHG emissions
— Launched a new charity partnership with Young
Lives vs Cancer and continued to donate and provide
support to local charities and organisations.
— Delivering attractive developments that are valued by
our customers and communities
— 55% reduction in scope 1 and 2 emissions compared
to FY19, the baseline year against which emission
reductions are measured
— Agreed to set a minimum B EPC rating for standard
house types
— Recipient of the Silver Award for the Armed Forces
Covenant Employer Recognition Scheme.
Communities
and environment
— Unit completions
— GHG emissions intensity
— Waste intensity
— PRS/Aordable unit completions
The communities and environment
local to our developments.
The Government expects proactive engagement from
us and solutions to meet the requirements of the Future
Homes Standard and industry initiatives that support
biodiversity and climate change matters.
Government
and other bodies
Board engagement
— Regular active dialogue and debate was held by the
Board on industry developments, including the Future
Homes Standard, NHQC, market trends and the
planning environment
— The Chief Executive participated in regulatory and
industry bodies that shape the legislative environment
and local planning departments
— The Chief Executive met with Ministers from the
DLUHC and the Department of Housing
— Ongoing discussion on the mandatory compliance with
the Future Homes Standard in 2025.
Group engagement
— Divisional attendance at HBF and NHBC events
— Divisional attendance at local planning meetings
and engagement with Homes England and
Housing Associations
— Active participants in the Future Homes Hub to
support the transition to net-zero and nature-
positive developments
— Regular engagement with local authorities, the
Environment Agency and local water authorities.
— Engagement with Government enables us to
understand their priorities for housing
— Progress with our partners across a multitude of our
strategic land projects
— Implemented the NHQC across the Group
— Regular dialogue with Government and industry to
address the global challenges of climate change and
biodiversity loss.
The Government, regulatory and
industry bodies shape the legislative
environment in which we operate and
local planning departments.
— Unit completions
— GHG emissions intensity
— Waste intensity
— PRS/Aordable unit completions
Crest Nicholson 19 Annual Report and financial statements 2023
Strategic Report
Sustainability review
Sustainability is embedded across
all aspects of our business, enabling
us to make a positive societal impact
andgenerate long-lasting value
for our stakeholders.
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Our approach
Sustainability is one of our four strategic
foundations. It remains at the core of our
Group’s purpose to build great places
for our customers, communities and
the environment.
Our sustainability strategy is built around
three overarching priorities, encompassing
the multi-faceted nature of sustainability:
Protect the environment
We are committed to reducing our climate
impact, preserving biodiversity, minimising
waste and conserving natural resources.
Make a positive impact on
our communities
We actively seek opportunities to make
a positive impact on the communities in
which we operate. This includes providing
attractive, high quality new homes and
investing in infrastructure that delivers
lasting benefits to communities.
Operate responsibly
We operate our business with integrity
by upholding high ethical standards.
We champion our people and prioritise the
health, safety and welfare of everyone who
comes into contact with our operations.
Recognising the ever-evolving landscape
of environmental and social challenges, we
are committed to regularly engaging with
our stakeholders. This dialogue allows us to
continually review and respond to concerns,
helping us address material issues and
anticipate potential sustainability-related
risks and opportunities. For more details
on what matters most to our stakeholders
and our engagement with them, see pages
16 to 19.
We continue to monitor emerging
regulations and reporting requirements,
including the disclosure standards
established by the International
Sustainability Standards Board and the
Taskforce on Nature-related Financial
Disclosures’ recommendations.
Our proactive approach enables us to align
with future compliance requirements.
To support our strategy, we link sustainability
targets to our remuneration packages
(see pages 82 to 83). Our Revolving Credit
Facility (RCF) is linked to four sustainability
targets detailed below. See page 147 for our
performance against the targets.
— Reduce absolute scope 1 and 2 GHG
emissions in line with our science-
based targets
— Increase supplier engagement with the
Supply Chain Sustainability School
— Increase the proportion of homes with an
Environmental Impact rating of A and B
— Increase the proportion of
employees in trainee positions or on
training programmes.
Read more on how our sustainability
strategy aligns with the UN’s Sustainable
Development Goals (SDGs).
Our ESG Data Handbook provides
further information on our sustainability
performance, including our response to the
Sustainability Accounting Standards Board
(SASB) Home Builder’s industry standard
FY23 highlights
Governance
Eective governance plays a pivotal role
in driving improvements in sustainability
performance. Our commitment to
responsible operations starts at the
highest level of our organisation with Board
oversight of the sustainability strategy and
objectives. The evolution of our strategy
and integration within the Group is guided
by our Sustainability Committee, which
operates with delegated authority from the
Board and Executive Committee. In FY23
the Sustainability Committee, chaired
by our Chief Executive, met four times.
Further details on our governance structure
can be found on page 44.
Protect the
environment
Make a positive impact
on our communities
Operate
responsibly
Reduction in scope 1 and
2 emissions compared to
baseline FY19
55%
FY22: 47%
Developments
within 1km of a
public transport link
92%
FY22: 88%
Trained mental health
first aiders
16
FY22: 18
Electricity procured
fromrenewable taris
89%
FY22: 70%
Aordable homes
delivered
525
FY22: 522
% employees in
trainee positions
or in formal training
22%
FY22: 19%
Crest Nicholson 20 Annual Report and financial statements 2023
Protect the environment
We are taking proactive measures to safeguard the
natural environment for the long term by reducing
greenhouse gas emissions, minimising our impact
on natural resources and preserving and enhancing
nature across our developments.
Climate action
GHG emissions continue to rise, and the
eects of climate change are becoming more
pronounced. The scale and urgency from
Government and stakeholders is increasing.
We are committed to mitigating our impact
on climate change through GHG emissions
reduction in alignment with our science-based
targets (SBTs).
Climate change presents both risks and
opportunities for our operations and value
chain. You can find information regarding
our climate-related risks and opportunities
inour Task Force on Climate-related
FinancialDisclosures (TCFD) section on
pages43 to 50.
FY23 highlights
— SBTs approved by the SBTi
— Reduced absolute scope 1 and 2
emissions by 55% compared to
2019 base year (35% reduction in
emissions intensity)
— Rolled out new fuel and plant
dashboards to embed resource ecient
practices across our sites.
Link to Strategic Priorities
Placemaking & Quality
Operational Eciency
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
Scope 1 and 2 GHG emissions breakdown
A Scope 1 2,848 tCO
2
e 75%
B Scope 2 956 tCO
2
e 25%
FY23
FY22
FY21
3,803
4,449
5,356
FY19 8,458
Scope 1 and 2 GHG emissions
performance (tCO
2
e)
Scope 1 and 2 emissions tCO
2
e
FY30 target (3,383 tCO
2
e)
Reducing our scope 1 and 2 emissions
In FY23 our total scope 1 and 2 GHG
emissions were 3,803 tonnes of carbon
dioxide equivalent (tCO
2
e), representing a 15%
reduction on FY22 and 55% reduction against
our FY19 science-based target baseline.
On an intensity basis, our scope 1 and 2 GHG
emissions were 2.09 tCO
2
e per 100 sq. m,
reflecting a 35% reduction compared to FY19
(FY19: 3.20 tCO
2
e).
Scope 1 emissions encompass direct emissions
from the use of fuel in the operation of plant
and equipment at our sites, gas consumption
for heating and hot water and the fuel used by
our vehicle fleet. Scope 2 emissions represent
indirect emissions arising from the procurement
of electricity and heat.
Scope 3 emissions relate to the emissions for
which we are indirectly responsible throughout
our value chain. These emissions are primarily
associated with our supply chain (upstream)
and the use of our homes (downstream).
Our targets
Reduce absolute scope 1 and 2 GHG
emissions 60% by 2030 from a 2019
base year
1
Reduce absolute scope 1 and 2 GHG
emissions 90% by 2045 from a 2019
base year
1
Our targets
Reduce scope 3 GHG emissions 55%
persq.m completed floor area by 2030 from
a2019 base year.
Reduce scope 3 GHG emissions 97% per
sq.m completed floor area by 2045 from
a2019 base year.
Reach net-zero GHG emissions across the value
chain by 2045 from a 2019 base year.
Our science-based targets
The Science Based Targets initiative (SBTi)
approved our near and long-term targets,
including our commitment to achieve
net-zero GHG emissions across our value
chain by 2045.
Achieving net-zero will be a significant
challenge and we continue to learn
and adapt our approach. A successful
transition to net-zero will require eective
collaboration and coordinated action
across the industry and our value chain.
Net-zero target
Scope 1 and 2 GHG emissions Scope 3 GHG emissions
1 Science Based Targets initiative.
A
B
Crest Nicholson 21 Annual Report and financial statements 2023
Strategic Report
Protect the environment continued
Actions taken to reduce scope 1 and 2 emissions
Implementing ecient
plant and equipment
— Continue to prioritise early connection to the grid to reduce the use of generators and
associated fuel consumption
— 100% of our telehandler fleet have the most ecient Tier 5 engines
— Utilise hybrid generators where feasible
— Site compound specification upgraded to improve fabric eciency, reducing heating
requirements and improving comfort.
Reduction in generators
on hire across the Group
in FY23
1
47%
Sourcing alternative low
carbon fuels
— Reducing consumption remains the priority
— Hydrotreated vegetable oil (HVO
2
) used as a substitute for white diesel that is lower in
carbon and derived from waste vegetable oil and fats. It accounted for 53% of our total
site diesel use
— Continue to explore alternative technologies to reduce fuel and energy consumption.
Proportion of HVO used
on our sites
53%
FY22: 49%
Procuring renewable
electricity
— Increased the proportion of electricity from renewable taris to 89%
— A key challenge is the lack of renewable taris for unmetered supplies, such as
street lights
— Engaging with peers, utility management partners and energy suppliers to
find solutions
— Targeting 100% renewable electricity for suppliers within our control.
Renewable taris
3
as
proportion of total
electricity consumption
89%
FY22: 70%
Shifting vehicle fleet
to electric and hybrid
— Provide a diverse range of electric and hybrid vehicles on our company car scheme
— Expanded EV charging infrastructure at our divisional oces and sites.
Proportion of our Group
car fleet hybrid or electric
64%
FY22: 40%
Communication
and behaviour
— Developed and rolled out monthly fuel and plant dashboards that provide insights into
on-site generator utilisation, telehandler eciency and opportunities to reduce site
fuel consumption
— Performance updates are provided in internal communication channels.
Reducing our scope 3 emissions
Scope 3 emissions account for 99% of our
total GHG emissions and predominantly
comprise of emissions relating to our supply
chain (upstream) and the use of our homes
(downstream). In FY23 our absolute scope 3
emissions reduced by 19% compared with
FY22. Scope 3 intensity was 2.64 tCO
2
e/sq. m,
representing a 9% increase from FY22
and a 3% increase from our FY19 baseline.
The intensity increase stems from our
ongoing construction activity and fewer legal
completions in FY23, particularly in emissions
tied to purchased goods and services.
Decarbonising our supply chain
GHG emissions associated with the materials
and services used to build our homes and
developments account for around 36% of our
total emissions. As emissions associated with
the use of our homes decrease, upstream
supply chain emissions will become the
largest source of our carbon footprint. This is
why collaboration with our supply chain will
be critical in our transition to net-zero.
In FY23 we conducted a whole life carbon
analysis on key Legacy Collection house
types of varying sizes. This analysis
enables us to identify emission reduction
opportunities and prioritise communication
with suppliers.
We engage with our suppliers on the
availability of emissions data and our recent
analysis highlighted that 26% of our upfront
embodied carbon emissions associated with
a home are covered by a supplier or product
specific Environmental Product Declaration.
Environmental Product Declarations
communicate verifiable environmental data
on products, which we use when assessing
material choices. A current area
of focus is engaging with the supply chain
to improve emissions data availability to
support these choices.
Additionally, we actively participate in the
Future Homes Hub’s Embodied and Whole
Life Carbon workgroup, which is developing
guidance tools and an implementation plan
to drive industry-wide reductions in whole life
carbon emissions.
1 Generators on hire reduced from 43 in November 2022 to 23 in October 2023. Includes generators sized 20kVA or larger.
2 HVO is a direct replacement for white diesel that is lower in carbon and derived from waste vegetable oil and fats.
3 Backed by Renewable Energy Guarantees of Origin certificates.
Scope 3 emissions breakdown
A Supply chain 36%
B Use of sold product 63%
C Other scope 3 1%
A
B
C
Crest Nicholson 22 Annual Report and financial statements 2023
13
2
3
4
5
6
7
8
9
10
11
1
12
14
15
16
17
Current fabric and technology
specifications include:
Potential fabric and technology
specifications from 2025 include:
CO
2
emissions
vs 2013
Building
Regulations
— At least 31% reduction. — At least 75% reduction
— Homes are ‘zero-carbon ready’.
Fabric
1
Fabric first approach to prevent heat loss,
including enhanced fabric in walls, floor, roof
and windows with thermally broken lintels
2
Improved airtightness from 5 to a maximum
of 4.5, helping keep the home warm while
using less energy.
12
Higher fabric eciency in external walls
and double or triple glazing
13
Further improvement in airtightness.
Technology
3
Renewable and low carbon technology
including solar PV and some homes fitted
with air source heat pumps
4
PV diverter on hot water cylinders (where
installed) to maximise eciency of PV
5
Enhanced heating controls
6
Ecient gas boilers where fitted
7
Waste water heat recovery
8
Larger radiators for optimal heating
eciency and pipes enlarged to future proof
for air source heat pumps
9
Electric vehicle charge points
10
Decentralised mechanical extract ventilation
and larger trickle vents on windows to
improve ventilation and reduce risk of
overheating
11
Ecient water fittings.
14
Increasing use of air source heat
pumps
15
Hot water cylinder in every home
16
Additional smart technology
17
Electric vehicle charge points to
everyhome
Mechanical ventilation withheat
recovery in apartments.
Decarbonising our homes
The use of our homes accounts for
approximately 62% of our GHG emissions.
In FY23 we implemented the interim update
to Part L of the Building Regulations,
which requires a 31% reduction in carbon
emissions compared to the 2013 regulations.
Looking ahead, the impending Future Homes
Standard set to be enforced from 2025,
presents a substantial challenge, mandating a
minimum 75% reduction in carbon emissions
compared to the 2013 Building Regulations.
In preparation for the transition, we are
actively collaborating with our energy
assessors, supply chain partners and the
industry to ensure we are well prepared
to meet the Future Homes Standard
requirements. Future Homes Standard-
compliant homes will be zero carbon ready,
utilising electric heating systems such as
air source heat pumps. We are gradually
introducing air source heat pumps to an
increasing number of developments and
leveraging the knowledge and experience
gained to prepare for the implementation of
the Future Homes Standard.
We prioritise a fabric first approach to
enhance the thermal eciency of our homes,
reducing heat loss. Technologies supporting
emissions reduction are also integrated into
our homes. Feedback from customers and
suppliers informs ongoing refinements to
our designs and the technologies utilised,
ensuring our homes are comfortable,
user-friendly and cost eective to operate.
The infographic details some of the fabric and
technology specifications incorporated within
our homes both now and beyond 2025.
Our sustainability-linked RCF includes a
target to increase the proportion of our
homes that receive an Environmental Impact
rating of A or B, progressively increasing the
number of A rated homes. In FY23 96% of our
homes achieved an A or B rating.
Reducing the ‘in-use’ emissions of our homes
Natural resources and waste
Unsustainable resource consumption and
waste are major contributors to climate
change, biodiversity loss and pollution.
Reducing waste and our impact on natural
resources aligns with our Operational
Eciency strategic priority.
Reducing and recycling construction waste
In FY23 our total construction waste
decreased by 6% compared to FY22
(FY23: 19,975 tonnes; FY22: 21,356 tonnes).
However, waste intensity increased to 10.98
tonnes per 100 sq. m legally completed floor
area compared to FY22 (8.72 tonnes/100
sq. m), representing a 14% increase from our
FY19 baseline and a 26% increase from the
previous year. This year’s increase in waste
intensity can be partly attributed to reduced
completions in FY23, while building work
continued to progress at a steady pace. It is
clear that significant eorts are needed to
achieve our FY25 target to reduce waste
intensity by 15% from our FY19 baseline.
To promote waste reduction and embed
good practices, we are enhancing
communication around waste management
and introducing new reports in FY24.
These reports will identify anomalies and
pinpoint opportunities to reduce waste.
We prioritise waste segregation across
our sites and diverted 98% from landfill
in FY23 (FY22: 96%), exceeding our
95% diversion target. We encourage
timber reuse through our partnership
with Community Wood Recycling and our
pallet return scheme. Community Wood
Recycling oers employment and training
opportunities to disadvantaged individuals,
producing products from surplus timber
and ocuts. Our collaboration with them in
FY23 resulted in eight jobs and 14 training
places. Additionally, our pallet return partner
collected 36,036 pallets (FY22: 15,052),
which were repaired and reused in our supply
chain or recycled.
Lightweight compactable material, primarily
packaging waste, constitutes the highest
proportion of the waste we generate.
We continued to partner with the Supply
Chain Sustainability School and industry
peers to lead a packaging optimisation
project with major industry suppliers.
This collaboration resulted in the publication
of an industry report on optimising product
packaging in the housebuilding sector.
We remain committed to working with our
suppliers to implement initiatives aimed at
reducing waste and enhancing sustainability
throughout our operations.
Crest Nicholson 23 Annual Report and financial statements 2023
Strategic Report
Water resilience
The country faces an escalating risk of water
supply stress due to factors including climate
change, population growth and ageing
water infrastructure.
To support a reduction in demand, our
Legacy Collection homes are designed to
consume less than 105 litres per person
per day (lpppd), a 16% reduction compared
to the current regulatory requirement
of 125 lpppd. Our homes feature water
meters, dual-flush toilets, low-flow taps and
showers, all which reduce water demand and
customer consumption.
Furthermore, we integrate sustainable
drainage systems (SuDS) into most of
our developments, enhancing resilience
against water scarcity and flood risk on a
development level. SuDS reduce water runo
rates by incorporating natural features like
swales and attenuation ponds, while having
the added benefits of improving water
quality, providing recreational space and
promoting biodiversity.
Nutrient neutrality
In response to elevated levels of phosphate
and nitrate in watercourses, several Local
Authorities have mandated nutrient neutrality
in new developments in accordance with
Natural England guidance. While this
initiative aims to address water quality
concerns, it has inadvertently resulted in
planning delays without directly tackling
the root cause of river pollution. We are
engaged with Government bodies, industry
stakeholders and other interested parties to
explore and implement solutions to address
nutrient neutrality.
Protect the environment continued
Enhancing biodiversity
Biodiversity loss is a significant issue, with
implications at both a local and global scale.
The 2023 State of Nature report highlighted
that one in six species in Great Britain is at
risk of extinction. The loss of biodiversity
has negative eects on ecosystems and
the environment, reducing the stability and
availability of natural resources.
Biodiversity net gain is set to become a
mandatory requirement in early 2024.
This regulation requires developers
to achieve a minimum 10% net gain in
biodiversity compared to a pre-development
baseline. This not only helps to preserve
local ecosystems but also supports the
Government’s ambition to curb biodiversity
loss by 2030.
The implementation of biodiversity net gain
strategies can vary significantly across our
developments. To navigate this eectively,
we engage ecologists and landscape
architects early in the planning process.
This ensures that our eorts are both cost
eective and environmentally beneficial,
reflecting our commitment to enhancing
biodiversity and recognising the role it
plays in supporting business sustainability
and resilience.
Case study
Supporting nature and delivering
low carbon homes in Windsor
Situated near Windsor, the development
achieved planning consent in 2023
and will comprise of 135 homes, with
40% designated as aordable housing.
Our South division actively engaged with
our energy consultants to ensure high
levels of fabric eciency. The homes
will incorporate air source heat pumps
and apartments will utilise hot water
heat pumps and electric panel heaters.
GHG emissions will be 76% lower across
the development than 2013 Building
Regulations, aligning with the Future
Homes Standard target. An additional
financial contribution into a carbon oset
fund will balance the residual emissions.
Our team worked in partnership with
our ecologists and landscape architects
to ensure that open spaces will provide
a haven for wildlife and attractive
recreational areas for residents.
The development will create a 14%
biodiversity net gain through the delivery
of a wildflower meadow, an orchard,
nature-based sustainable drainage and
tree planting. Other features that support
nature and the community include:
— Community allotments
— 50 swift bricks
— 50 bat bricks
— 10 bee homes
— Hedgehog highways
— Playground and informal play spaces
throughout the development
— Attractive drainage features that are
designed for informal recreational
space, ecological benefits and
water management during high
rainfall events.
In line with our commitment
to sustainability, as well as
delivering much needed new
homes and aordable housing,
we aim to make Windsor Gate
a sustainable development for
future generations.”
Nicholas Daruwalla
Land Director, South
Crest Nicholson 24 Annual Report and financial statements 2023
Make a positive impact on our communities
We are committed to delivering attractive, high quality
homes, excellent customer experience and a lasting
positive legacy for our communities and the local
environment.
Creating thriving communities
and social value
At the core of the Group’s purpose is
the creation of thriving communities
and the delivery of lasting social value.
Through a considered approach to
placemaking, collaborative planning
and stakeholder engagement, we are
committed to providing high quality homes
with convenient access to local amenities.
We prioritise enhancing the connection
between our customers and nature by
establishing accessible green space
wherever possible.
Placemaking is aligned with the provision
of social value within the local community.
This is realised through local infrastructure
enhancements which include public
transportation connectivity, community
centres, educational facilities and
recreational and play areas. In addition, we
actively contribute socio-economic benefits
by generating employment opportunities for
local subcontractors, apprentices, trainees
and the supply chain.
Charitable giving and supporting the
local community
In FY23 we launched our charity partnership
with Young Lives vs Cancer. Their mission is
to make sure children and young people with
cancer get the right support at the right time.
Additionally, the Group actively supports
local charities and organisations through
donations and sponsorships, while oering
a payroll giving scheme enabling employees
to make tax-free donations to their chosen
charities directly from their salary.
Delivering high quality homes and
excellent customer experience
Building high quality homes and delivering
excellent customer experience is a core
component of our sustainability strategy.
In FY23 we were marginally below the
threshold to retain our five-star rating
for customer satisfaction from the Home
Builders Federation (HBF). The Group has
taken several proactive measures to regain
our five-star status and enhance the overall
customer journey.
Implementation of the New Homes
Quality Code
The New Homes Quality Code (NHQC)
was introduced in FY23. The NHQC which
aims to improve quality, consistency and
customer service standards across the
industry. We are strongly committed to
its principles and invested in employee
training and the development of new
processes to successfully implement the
NHQC requirements.
Quality Assurance
Our Quality Assurance team supports and
trains our site teams to deliver high quality
homes. During FY23 the team supported
our divisions with the implementation of Part
L Building Regulations requirement to take
photographic evidence during the quality
assurance process. Photographic evidence is
required to demonstrate that new homes are
built to high thermal standards and to provide
peace of mind that customers will receive a
high quality and energy ecient home.
Customer experience
Central to our commitment to delivering
an excellent customer experience is the
introduction of our new Customer Relations
Managers. The team provides a central
contact point within the build team for our
customers. They provide support both prior
to moving in and during the early weeks
of occupation.
After this initial period, the dedicated
customer service teams manage any
further queries from customers. We have
strengthened our follow-up processes which
are designed to address concerns promptly
and eectively, providing customers with the
support and resolution they expect.
FY23 highlights
— Embedded the NHQC
— Established new quality assurance
and customer experience processes
— 525 aordable homes delivered
— Launched charity partnership with
Young Lives vs Cancer.
Link to Strategic Priorities
Placemaking & Quality
Five-Star Customer Service
Multi Channel Approach
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
Read more in our
Customer Charter
Easter egg hunt to celebrate the launch of a new
play area. In addition, Crest Nicholson sponsored
the local preschool to upgrade its roof, drainage and
outside area.
‘Story time’ event with a local
author provided to pupils at one of
our developments.
Crest Nicholson 25 Annual Report and financial statements 2023
Strategic Report
Operate our business responsibly
We are committed to responsible business operations.
We foster a safe, inclusive workplace and collaborate
with our supply chain to drive positive outcomes for
ourstakeholders.
Sustainable supply chain and
responsible procurement
Collaboration with our supply chain partners
plays a critical role in the successful
delivery of our strategy and sustainability
performance. Our Sustainable Procurement
Policy and Supply Chain Code of Conduct
(Supplier Code) set out clear environmental,
ethical and social obligations for our supply
chain partners and promote safe and
fair working conditions. We continue to
partner with the Supply Chain Sustainability
School, of which we have achieved Gold
status membership.
Membership of the Supply Chain
Sustainability School provides access to
sustainability-related learning resources and
CPD-accredited content for our supply chain.
We launched a new learning pathway for
our supply chain, which was developed
in partnership with the Supply Chain
Sustainability School. This pathway facilitates
increased engagement between our
suppliers and the Supply Chain Sustainability
School while enhancing the skills and
knowledge of our supply chain through
specific learning modules on important
sustainability topics, including climate
change, waste and modern slavery.
In FY22 we established our sustainability-
linked RCF. One of our targets is for 90% of
suppliers with Group Trading Agreements to
achieve bronze, silver or gold membership
of the Supply Chain Sustainability School by
FY26. At the end of FY23 56% had achieved
at least bronze status, of which 33% had
achieved gold status.
Sustainable timber
Our Sustainable Timber Policy commits
us to purchasing certified timber from well
managed forests, including FSC (Forest
Stewardship Council) and PEFC (Programme
for the Endorsement of Forest Certification)
certified timber. Purchasing FSC and PEFC
accredited timber promotes sustainable
forest management and reduces the risk of
illegal deforestation. Our last reported timber
audit confirmed 100% of our timber procured
from suppliers was FSC or PEFC certified.
Human rights and anti-slavery
We are committed to conducting business
with integrity, respecting and safeguarding
the human rights of our colleagues and those
who are associated with our operations,
including our supply chain, customers and the
communities in which we work. Our Human
Rights Policy supports the principles set out
in the UN Guiding Principles on Business and
Human Rights, the Universal Declaration of
Human Rights and the International Labour
Organization’s Fundamental Conventions.
We expect our supply chain partners to
operate responsibly and with respect for
human rights. Our Supplier Code sets out
our expectations relating to environmental
and social matters within our supply chain.
All supply chain partners are contractually
required to abide by our Supplier Code,
which is available on our website.
An anti-slavery e-learning module is
compulsory on induction for relevant new
employees and is completed annually by
existing employees. Anti-slavery updates are
provided on our intranet and posters have
been issued to sites to help those working on
our developments identify the potential signs
and understand how to report concerns via
the Speaking Up (whistleblowing) helpline
and website. A zero tolerance approach
is taken to any form of modern slavery,
including forced labour and child labour.
Our Speaking Up policy allows our
colleagues, subcontractors, suppliers and
the local community to report concerns.
During FY23 there were zero substantiated
grievances relating to human rights and zero
reported cases of modern slavery.
FY23 highlights
— Launched new learning pathway for
our supply chain
— Increased supply chain
engagement with the Supply Chain
Sustainability School
— Became an accredited Living
Wage Employer
— Achieved The 5% Club Gold Award.
Link to Strategic Priorities
Placemaking & Quality
Operational Eciency
Multi Channel Approach
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
Read more in our
Speaking Up policy
Real Living Wage
In FY23 we were accredited as a Living Wage
Employer by the Living Wage Foundation.
The real Living Wage is higher than the
Government’s minimum and National Living
Wage, and it is the only UK wage rate that is
independently calculated based on the cost
of living.
We pay at least the real Living Wage to
all direct employees¹ and this is reviewed
annually. Our Supplier Code sets out a
requirement that subcontractors working on
our sites are also paid the real Living Wage.
We communicate our status as a Living
Wage Employer across our sites. We provide
information on how to report any potential
non-compliance through the Speaking
Up channels.
Group suppliers at bronze,
silver or gold status
with the Supply Chain
Sustainability School, of
which 33% received gold
56%
FY22: 18%
Read more in our
Supply Chain Code of Conduct
1 Apprentices are subject to a dierent pay scale in line
with statutory requirements.
Crest Nicholson 26 Annual Report and financial statements 2023
Safety, Health & Environment
The safety and welfare of everyone who
comes into contact with our operations
is our number one priority.
Our number one priority is that our
employees and people aected by our
activities remain healthy and go home safely
to their family and friends every day. We can
only achieve this by continuing to have a
relentless focus on identifying risks early and
everyone taking responsibility to mitigate
these through proactive decision making
and compliance.
We continually monitor our compliance with
Safety, Health & Environment (SHE) standards
and industry best practice. Compliance has
improved during the year increasing to
89.9% (FY22: 87.9%). Measuring compliance
gives us a forward indicator of performance.
We use this performance monitoring
information and analysis of incidents to
guide our eorts, through intervention and
improvement campaigns.
We are pleased with our progress this year
and with the reduction in our AIIR which has
reduced to 304 (468 in FY22). A continual
focus on safety is required for us to maintain
this performance, delivered through our
ongoing compliance and programme of
SHE campaigns.
SHE leadership
The Board monitors SHE performance at
every meeting. Below Board, the governance
structure comprises our SHE Committee,
functional forums and a comprehensive
programme of divisional meetings, leadership
safety tours and compliance inspections.
This year our Internal Audit function reviewed
the structure and identified some areas
for improvement in our management of
subcontractor RAMS.
Building Safety
We are committed to remediating legacy
buildings within the scope of the Developer
Remediation Contract. Our dedicated
remediation teams and safety team have
introduced procedures and monitoring
processes so that the work is carried out safely.
SHE audit compliance
89.9%
FY22: 87.9%
AIIR
304
FY22: 468
SHE training days
455
FY22: 366
Director safety tours
141
FY22: 144
SHE compliance inspections
599
FY22: 685
FY23 highlights
— Slips, trips and falls – introduced
a campaign to refocus site teams
on the benefits of keeping a tidy
workplace for safety reasons and in
turn minimising the waste of materials
through improved storage
— Telehandler improvements – our
fleet has been fitted with reversing
cameras to reduce the number
of incidents
— Preventing service strikes – a
new permit framework has been
developed for all trades involved in
digging, with much greater emphasis
on properly identifying hazards before
digging takes place
— Tool handling – assessed individual
trades on the use of hand tools
and workstation set up with the
aim of reducing injuries to hands
and forearms
— Risk Assessments and Method
Statements (RAMS) – introduced
new management processes and
measures to improve the way we
review our subcontractors, as well as
ensure continuity in risk management
when site teams change.
Link to Strategic Priorities
Placemaking & Quality
Operational Eciency
Five-Star Customer Service
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
All telehandlers have been
fitted with reversing cameras
Crest Nicholson 27 Annual Report and financial statements 2023
Strategic Report
Our People
Our people are at the heart of
everything we do and their commitment
to our purpose and values is critical
to our long-term success.
Training and development
We continue to enhance our development
oering and actively encourage people to
focus on their personal growth. The Crest
Academy introduced a new Management
Development Programme, to complement
our existing Talent Programmes.
Our Management Development Programme
was designed for a wide range of employees,
which includes experienced and new
managers, and employees in the pipeline to
be a future manager. The aim was to provide
our people with the tools to develop their
skills to be the best manager they can be and
bring out the best in their teams.
In addition, we launched our Personal Skills
Training oering a range of resources to
all employees. This enabled our people
to have the chance to take part in a series
of interactive, distilled and bite-sized
training modules.
Health and wellbeing
It is important for our people to feel happy
and healthy at work. We have continued to
invest in various tools that can aid our people
to ensure their health is a priority, both at
work and at home.
We have a dedicated Anity Group for
Mental Health and Wellbeing. This Anity
Group raises awareness and promotes
initiatives to improve people’s health and
wellbeing. Subsequently several campaigns
have been launched across the Group,
including celebrating World Kindness Day.
Female
38%
Employees have been promoted
through the year
61
We have 16 Mental Health First
Aiders trained across the Group.
16
Equality, diversity and inclusion
It is vital that we have a diverse workforce,
thriving in an inclusive culture and
reflecting the communities we serve.
Our Anity Groups were embedded in
FY23 as part of our Diversity and Inclusion
strategy. This is important for us as we
continue our focus on maintaining an
inclusive environment where all our people
are valued, included and empowered to
succeed. The aim of our Anity Groups is to
provide a safe space for discussion, help to
raise awareness and drive change, where
required, within the Group. They provide a
source of support and oer a collective voice
for our people.
As well as supporting employee-led
initiatives and networks, we launched a
dedicated diversity and inclusion intranet
page. We marked notable dates and
religious festivals to raise awareness
and respect for dierent faiths and
important causes.
Male
62%
Catalyst experience
In June 2023 we launched our first Catalyst
immersive experience for a cross-section
of women in the Group. The programme
focused on building resilience, confidence,
self-awareness and networking situations
in a supportive space that challenged
the narrative around gender and
leadership. The participants received
personalised one-to-one coaching with an
external coach.
Participants focused on areas such as:
— Personal leadership inspiration
— Power and the power of others
— Purposeful networking for
career success
— Developing a plan for integrating your
whole self.
The course allowed for a lot of self-
reflection and at times, required
you to ask yourself dicult
questions on self-respect.
For me, the biggest takeaway was
recognising I needed more self-
care, both physically and mentally
to be able to be more resilient and
be the best version of myself.”
We have concentrated our eorts
championing our people, investing
in their development, personal
growth and prioritising their
wellbeing.
Natalie Shanks
Finance Manager, PSL
Crest Nicholson 28 Annual Report and financial statements 2023
Our trainees
We aim to develop our
employees and create a
pipeline of talent. We have
invested heavily in our
Future Talent Programme
designed for trainees.
With the future pipeline of
talent in mind, we’ve increased
our investment in training and
development this year, increasing
the availability of training to all.”
Jane Cookson
Group HR Director
We welcomed five new trainees into the
Group this year and these individuals were
enrolled onto our Future Talent Programme.
The first of five cohorts have completed
their development programme. The final
session was our kick down event which
brought the trainees together for
networking with senior management to
celebrate the successful completion of the
programme. Our trainees reviewed the
core topics which guided their learning
journey, enabling them to reflect on their
experience and consider how they will
embed this learning into their careers
going forward.
To demonstrate our commitment to entry-
level careers, we are a member of The 5%
Club and have received the Gold Award
which acknowledges the work we have
undertaken to close the skills gap. The 5%
Club is a movement of employers who are
committed to have 5% of their workforce in
earn and learn positions.
Trainees have gone through our
trainee programme since January 2022
63
Trainees have been promoted since
completing our training programme
21
Gold Accredited member
of The 5% club
5%
I have greatly benefitted from
the Future Talent Programme
as I feel that I am more resilient,
self-aware and productive.”
Hassan Ahmed
Company Secretarial Assistant
FY23 employee engagement
Quarterly
Our newsletter
delivers the
latest news and
updates about the
Group. Regular
features included
a business update
from the Chief
Executive, people
news and a ‘day
in the life’ of
employees.
Throughout the
year
The Board visited
developments
individually and as
a group, interacting
with employees
on a collective and
one-to-one basis,
giving greater
insight on what
is important to
employees.
Throughout the
year
Our Anity Groups
met to discuss
the barriers our
people face within
under-represented
groups and
reported back to
the Diversity and
Inclusion Forum
with practical
suggestions.
Throughout the
year
We use timely,
relevant and
targeted
messaging to
communicate
important news
about benefits,
policies, IT
updates, employee
recognition and
other employee
initiatives using the
IT tool Snapcomms.
May and
September 2023
The ELT spent
time with each
division to thank
employees for
their hard work,
discuss how we
are progressing
against our
strategy and
outline our plans
for the future.
Employees were
encouraged to ask
questions in the
sessions or submit
them anonymously
in advance.
May, September
and October 2023
The Employee
Voice forum is
chaired by Louise
Hardy, our Non-
Executive Director
responsible
for employee
engagement,
and attended
by volunteers
from across
the Group. This
forum facilitates
meaningful, regular
dialogue between
the Board and
employees from
across the Group.
July 2023
We asked
employees to
let us know their
thoughts about
the Group’s
culture. These
conversations have
provided important
insight into what
it is like to work at
Crest Nicholson
and will form the
basis of the Culture
Action Plan.
The Exchange Board site visits Diversity
and inclusion
Group
communications
Employee
roadshows
Employee Voice Culture focus
groups and
interviews
Gold
2023/24
Crest Nicholson 29 Annual Report and financial statements 2023
Strategic Report
Key performance indicators
We use 12 key performance indicators to
monitor our progress against our strategy.
These are how we measure theperformance
and health of our business.
We deliver sustainable growth while
delivering shareholder returns supported by
a robust balance sheet. It is essential that
financial performance does not compromise
the safety, build quality or customer
experience ofthose working on our sites.
To align the focus of the Board and ELT with
the interests of stakeholders, some KPIs
are reflected in our senior management
incentive schemes.
Financial KPIs
Further information onremuneration can
be found on pages81 to 98.
6.3%
Return on capital
employed (ROCE)
1
6.7%
Earnings before
interest and tax
(EBIT) margin
1
2,020
Unit completions
24.0%
Land creditors as
a% of net assets
1
£64.9m
Net
cash
1
23.2%
Land portfolio
gross margin
Definition
Sales of homes recognised in the year including
100% of those held in joint venturesand on an
equivalent unit basis.
Why we measure
Reflects overall business activity andoutput
and enables the Group to forecast future
capacity requirements.
Link to Strategic Priorities,
Foundations and principal risks
4
1
3
5
Definition
EBIT margin (operating profit margin)
reflectsthe adjusted profit before interest,
joint ventures and tax achieved by the
Group, divided by revenue.
Why we measure
Assesses the financial eciency
of our Group operations before
any one-o cost.
Link to Strategic Priorities,
Foundations and principal risks
4
1
3
5
Definition
Adjusted operating profit before
joint ventures divided by average
capital employed.
Why we measure
Illustrates how eective the Group’s
capitalallocation is in delivering returns.
Link to Strategic Priorities,
Foundations and principal risks
4
3
5
Definition
Land creditors divided by net assets.
Why we measure
Ensures that the Group is maintaining
arobust financial position when entering
into future land commitments.
Link to Strategic Priorities,
Foundations and principal risks
4
1
3
5
Definition
Cash and cash-equivalents plus
non-current and current interest-bearing
loans and borrowings.
Why we measure
Illustrates the Group’s overall liquidity
position and general financial resilience.
Link to Strategic Priorities,
Foundations and principal risks
1
3
5
Definition
The forecast gross margin after sales
andmarketing costs of land we hold
inourshort-term land portfolio.
Why we measure
Indicates the earnings potential of
currentand future land development
andthesale ofassociated homes.
Link to Strategic Priorities,
Foundations and principal risks
1
3
5
FY23
FY21
FY22
6.3%
17.2%
22.4%
FY23
FY21
FY22
24.0%
24.7%
22.5%
FY23
FY21
FY22
6.7%
14.6%
15.4%
FY23
FY21
FY22
£64.9m
£252.8m
£276.5m
FY23
FY21
FY22
2,020
2,407
2,734
FY23
FY21
FY22
23.2%
23.4%
25.0%
Crest Nicholson 30 Annual Report and financial statements 2023
Key
Non-financial KPIs
Link to Remuneration
KPI used in the annual bonus scheme
KPI used in the Long-Term Incentive Plan
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
4
Financial Targets
Link to principal risks
6
12
1 2 3 4 5
7 8 9 10 11
See pages 35 to 42
See pages 10 to 11
Link to Strategic Priorities
Placemaking & Quality
Land Portfolio
Operational Eciency
Five-Star Customer Service
Multi Channel Approach
1 ROCE, EBIT margin, net cash and land creditors as a percentage of net assets are alternative performance measures. See pages 161 to 162 for further details.
2.09
Greenhouse gas (GHG)
emissions intensity
10.98
Waste intensity
Definition
The percentage of leavers during the
year by reason of resignation or
retirement as aproportion of total
employees at the end of the year.
Why we measure
The quality of our people and the
decisions they make are fundamental
to the successful implementation of our
strategy. Low employee turnover supports
greater depth of experience, continuity
anddevelopment of skills within our teams.
Link to Strategic Priorities, Foundations
and principal risks
1
3
7
Definition
Waste intensity reflects tonnes of
construction waste per 100 sq. m of
completed floor area.
Why we measure
This is one of the key measures we use
totrack our progress on reducing our
impacton the environment. There is
alsoafinancial benefit from the reduced cost
ofmaterials purchased and waste generated
in the construction process.
Link to Strategic Priorities, Foundations
and principal risks
2
9
Definition
The GHG emissions intensity reflects
our scope 1 and 2 emissions (tCO
2
e)
per 100 sq. m of completed floor area.
It includes business travel via company cars,
fuel and energy used on sites and in oces.
Why we measure
This is one of the key measures we use to
track our progress on reducing our impact
on the environment. There is also a financial
benefit from increased operational eciency
and reduced cost of fuel used.
Link to Strategic Priorities, Foundations
and principal risks
2
9
10
Definition
The annual HBF’s customersatisfaction
rating based on theNHBC surveywhich
newhome buyers receive. Survey results are
published in March each year.
Why we measure
Providing Five-Star Customer Serviceis one
of the Group’sstrategic priorities.
Link to Strategic Priorities, Foundations
and principal risks
4
Definition
AIIR represents the number of
accidentsinthe year normalised
per100,000people working on-site.
Why we measure
The safety, health and welfare
ofeveryonewho is part of our
operationsisournumber one priority.
Link to Strategic Priorities, Foundations
and principal risks
3
1
3
5
Definition
Proportion of unit sales of homes
recognisedin the year to the Private
Rented Sector (PRS) or aordable housing.
Why we measure
A Multi Channel Approach is one of
theGroup’s strategic priorities.
Link to Strategic Priorities, Foundations
and principal risks
4
1
19%
Voluntary
employee turnover
4 star
Customer
satisfaction
304
Annual Injury
Incidence Rate (AIIR)
26.0%
PRS/Aordable
unit completions
FY23
FY21
FY22
2.09
2.52
1.82
FY23
FY21
FY22
4
5
5
FY23
FY21
FY22
10.98
9.25
8.72
FY23
FY21
FY22
304
385
468
FY23
FY21
FY22
19%
35%
27%
FY23
FY21
FY22
26.0%
37.1%
35.1%
Crest Nicholson 31 Annual Report and financial statements 2023
Strategic Report
Financial review
Bill Floydd
Group Finance Director
Revenue
£657.5m
FY22: £913.6m
Net cash
£64.9m
FY22: £276.5m
Adjusted gross profit
£100.6m
FY22: £194.3m
As in previous years, the Group continues to report alternative
performance measures relating to sales, return on capital
employed and ‘adjusted’ performance metrics because of the
exceptional items as detailed in note 4 of the consolidated
financial statements. Exceptional items are those which, in the
opinion of the Directors, are material by size and/or non-recurring
in nature and therefore require separate disclosure within the
consolidated income statement in order to assist the users of
the financial statements to better understand the performance
of the Group, which is also how the Directors internally manage
the business. Alternative performance measures are detailed on
pages 161 to 162.
Our financial
position
Crest Nicholson 32 Annual Report and financial statements 2023
FY23 trading performance
FY23 saw a weakening sales market
compared to FY22 which has impacted levels
of demand for new homes. Supply chain
pressures, labour inflation and rising prices
of raw materials experienced in FY22
eased during FY23 leading to a reduction in
inflationary impacts during the year, albeit still
higher than average historic rates.
Sales prices remained stable, with modest
declines through autumn.
FY23 has been impacted by domestic
political uncertainty. At the end of FY22
the Mini-Budget led to rising interest rates
resulting in a temporary collapse in housing
sales. Confidence gradually returned to the
housing market as increases in interest rates
began to stabilise, with a steadier sales rate
being achieved by spring 2023.
The weakening sales market, driven by
domestic economic uncertainty, increases
in interest rates, modest reductions in sales
prices, build cost inflation and ongoing
challenges at some of our sites have in
combination impacted financial metrics
compared to FY22.
Sales, including joint ventures is down 27.6%
on prior year at £692.1m (FY22: £955.8m).
This comprised £657.5m of statutory revenue
(FY22: £913.6m) and £34.6m of the Group’s
share of revenue through joint ventures
(FY22: £42.2m). The Group entered into a
new joint venture in the year that is expected
to start contributing to Group profit in FY24.
The Group delivered 2,020 (FY22: 2,734)
home completions during the year, down
26.1% on prior year. 1,495 of these were open
market completions (including bulk deals)
(FY22: 2,212), down 32.4% on prior year,
with the balance derived from aordable
completions at 525 (FY22: 522), up 0.6% on
prior year. Current and prior year comparative
values both state joint ventures at full unit
count and include an allocation for any land
sale element that is present in any relevant
completed transaction, referring to this as
being on an equivalent unit basis.
Open market (including bulk) average
selling prices increased to £406,000
(FY22: £388,000) during the year due to the
mix of units recognised.
Adjusted gross profit was £100.6m
(FY22: £194.3m), down 48.3% on prior year,
reflecting the weaker sales environment
and build cost challenges. Adjusted gross
margin was down on prior year at 15.3%
(FY22: 21.3%). As announced in our
November trading statement Brightwells
Yard, Farnham recorded c. £11m incremental
build costs in the year. The Group has
subsequently conducted a comprehensive
review of the costs to complete this project as
well as our other legacy and low margin sites.
Consequently, further additional costs of
£5.5m have been identified, including £2.5m
at Farnham, which have impacted FY23
APBT. The Group has commenced a thorough
plan to improve commercial processes and
controls to mitigate the risk of future cost
overruns. Construction at the Farnham
scheme is now in its final stages. Gross profit
was £86.3m (FY22: £91.8m), down 6.0% on
prior year due to the impact of significantly
higher level of exceptional items in FY22
oset by the impact of the challenging sales
market in FY23.
Net administrative expenses for the year were
£55.8m (FY22: £51.1m). With the expectation
of tougher trading conditions, the Group
undertook a rationalisation exercise in the
second half including the merger of the East
Anglia division with our Eastern division
and the streamlining of operations which is
expected to reduce annualised administrative
expenses by circa £3.0m in FY24.
Included within net administrative expenses
is a restructuring charge of £0.5m which was
substantially completed at the end of the year.
Net impairment losses on financial assets
were £0.6m (2022: £2.3m). The FY22
charge related to the disposal of the Group’s
50% share in the joint venture containing
the London Chest Hospital to its joint
venture partner.
Adjusted operating profit (or Earnings Before
Interest and Tax – EBIT) decreased in the year
to £44.2m (FY22: £140.9m) with EBIT margin
decreasing from 15.4% to 6.7% due to lower
revenue falling through to margin. Finally,
adjusted profit before tax (APBT) for the year
was £41.4m (FY22: £137.8m), down 70.0% on
prior year and profit before tax after exceptional
items for the year was £23.1m (FY22: £32.8m),
reflecting the impact of the weaker year-
on-year operating profit contribution oset
by the exceptional charge outlined below.
Operating profit was £29.9m (FY22: £38.4m),
down 22.1% on prior year due to the weaker
trading environment and build cost challenges.
Control environment
Commercial controls in two divisions
have not been eective during the year.
Weaknesses were identified in the divisions’
management and forecasting of build costs
and margin of which the most material
example was in Farnham. At the end of FY23,
the Group completed its rollout of a new ERP
system which going forward will strengthen
the key financial and commercial controls
that operate across the business. A new
Group Commercial Assurance team has
been established to monitor key commercial
controls. In addition, the appointment of a
new Chief Operating Ocer from 1 January
2024 will provide additional group oversight.
Exceptional items
As a consequence of signing the Developer
Remediation Contract on 13 March 2023,
the Group has entered into contractual
commitments with the Government to
identify and remediate those buildings it
has developed with possible life-critical fire
safety defects. The combustible materials
charge in FY23 represents changes in
forecast build costs and in the discount rate
applied to the provision. See notes 4 and 22
of the consolidated financial statements for
additional information.
In FY23 the Group recorded an exceptional
total combustible materials related charge of
£5.3m (FY22: £105.0m) representing forecast
changes in build costs and in the provision
discount in the year. This total charge is after
a £10.0m cash receipt from a third party
relating to buildings included within the
combustible materials provision.
The Group also recognised a charge of
£13.0m as it is subject to a legal claim relating
to a low rise apartment, three-storey scheme
built by the Group which was damaged by
fire in 2021. Due to the size and nature of the
claim, and in line with the Group’s accounting
policy, this has been presented as an
exceptional item.
The tax credit on exceptional items is £4.8m
(FY22: £22.4m).
Finance expense and taxation
Adjusted net finance expense of £5.5m
(FY22: £7.1m) is £1.6m lower year-on-year,
and the Group Revolving Credit Facility (RCF)
remained undrawn for the duration of the year.
Net finance expense was £10.1m (FY22: £8.1m).
Income tax charge in the year of £5.2m
(FY22: £6.4m) represented an eective tax
rate of 22.5% (FY22: 19.5%). This increase is
due to the impact of changes in UK tax rates.
Further detail can be found in note 8 of the
consolidated financial statements.
£250m Revolving Credit Facility
The Group’s previous £250m RCF was due
to expire in June 2024. During the prior year
we completed a new Sustainability Linked
Revolving Credit Facility. The £250m facility
expires in October 2026. It is also linked to
the Group’s sustainability strategy with a
lower interest payable if certain targets are
achieved. These targets include:
— Reduction in absolute scope 1 and
2 emissions in line with our science-
based targets
— Increasing the number of our suppliers
engaging with the Supply Chain
Sustainability School
— Reduction in carbon emissions associated
with the use of our homes
— Increasing the number of our
employees in trainee positions and on
training programmes.
For FY23 all targets have been met. This will
result in a margin reduction of 0.05%.
Sales
£692.1m
FY22: £955.8m
Home completions
2,020
FY22: 2,734
Crest Nicholson 33 Annual Report and financial statements 2023
Strategic Report
Financial review continued
Dividend
The Board proposes to pay a final dividend
of 11.5 pence per share for the financial year
ended 31 October 2023 which, subject to
shareholder approval, is expected to be
paid on 23 April 2024 to shareholders on
the Register of Members on 22 March 2024.
This is in addition to the 5.5 pence per share
interim dividend that was paid in October
2023. The Group expects to revert to its
policy of dividend cover of 2.5 times for FY24,
having deviated from policy in FY23 to meet
our commitment to maintain the same cash
dividend as FY22.
Financial position
The Group had net cash of £64.9m
at 31 October 2023 (FY22: £276.5m).
Net cash and land creditors were £(140.6)m
(FY22: £77.8m).
Inventories at 31 October 2023 were £1,164.8m
(FY22: £990.1m), up 17.6% year-on-year.
During FY23 the Group increased investment
in inventories and strategically acquired high
quality land to strengthen its land portfolio,
supported by its strong balance sheet.
This strategic move positions the Group to
capitalise on growth when the market returns
to a more normalised level. Included within
this balance is an NRV provision of £20.2m
(FY22: £12.6m) which principally relates to
the Group’s scheme at Brightwell’s Yard,
Farnham. Completed units at 31 October 2023
were £89.6m (FY22: £30.1m). Further detail
on inventory can be found in note 19 of the
consolidated financial statements.
Net cash outflow from operating activities was
£165.6m (FY22: £51.7m inflow) and return on
capital employed (ROCE) reduced in the year to
6.3% (FY22: 22.4%), reflecting the decrease in
earnings and investment in land. Net assets at
31 October 2023 were £856.3m (FY22: £883.1m),
a decrease of 3.0% on prior year.
Land portfolio
The supply of land continued to tighten in
the year due to the Government changing
the top-down housing targets and planning
issues around nutrients, water neutrality,
recreation zones and air quality constraints.
With the uncertain economic outlook during
FY23 some developers did not complete
planned acquisitions or temporarily
withdrew from the market. The Group took
the opportunity to acquire several highly
desirable sites and strengthening its land
portfolio and securing favourable terms.
The Group’s decision to remain active in the
land market positions it to mitigate planning
delays, ensuring a higher number of outlets
are in place when market conditions improve.
The land acquisition programme will remain
at a reduced level during FY24. FY23 average
outlets were 47 (FY22: 54) and it is expected
that FY24 will be at a similar level, reflecting
the backdrop outlined above. 3,864 plots
have been approved in FY23 for purchase
at a gross margin of 25.2% (after sales and
marketing costs).
The Group’s short-term land portfolio
at 31 October 2023 comprised 14,922
(FY22: 14,250) plots, representing
approximately five years of supply. In addition,
the Group’s strategic land portfolio comprised
18,830 plots (FY22: 22,450), resulting
in a total land portfolio at 31 October
2023 of 33,752 (FY22: 36,700) plots with
a Gross Development Value (GDV) of
£12.2bn (FY22: £12.1bn). During the year
the Group added 3,501 units to the short-
term land portfolio and delivered 2,020
home completions.
Bill Floydd
Group Finance Director
Waterman’s Gate, Arborfield, Berkshire
1 Units based on management estimates of site capacity. Includes joint venture units at full unit count and on an equivalent unit
basis which allocates a proportion of the unit count for a deal to the land sale element where the deal contains a land sale.
2 Gross development value (GDV) is a management estimate calculated on the basis of a number of assumptions, for
example, assumed sale price, number of units within the assumed development and the split between open market and
aordable housing units, and the obtaining of planning permission. These are management’s estimates and do not provide
assurance as to the valuation of the Group’s portfolio. Units based on management estimates of site capacity.
FY23 FY22
Units
1
GDV
2
– £m Units
1
GDV
2
– £m
Short-term housing 14,922 5,054 14,250 4,661
Short-term commercial – 60 – 41
Total short term 14,922 5,114 14,250 4,702
Strategic land 18,830 7,049 22,450 7,409
Total land pipeline 33,752 12,163 36,700 12,111
Crest Nicholson 34 Annual Report and financial statements 2023
Principal risks and uncertainties
How we manage risk
Risk appetite
Risk appetite at Crest Nicholson is
the amount of risk that the Board is
prepared to accept in return for achieving
our purpose of building great places
for our customers, communities and
the environment.
Our appetite for risk is based on our
analysis of market context, our strategy
and input from management and advisors.
This is reviewed throughout the year.
In order to achieve the Group’s strategy,
and objectives, the Board takes a prudent
view on risk and has an overall risk
appetite across its portfolio of risks that
reflects this.
We seek to balance our risk
position between:
— Maintaining a strong focus on
health, safety and regulatory
compliance matters
— Ensuring financial strength by
generating profits and cash through
our operations
— Having a balanced portfolio through
our Multi Channel Approach and
being selective in land acquisitions.
This allows us to adapt to cyclical
markets and be flexible in our
investment decisions
— Being disciplined in our operational
eciency and future growth
— Maintaining the right culture and
shared values.
Risk culture
Risk awareness exists through decision-
making processes and is embedded in
systems, policies, leadership, governance
and behaviours. Aligned to our values, we
maintain a culture where our colleagues are
empowered to make decisions within agreed
parameters in the delivery of our objectives.
We ensure we have the right accountabilities
across the Group, maintaining eective risk-
based decision making.
Emerging risks
Emerging risks have the potential to impact
our strategy but currently are not fully
defined, or are principal risks, which are
particularly elevated or increasing in velocity.
Our emerging risks are identified through
horizon scanning by the Board and ELT
including in relation to industry and macro-
economic trends. This is supported by our
divisional risk review process.
The Group’s performance is subject to
potential risks and uncertainties in the pursuit
of its objectives.
These risks could, either separately or
in combination, have a material impact
on the Group’s performance, customers,
employees, communities, the environment
and shareholder returns.
To continue to be a successful housebuilder
in the long term, our decision making must
be informed by a clear understanding
of our business risks and opportunities.
These include potential likelihood, impact
and outcomes that inform and define our
risk appetite.
Our Risk Management Framework supports
us in providing assurance that we have
identified and are addressing our principal
and emerging risks. Risk management is
embedded throughout our strategy and
decision-making processes.
Our divisional boards consider their
divisional risk registers on a half-yearly
basis. The divisional risk reviews, alongside
the Group’s principal risks, are carefully
considered by the ELT. The Board and Audit
and Risk Committee both have oversight of
the Group’s principal and emerging risks and
regularly assess these against the Group’s
risk appetite and its capacity to handle risk.
Bottom up
Assessment and
mitigation of risk
across divisional and
functional areas
Risk governance framework Board
— Has overall responsibility for strategy, risk management
and internal control
— Reviews the Group’s principal and emerging risks
— Sets the Group’s appetite for risk and strategy
— Delegates risk oversight to the Audit and Risk Committee
and to the Executive Committee and divisions.
Audit and
Risk Committee
— Responsible for monitoring our risk management processes and
approving relevant disclosures
— Monitors financial reporting and internal and external audit activities
— Provides assurance to the Board in relation to financial,
operational and compliance controls.
Executive
Committee
— Oversees how we are managing the principal, emerging and the
divisional risks within the Group’s risk appetite
— Embed risk management within the Group
— Monitors divisional performances and development risks.
Divisional
board and site
management
— Responsible for control and risk management within the division
or function
— Monitors and assesses the divisional and operational risks
— Maintains an eective system of control and risk management
at a site level, including SHE and supply chain risks.
Top down
Assessment and
mitigation of risks
at a Group level
Crest Nicholson 35 Annual Report and financial statements 2023
Strategic Report
FY23 emerging risks
Economic outlook
We continue to monitor the developing
uncertainties surrounding the political and
economic outlook, rising interest rates and
mortgage availability, which could lead to
lower sales volumes. As a result we have
taken actions to adjust our strategy and
reduce overhead costs.
Build costs
We have continued to review and
discuss risks surrounding our build costs
forecasting. Additional oversight controls
are being implemented and we are
strengthening our reporting through the
ERP system.
Regulatory change
This risk has continued to evolve during
the year and impacts us in several ways.
We have continuously reviewed the
speed of progress on in-scope remedial
fire safety work in addressing our
commitments with the UK Government’s
Developer Remediation Contract.
There can often be challenges with
a shortage in available fire safety
professionals, getting access to sites,
including legal consent, all of which can
aect our ability to progress work as
quickly as possible.
Changes to our principal risks
As part of the Group’s risk review process,
some of the Group’s principal risks have
evolved during the year:
Risk heat map
The Board has identified 12 principal risks that it considers material
to the Group’s performance. They have been mapped on a
residual risk basis considering likelihood and impact.
1
Market conditions
2
Safety, Health & Environment
3
Supply chain
4
Customer service and quality
5
Build cost management
6
Information security and
business continuity
7
Attracting and retaining our skilled people
8
Solvency and liquidity
9
Laws, policies and regulations
10
Climate change
11
Land availability and planning
12
Combustible materials
1
2
9
5
8
10
11
6
7
3
4
12
Increasing likelihood
Increasing impact
Principal risks and uncertainties – How we manage risk continued
Market conditions
Increasing trend
Supply chain
Reducing trend
Customer service and quality
Reducing trend
Build cost management
Increasing trend
Attracting and retaining our skilled people
Reducing trend
Solvency and liquidity
Increasing trend
Laws, policies and regulations
Increasing trend
Land availability and planning
Increasing trend
Board assessment
The Board confirms that it has performed a
robust assessment of the Group’s principal
and emerging risks, with consideration of
the long term.
Actions are in place over the long term to
address specific risks where necessary,
reducing the level of residual risk.
Crest Nicholson 36 Annual Report and financial statements 2023
Principal risks and uncertainties
Our principal risks
Market conditions
1
Risk description
A decline in macro-economic conditions in
the UK, which negatively impacts the UK
residential property market and reduces
the ability for people to buy homes, either
through unemployment or low employment,
constraints on mortgage availability.
Decreased sales volumes occurring from
a drop in housing demand, could see
an increasing number of units held as
unreserved and part exchange stock with
apotential loss realised on final sales.
Changes to regulations and taxes, for
example Stamp Duty Land Tax and the
impact of Government schemes such as
Help to Buy and Equity Loan.
Actions/mitigations
We continually evaluate our strategy
which we can flex and adjust as demand
profiles change.
Regular sales forecasts and cost reviews to
manage potential impact on sales volumes.
Forward sales, land expenditure and work-in-
progress are all carefully monitored to ensure
they are aligned to levels of demand.
Our Multi Channel Approach gives us access
to a range of tenure options and earning
resilience in changing market conditions.
We focus on strategic purchase of sites,
continued development of shared ownership
models and engagement with a variety of
incentive schemes.
We actively develop our sales oering by
introducing new and innovative products to
reflect the nature of market conditions.
Development in the year
Demand for housing has deteriorated
during the year, with significant economic
headwinds. Mortgage borrowing has
become significantly more expensive with
noGovernment support for first-time buyers.
We have significantly reduced land activity
during the year and have reduced the
Group’s overhead position. We have
incorporated the newly created East Anglia
division into its existing Eastern division with
revised boundaries.
We continued to build our pipeline of trusted
partners and have negotiated several bulk
deals on appropriate commercial terms with
partners which will provide volume delivery
infuture years.
We have introduced a series of new sales
products and sales schemes that reflect
current market conditions such as Smart
Ownand Family Cashback.
The Group has adequate liquidity to deal
with all plausible downside market scenarios
and continues to focus and monitor its cash
position, ensuring build costs and capital
outlay match sales demand.
Residual High Appetite Medium Movement in year Increasing
Link to our stakeholders
Investors Our people Supply chain Customers Communities and environment Government and other bodies
Safety, Health &
Environment (SHE)
2
Risk description
A significant health and safety event
could result in a fatality, serious injury or a
dangerous situation to an individual.
Significant environmental damage could
be caused by operations on-site or in our
oces (for example, water contamination
from pollution).
Lack of recognition of the importance of the
wellbeing of employees.
These incidents or situations could have
an adverse eect on people aected by
our actions, our reputation and ability to
secure public contracts and/or, if illegal,
prosecution or significant financial losses.
Actions/mitigations
We have eective SHE management systems
in place with increased authority for divisional
build managers and Group SHE advisors
to undertake incident investigations and
implement follow up actions.
We use external independent safety auditors
to conduct regular site safety reviews as
appropriate and without warning.
We have a network of mental health
first aiders and a dedicated Employee
Assistance Programme.
SHE performance is a bonus metric target
used across the Group.
Where appropriate, interim risk mitigation
solutions have been deployed in
buildings where fire safety concerns have
been identified.
Development in the year
We have increased focus to ensure
compliance with subcontractor Risk
Assessment and Method Statements (RAMS).
We have expanded reporting of safety
performance to help assess root causes.
We have continued to expand our training
and communications across our build teams
and provide regular safety bulletins and
guidance updates.
We have expanded our network of mental
health first aiders across our divisions.
Delivering on our commitments contained
in the Developer Remediation Contract, the
Group has continued to identify and risk
assess any buildings impacted by possible
safety issues.
Residual Medium Appetite Low Movement in year No change
Link to our stakeholders
Our people Supply chain Customers Communities and environment
Crest Nicholson 37 Annual Report and financial statements 2023
Strategic Report
Supply chain
3
Risk description
Changing production levels across the
industry put pressure on our materials
supply chain.
The industry struggles to attract the next
generation of talent into skilled trade
professions. The labour market may not have
the knowledge and skills required to deliver
modern methods of construction projects.
Materials availability can be impacted by
changes in demand, rising energy prices
and dislocation in supply chains due to
external events.
There may be a risk of suppliers and
subcontractors facing insolvency due
toadverse economic conditions.
Actions/mitigations
Established long-term relationships with our
supply chain partners through Group trading
agreements and multi-year subcontractor
framework agreements.
We engage in dialogue with major suppliers
to understand critical supply chain risks and
respond eectively.
We have developed eective procurement
schedules to mitigate supply challenges.
Dierent construction methods are
considered such as timber frame or using
alternative materials such as concrete bricks.
Development in the year
Access to site labour and materials through
the supply chain has improved throughout
the year due to reducing inflation and lower
production levels. We continued to focus on
price competitiveness through re-tendering,
quality and improved product selection.
Where possible and appropriate we forward
order materials to secure supply and also
utilise alternative products if they are
available and it is appropriate to do so.
Residual Medium Appetite Medium/Low Movement in year Reducing
4
Risk description
Customer service and build quality falls
below our required standards, resulting in
reduction of reputation and trust, which
could impact sales and volumes.
Unforeseen product safety or quality
issues or latent defects emerge due to new
construction methods.
Failure to eectively implement or comply
with new regulations on build quality
or customer service requirements and
respond to emerging technologies.
Actions/mitigations
We continue to focus on enhancing build
quality, achieving high customer satisfaction
ratings and a retained commitment to
excellent placemaking.
Enhanced quality and build stage
inspections to monitor adherence to our
quality standards.
Our Legacy Collection house type range
established that reduces complexity and
drives improvements in quality.
There is a central team of quality assurance
and customer relationship managers to cover
all divisions.
Customer service and quality performance is
a bonus metric target used across the Group.
Development in the year
We have continued to enhance our
quality processes and have recruited
additional resources to support the
quality improvements.
We have developed processes and
introduced new technology to support new
regulatory requirements for the Future
Homes Standard – Part L.
We implemented the requirements of the
New Homes Quality Code in February
2023 and made significant changes to our
customer service processes and systems
which are subject to further ongoing review
and monitoring.
We have introduced a wider range of
options and extras for customers and
deployed a 24-hour web chat service along
with online home demonstrations.
Residual High/Medium Appetite Low Movement in year Reducing
Customer service
and quality
Principal risks and uncertainties – Our principal risks continued
Link to our stakeholders
Our people Supply chain Customers Communities and environment Government and other bodies
Link to our stakeholders
Supply chain Customers Communities and environment
Crest Nicholson 38 Annual Report and financial statements 2023
Build cost management
5
Risk description
Build cost inflation and unforeseen cost
increases driven by demands in the supply
chain or failure to implement adequate cost
control systems.
Lack of awareness and understanding
of external factors that may impact
build costs including complex planning
permissions and emerging sustainability
and environmental regulations.
A lack of quality in the build process could
expose the Group to increased costs,
reduced selling price and volume, and
impact our reputation.
Actions/mitigations
We benchmark our costs against existing
sites to ensure rates remain competitive.
A fair and competitive tender process is in
place and we are committed to paying our
suppliers and subcontractors promptly.
There are regular divisional build cost review
processes and site-based quality reviews.
We continue to investigate alternative
sources of supply where possible and utilise
alternative production methods or materials
where it is appropriate to do so.
Development in the year
We have continued to monitor our
build costs closely, ensuring eective
management of inventory levels and
competitive re-tendering through the
supply chain.
We completed the implementation of
COINS, our new ERP platform. This has
enhanced the reporting and visibility of
build costs across the Group. We are
enhancing the independent assurance of
build costs reporting through a centralised
second line commercial team providing
periodic review and advisory support to
the divisions.
Residual High Appetite Medium/Low Movement in year Increasing
6
Risk description
Cyber security risks such as data breaches,
ransomware or phishing attacks leading to
the loss of operational systems, market-
sensitive information or other critical data
which risks non-compliance with data
privacy requirements.
This in turn could result in a higher risk of
fraud and, as a result, financial penalties
and an impact to reputation.
Actions/mitigations
We employ network security measures and
intrusion detection monitoring, including virus
protection on all computers and systems,
and carry out annual security-breach tests.
We utilise customer relationship management
systems for storing sensitive data to prevent
negligent misuse by employees. We operate
in a cloud environment with resilient IT
providers, reducing centralised and physical
risk exposure.
This is complemented by employee training
on data protection and internet security,
data classification, retention policies and
toolsets with appropriate and responsive
procedures embedded to respond to data
privacy matters; and IT disaster recovery
and business continuity plans. The IT Cyber
Security and Data Sub-Board Committee,
chaired by the Group Finance Director meets
throughout the year to address cyber security
matters, assess threat levels and develop
appropriate policies and procedures.
We are Cyber Essentials Plus certified and
are subject to regular external and internal
audit review.
Development in the year
We continued to utilise a Security
Operations Centre to monitor our networks
and have enhanced our security policies
and procedures with further training
for employees.
We have also provided executive level
training to the Board on Cyber security.
We continued to review emerging risks,
such as Artificial Intelligence and have
developed policies to ensure appropriate
use in the organisation.
Residual Medium Appetite Low Movement in year No change
Information security and
business continuity
Link to our stakeholders
Supply chain Customers
Link to our stakeholders
Our people Customers
Crest Nicholson 39 Annual Report and financial statements 2023
Strategic Report
Principal risks and uncertainties – Our principal risks continued
7
Risk description
An increasing skills gap in the industry at all
levels resulting in diculty with recruiting
the right and diverse mix of people for
vacant positions.
Employee turnover and requirement
to induct and embed new employees,
alongside the cost of wages increasing as a
result of inflation.
Loss of knowledge within the Group which
could result in ineciencies, productivity
loss, delays to business operations,
increasing costs, and an overuse or reliance
on consultants and the supply chain.
Ensuring we have the right culture and
environment to attract and retain talent.
Actions/mitigations
Employee engagement surveys to
enable the Board and ELT to understand
employee feedback.
Continual focus on improving flexible
and agile working arrangements to
support employees.
Programmes of work to develop robust
succession plans and improve diversity and
inclusion across the Group.
We monitor pay structures and market trends
to ensure we remain competitive against
our competitors.
We monitor employee turnover, absence
statistics and feedback from exit interviews.
Development in the year
Continued to evolve our people strategy and
have expanded the range of leadership and
personal skills training across the Group.
We became Gold Accredited through The
5% Club in respect to our recruitment and
development of trainees.
Developed our diversity and inclusion policies
and initiatives and have held a number of
executive sponsored Anity Group meetings.
Established the Women in the
Workplace forum.
We have implemented a new enterprise
wide talent management, recruitment,
HR and payroll system this year.
Residual Medium Appetite Medium/Low Movement in year Reducing
Solvency and liquidity
8
Risk description
Cash generation for the Group is a
key part of our strategy and our cash
headroom could be aected by economic
pressures that result in delayed receipts
and potentially lower sales in the short to
medium term.
Commitments to significant land and
build obligations that are made ahead of
revenue certainty.
Reduction in margins as average
selling prices fall, inability to restructure
appropriately and unsustainable levels of
work-in-progress.
Actions/mitigations
Cash performance is measured against
forecast with a variance analysis issued
weekly. Cash performance is also considered
in detail at a divisional board level.
We scrutinise the cash terms of land
transactions. Private Rented Sector and
bulk sales oer us the potential for early
cash inflow.
The Group has available the use of a £250m
Sustainability Linked Revolving Credit Facility
(RCF).
We generally control strategic land rather
than own it and have limited capital tied up on
the balance sheet. These sites are subject to
regular review and diligent appraisal before
being drawn down.
Development in the year
While net cash has reduced in the year,
the Group continued to benefit from a
strong balance sheet with diverse sources
of funding.
We continued to stress test the Group’s
financial resilience for various scenarios
and are satisfied that adequate funding is
in place. We have maintained a disciplined
focus on cash performance and capital
allocation throughout the year.
Residual High Appetite Low Movement in year Increasing
Attracting and retaining
ourskilled people
Link to our stakeholders
Our people
Link to our stakeholders
Investors Our people Supply chain
Crest Nicholson 40 Annual Report and financial statements 2023
Laws, policies and
regulations
9
Risk description
The housebuilding industry is subject to
complex regulation, policy changes and
Government intervention.
Future regulatory changes could impact
our ability to make medium and longer-
term decisions.
Failure to eectively implement new
regulations including the Future Homes
Standard, the Environment Act 2021, New
Homes Quality Code and the Building
Safety Act 2022 could impact the Group.
Actions/mitigations
We engage with the Government directly and
through the HBF, various memberships of
Industry groups and build relationships in key
local authority areas.
We continue to assess and plan for emerging
regulation and developments in readiness for
potential regulatory change.
Development in the year
The pace of regulatory reform has continued
to increase in the housebuilding industry.
We are developing our operating framework
to support various regulatory requirements.
Implemented the New Homes Quality Code
and relaunched the standard housing range
in the spring to comply with Phase 1 of the
Future Homes standard.
Residual High Appetite Medium Movement in year Increasing
Climate change
10
Risk description
The Group will need to further enhance its
sustainable practices and processes as we
transition to a net-zero carbon business
by 2045 and continue to meet evolving
Government regulations and growing
investor expectations.
Climate change could impact our business
through transition and physical risks.
Transition risks include increasing regulatory
change, increased carbon pricing and shifts
in stakeholder preferences.
Physical risks are direct impacts from
a changing climate including rising
temperatures and changing weather patterns.
Failure to manage climate-related risks could
lead to additional costs, build programme
delays and damage to our reputation.
Actions/mitigations
Our Sustainability Committee oversees
our sustainability strategy, including our
approach to climate change. The Committee
monitors performance against our climate
targets and assesses climate-related risks
and opportunities.
We are members of the Future Homes Hub,
an industry-wide initiative to support the
implementation of the Future Homes Delivery
Plan to meet climate and environmental
targets. We also have internal workstreams to
plan for new regulations, including the Future
Homes Standard.
Near and long-term science-based targets
are in place, driving action to reduce
GHG emissions.
Executive Directors have GHG emission
reduction targets within their Long-Term
Incentive Plan.
Development in the year
Implemented the interim update to Part L
of the Building Regulations, which requires
a 31% reduction in carbon emissions
compared to the prior regulations.
Continued to collaborate with our energy
assessors, supply chain and wider industry
to prepare for the Future Homes Standard.
Our Sustainability Linked RCF incorporated
targets to reduce GHG emissions
associated with our operations and the
use of our homes. We achieved both RCF
climate-related targets.
Residual Medium Appetite Low Movement in year No change
Link to our stakeholders
Investors Our people Supply chain Customers Communities and environment Government and other bodies
Link to our stakeholders
Investors Supply chain Customers Communities and environment Government and other bodies
Crest Nicholson 41 Annual Report and financial statements 2023
Strategic Report
Principal risks and uncertainties – Our principal risks continued
11
Risk description
Maintaining a supply of suitable strategic
and consented land at the right economic
terms to support our growth ambitions.
Acquired land is delayed in the planning
process where local authorities and public
sector resources are constrained.
The regulatory planning and environmental
requirements continue to evolve with the
national policy framework developments.
Environmental requirements such as
nutrients, water neutrality and biodiversity
obligations are increasing. This increases
the challenge of providing quality and
aordable homes in the locations required.
Actions/mitigations
Expertise within our Land teams to ensure
we acquire sites in the best locations
and that allow us to demonstrate our
placemaking credentials.
Formal relationships with key land suppliers,
landowners and agents and local authorities.
Land acquisitions are subject to formal
appraisal and viability assessment prior to bid
submission and exchange of contracts.
The planning status of all our sites are
regularly reviewed.
We undertake close consultation with the
Government on planning reform.
Development in the year
Our strategy has increased focus on
achieving planning consent on land under
our control as we have reduced land
acquisitions and acquiring new sites.
The planning process continues to be
highly complex and time consuming with
ongoing demands relating to aordable
housing, Section 106 obligations and the
community infrastructure levy. There has
been a particular challenge in some of our
divisions regarding nutrients and water
neutrality which has impacted the speed
of planning approvals. These complexities
increase the cost of development and
the time taken to move land through the
planning process, which is also impacted
by resource constraints in local authority
planning departments.
Residual High Appetite Medium/Low Movement in year Increasing
Combustible materials
12
Risk description
Failure to plan and implement the changes
required by the Government in respect of
combustible materials and fire safety in a
timely manner, which could significantly
impact our reputation.
This is a complex area where it is often
dicult to identify and implement remedies
quickly. The rapidly changing landscape
of regulatory guidance and the need
to engage with multiple stakeholders
contribute to this complexity, as does the
limited availability of qualified resource
to oversee work performed. Given this,
costs can be dicult to estimate and could
be subject to considerable variability and
Government legislation, or regulation
could further change increasing the
scope of legacy buildings and required
remedial works.
Actions/mitigations
A dedicated specialist team is in place
with controls and processes in respect of
combustible materials. There is a regular
review process in place which is overseen by
the Chief Executive, Group Finance Director
and the internal project team responsible for
this area.
There is a detailed risk register of all
schemes under review including any
safety considerations, recent customer or
stakeholder correspondence and considers
how the Group may choose to respond.
In addition, the central team assesses
whether faulty workmanship or design was
a factor in the potential remedial works, and,
if appropriate, seeks to recover these costs
directly from the subcontractor or consultant
involved, or through engagement of external
legal counsel.
Development in the year
The Group continued to review the risk
register of legacy buildings in scope,
assessing the latest guidelines against
each aected building, advice from
technical or legal advisors along with
relevant notifications from a variety of
stakeholders. We monitor and report
progress of remedial work to DLUHC on a
periodic basis. Management has considered
the progress of any remedial works and
adjusted the financial provision to reflect the
Group’s best estimate of any future costs.
We continue to review the appropriateness
of our combustible materials provision.
The Board signed the Developers
Remediation contract and we are now
contractually obligated to the pledge.
Residual Medium Appetite Low Movement in year No change
Land availability
and planning
Link to our stakeholders
Investors Customers Communities and environment Government and other bodies
Link to our stakeholders
Supply chain Customers Communities and environment Government and other bodies
Crest Nicholson 42 Annual Report and financial statements 2023
Against a backdrop of increasing GHG
emissions and the growing challenge to
limit temperature rise to 1.5°C, we remain
committed to reducing our GHG emissions.
Our target is aligned with a 1.5°C trajectory,
aiming for net-zero across our value chain by
2045. This cannot be delivered in isolation,
and we are collaborating throughout our
value chain in support of decarbonising
the business.
Recognising climate change as a principal
risk for the Group since FY21, we published
our voluntary TCFD disclosure that year,
followed by our first comprehensive
disclosure in FY22. Ongoing collaboration
with external climate change experts
reinforces our commitment to enhance our
climate risk analysis. Given the uncertainties
surrounding the potential future impacts
of climate change, we will continue to
adapt our response as scientific and
economic understandings evolve, alongside
advancements in methodologies and risk
management tools.
The following pages detail our disclosures
aligned with the TCFD recommendations.
In accordance with Listing Rule 9.8.6R,
our consistency with the 11 TCFD
recommendations is outlined in the table
below, with references to page numbers
for additional information. Set out below is
the progress achieved in the past year and
the actions planned for FY24 to enhance
our approach.
In our assessment of consistency, we
voluntarily referred to the ‘Implementing
the Recommendations of the Task Force
on Climate-related Financial Disclosures’
document published by the TCFD in
October 2021.
Further information on the TCFD is
available on the Financial Stability
Board’s website www.fsb-tcfd.org
Task Force on Climate-related Financial Disclosures
We are focused on reducing greenhouse gas emissions while
responding to the potential risks and opportunities relating to
achanging climate.
The table below provides the location for content related to the TCFD recommendations
TCFD pillar Recommended disclosure Page(s)
Governance
Disclose the
organisation’s
governance around
climate-related risks
andopportunities.
a) Board oversight
44
b) Management’s role
44
Strategy
Disclose the actual
andpotential impacts
of climate-related
risksand opportunities
on the organisation’s
businesses, strategy,
and financial planning
where such information
ismaterial.
a) Risks and opportunities
45–47
b) Impact on organisation
45–47
c) Resilience of strategy considering
climate scenario analysis
45–47
Risk management
Disclose how the
organisation identifies,
assesses and manages
climate-related risks.
a) Risk identification and
assessment process
48
b) Risk management processes
48
c) Integration into overall
risk management
48
Metrics and targets
Disclose the metrics
andtargets used to
assess and manage
relevant climate-related
risks and opportunities
where such information
is material.
a) Climate-related metrics
49–50
b) Scope 1, 2, 3 GHG emissions
49–50
c) Climate-related targets
49–50
Consistency with TCFD recommendations:
Not consistent Partially consistent Consistent
FY23 progress
— Continued to engage with our
supply chain on climate-related
issues and preparation for the Future
Homes Standard
— Conducted whole life carbon
analysis on a selection of our Legacy
Collection homes
— Evolved our climate scenario analysis
to gain better insight into potential
risks and opportunities
— Continued progress in reducing
GHG emissions.
FY24 areas of focus
— Further investigation, and trialling
of technologies to support the
delivery of the forthcoming Future
Homes Standard
— Continue to engage with our supply
chain and wider industry to support
improved GHG emission data and
decarbonisation initiatives
— Development of transition plan
— Continue to evolve the assessment
and quantification of our climate-
related risks and opportunities.
Crest Nicholson 43 Annual Report and financial statements 2023
Strategic Report
Governance
A. Board’s oversight of climate-related
risks and opportunities
The Board is responsible for risk
management, including climate-related risks
and opportunities. This oversight involves
semi-annual reviews and updates to the
Group’s principal risks. Climate change
remains one of the Group’s principal risks
and is governed by our Risk Management
Framework detailed on page 35.
The Board receives updates on the Group’s
approach to climate change and sustainability
matters. This encompasses progress against
climate-related KPIs, including our science-
based targets. During the year the Board
received a comprehensive update on current
and emerging environmental regulations,
performance against our targets and our
transition to net-zero.
Supporting the Board in its governance are
three Board Committees which oversee
sustainability matters. See diagram below.
With delegated authority from the Board
and Executive Committee, the Sustainability
Committee is responsible for overseeing
the development and delivery of strategic
aims and initiatives to enhance sustainability
performance. Chaired by our Chief
Executive, it met four times during FY23 and
provided regular updates to the Board and
Executive Committee.
B. Management’s role in assessing and
managing climate-related risks and
opportunities
Our Group Operations Director, with
executive responsibility for sustainability
and climate-related risk, is a member
of both the Executive Committee and
Sustainability Committee. Overseeing the
Group’s disciplines supporting climate-
related outputs, the Group Operations
Director is responsible for the assessment
and management of climate-related
risks, alongside the realisation of
business opportunities.
Regular reports are submitted to the
Board and Executive Committee meetings,
providing updates on performance against
climate-related targets and highlighting
forthcoming regulatory changes.
The Group Operations function possesses in-
depth knowledge of climate-related matters,
including current and emerging regulation.
Team members actively participate in
external working groups, including the Future
Homes Hub and Supply Chain Sustainability
School, fostering knowledge development
and industry engagement.
At a divisional level, responsibility is assigned
for considering how climate-related risks and
opportunities may impact developments.
Divisions report on these aspects within
their divisional risk registers, which undergo
semi-annual reviews as part of the Group’s
Risk Management Framework. Climate-
related considerations, such as flood risk
assessments during site selection, are taken
into account at the project level.
The diagram below provides an overview of
our governance framework and how climate-
related matters are considered throughout
the Group.
Governance framework and climate touch points
Board and
Executive
Committee
oversight
Audit and Risk Committee
— Conducts formal reviews of principal
and emerging risks semi-annually,
including climate-related risks
— Oversees the Internal Audit
Plan which includes climate-
related audits.
Remuneration Committee
— Responsible for including climate-
related targets within employees’
remuneration arrangements
— Approves climate-related targets in
long-term pay incentives for ELT and
senior management.
Nomination Committee
— Considers a broad range of skills
and experiences the Board will
need. Climate change experience is
considered as part of this process.
Sustainability Committee
— Met four times in FY23
— Oversees the development
and delivery of strategic aims
and initiatives to improve
sustainability performance.
SHE Committee
— Met five times in FY23
— Oversees the management of the
Group’s SHE risks and SHE strategy,
including environmental risk
management on-site.
Divisional boards
— Meet monthly and responsible for
key risks, including climate change,
within the division. Reviews and
updates the divisional risk register
semi-annually.
Executive Committee
— Considers the Group’s principal risks and oversees the divisional risk process, with support from functional representatives.
Climate Risk Working Group
— Responsible for assessing climate-
related risks and opportunities
— Membership composition includes
representatives from the Finance,
Procurement, Sustainability,
Technical and Internal Audit teams.
Group Operations team
— Subject matter experts on
sustainability and climate change
— Responsible for developing the
Group’s sustainability strategy and
supports the divisions in
driving its implementation.
Functional Forums
— Meet quarterly and are responsible
for delivering initiatives, achieving
targets and embedding procedures
within the Group
— Functional Forums include SHE &
Build, Technical, Commercial, Sales
& Marketing, Land & Planning and
Customer Service.
Management
oversight
TCFD continued
The Board
— Oversight of the Group’s sustainability strategy and its performance
— Overall responsibility for risk management, including climate-related risks and opportunities.
Crest Nicholson 44 Annual Report and financial statements 2023
Strategy
A. Climate-related risks and opportunities
identified over the short, medium and long
term
While we are taking action to reduce our
GHG emissions across our value chain,
climate change presents a range of risks and
opportunities to our business. The extent
and severity of risks will vary depending
on the actions taken both at UK and
international level.
The eects of climate change and how they
impact our business are both uncertain
and evolving. Over the last two years the
Group has engaged external consultants,
Verco Advisory Services, to support the
identification of potential climate-related risks
and opportunities alongside the application
of scenario analysis to understand how the
risks and opportunities may arise over the
short, medium and long term.
Scenario analysis
Scenario analysis supports the Group’s
understanding of potential climate change
impacts on our business. It is important to
note that climate scenarios are not intended
to be forecasts but rather hypothetical future
states designed to be plausible, improving
our comprehension of possible climate
outcomes and their potential implications
for our operations. This in turn informs our
strategy and business planning, increasing
our resilience to climate change.
In accordance with TCFD recommendations,
we have identified climate-related risks and
opportunities against:
Transition risks: related to the transition
to a low carbon economy to avoid
the worst physical impacts of climate
change. Examples of transition risks
include regulatory changes, carbon
taxation, new technology and shifting
stakeholder expectations.
Physical risks: resulting from a changing
climate are broken down by acute risk (event-
driven, including increased severity of storms
and floods) and chronic risk (longer-term
shifts in climate patterns, including higher
temperatures, rising sea levels, chronic
heatwaves and droughts).
The risk management section on pages 48
to 49 details our processes for identifying
climate-related risks and opportunities.
In FY23 we retained the climate scenarios
from the previous year, each representing
distinct pathways:
Orderly transition: well-coordinated early
action to achieve a net-zero economy by
2050 with limited warming of 1.5°C.
Disorderly transition: late and disruptive
action to limit warming to below 2°C.
Hot house earth: late action leads to a
warming of around 4°C by 2100 bringing
increased exposure to physical risks.
The information on pages 47 to 48 describes
the primary climate-related risks and
opportunities we have identified and sets out
our management’s response to each one.
Time horizons
We have considered climate-related risks and
opportunities over three time horizons:
— Short term (0–3 years)
— Medium term (3–10 years)
— Long term (10 years plus).
The time horizons have been selected to
allow the Group to consider multiple risks
and opportunities, including instances
where physical and transition risks are
more dominant. The table below provides
further detail on why these time horizons
were selected.
These scenarios encompass a range of
future climate states with varying transition
and physical impacts. Leveraging insights
from our external consultants and utilising
a diverse set of internal and external data
sources, including global, regional and local
datasets, we applied a range of assumptions
to determine potential climate change
impacts. An overview of each scenario and
their specific impacts on our business is
detailed in the table on the next page.
Time horizon Time period Description
Short term 0–3 years This covers the current operating climate and aligns with our business planning cycle.
Existing legislation is likely to be in place for most of this time horizon.
Medium term 3–10 years This covers the period where legislation currently under consideration is more likely
totakeeect and have an impact on the business. It also aligns with the time period
forour2030 science-based targets.
Long term 10 years plus This period is challenging to predict. While it is clear the climate has already changed,
andthis is going to continue, the physical risks relating to climate change are likely to have
amore significant impact in the long term.
Considering risks out to 2050 prompted exploratory discussions on the likelihood and
impact of a range of risks and opportunities that are dierent or more severe thanthose
experienced today.
Crest Nicholson 45 Annual Report and financial statements 2023
Strategic Report
Climate scenarios summary
Scenario 1:
Orderly transition
Scenario 2:
Disorderly transition
Scenario 3:
Hot house earth
Scenario source SSP1/RCP1.9-2.6 SSP1/2/RCP2.6 SSP5/RCP8.5
Scenario description Well coordinated and eective
global response to climate change.
Rapid progress in the 2020s limits
warming to around 1.5°C by 2100.
The global response to climate
change is disorderly and annual
emissions do not decrease until
2030. The pace of regulatory
change is more manageable in the
short term but it results in faster,
stronger changes to limit warming
to below 2°C by 2100.
The global response to climate
change is poorly coordinated and
ineective, resulting in warming of
over 4°C by 2100.
Transition risk Moderate High Low
Physical risk Low Low/moderate High
Business impacts Products and services: climate-related risks and opportunities influence our product development.
Under scenarios 1 and 2 we anticipate increased emissions reduction regulations. Conversely, fewer regulatory
requirements are expected under scenario 3.
Supply chain: our supply chain, responsible for approximately one-third of our carbon footprint, faces potential
challenges in the transition to net-zero. Scenarios 1 and 2 anticipate higher carbon prices, leading to increased
material costs. Additionally, there may be heightened demand for lower carbon products, potentially aecting
costs. A disorderly transition may result in a steeper rise in carbon prices. In scenario 3, the supply chain is
expected to experience the most severe physical impacts, including acute events like storms and chronic
changes, potentially necessitating supplier relocations and causing productivity reductions.
Operations: under scenarios 1 and 2, we anticipate increased energy and fuel costs, driven by rising carbon
prices and heightened demand for lower carbon alternatives. In scenario 3, our sites may face greater
disruption due to increased risks of severe events, including heatwaves and more frequent and severe storms.
Additionally, flood risk is expected to rise, potentially limiting available land for development.
Access to capital: in scenarios 1 and 2, accessing aordable capital may become more challenging unless we
can eectively demonstrate our climate risk management.
Customers and markets: in scenarios 1 and 2, there may be greater demand for lower carbon homes.
To successfully transition to new low carbon homes with added technologies, high levels of customer
engagement are crucial. In scenario 3, customers are more likely to be aected by physical impacts.
B. Impact of climate-related risks and
opportunities on business, strategy and
financial planning
In FY23 our climate-related risk analysis
identified potential implications on our business,
including on our products and services,
operations, supply chain and market perception.
To address these risks and capitalise on
opportunities, we remain committed to reducing
GHG emissions throughout our value chain while
adapting our response to evolving regulations
and other climate-related impacts.
In FY23 we evolved our home designs,
prioritising enhancements in energy eciency
and reducing GHG emissions. We set a
requirement for all houses in our Legacy
Collection to achieve a minimum Energy
Performance Certificate (EPC) rating of B.
We continue to research and develop solutions
to achieve the Future Homes Standard and the
anticipated additional build costs are accounted
for in our new project acquisition appraisals.
While maintaining a high level decarbonisation
roadmap consistent with our science-based
targets, we recognise the need for a more
detailed net-zero transition plan. In FY24 we
are planning to produce a comprehensive
plan, guided by the Transition Plan Taskforce
1 Shared Socioeconomic Pathways (SSPs) describe possible future development pathways for society. Representative Concentration Pathways (RCPs) are trajectories of greenhouse gas
concentrations that provide a broad range of climate outcomes. The combination of SSP scenarios and RCP climate projections provides a framework to consider potential future climate impacts.
recommendations. This plan will provide a more
granular view of our path to net-zero emissions.
C. Resilience of strategy, taking into
consideration dierent climate-related
scenarios, including 2°C or lower
We have considered the potential for the
Group’s financial statements to be impacted
by climate change. Our assessment indicates
that there is no material financial risk to our
business in the short term. Our strategy, which
includes research and development of lower
carbon homes, remains relevant considering
changing climate risks.
Physical risks associated with climate change
will increase, particularly under the high
carbon hot house earth scenario. Risks such as
flooding, overheating and disruption to site and
supply chain activities are anticipated to grow
over time, with a greater impact in the longer
term. There is significant uncertainty about
the extent and impact of these risks to the
Group and we continue to assess and monitor
these risks. Although we do not believe that
we are significantly exposed to physical risks
in the short term, we continue to take action to
mitigate risk through flood risk and overheating
assessments and regular dialogue with our
key suppliers.
We believe that transition risks pose the
most substantial threat in the medium term,
notably the potential for an increasing price
of carbon. Carbon taxes are expected to
rise under scenarios 1 and 2 and we are
engaging with our suppliers to gain further
insight in this area. While we acknowledge
exposure to some short-term climate-related
risks, including emerging regulations, their
impact is not considered material due to the
mitigations the Group has in place.
The anticipated costs related to the delivery
of the Future Homes Standard are included
in new project acquisition appraisals.
Further information on our climate-related
risks and opportunities is provided overleaf.
There has been no material impact on the
financial reporting judgements and estimates
applied in the preparation of the FY23
Annual Report and financial statements.
Additional details can be found in our accounting
policies on pages 115 to 121. We remain
committed to evolving our assessment and
quantification of climate-related risks and
opportunities over time. This includes horizon
scanning and engagement with the divisions
and relevant functions to identify any additional
emerging risks and opportunities.
TCFD continued
Crest Nicholson 46 Annual Report and financial statements 2023
Transition risks
Risk description Financial driver Management response
Policy and legal
Impact of carbon pricing mechanisms on internal operations and supply chain
Carbon taxes and other pricing mechanisms
serve as a policy tool to curb GHG emissions.
This provides a policy lever for governments
to transition economies towards net-zero.
The escalation of carbon prices has the potential to
impact our direct fuel and energy consumption and
those associated with our supply chain.
Highest impact scenario: Disorderly transition
Increased cost of sales
Time horizon: Medium to
long term
Potential impact under
disorderly transition:
Short term: Low
Medium term: Low
Long term: Moderate
We are committed to reducing our GHG emissions
across all scopes in line with our science-based
targets. We are engaging with supply chain partners
to reduce upstream scope 3 emissions, reducing
the impact of potential carbon taxes and other
pricing mechanisms.
Emerging regulations
Emerging regulations targeting emissions
reduction poses a potential impact on our home
specifications. The Group proactively considered
additional build costs linked to the Future Homes
Standard. Further low carbon requirements
mandated by Government or Local Authorities
may arise. Additionally, we anticipate increased
reporting requirements and potential future
regulations addressing embodied carbon.
Highest impact scenario: Disorderly transition
Increased cost of sales
Time horizon: Short to long term
Potential impact under
disorderly transition:
Short term: Low
Medium term: Moderate
Long term: High
Relevant departments review and respond to
potential regulatory changes and consultations.
Our active engagement with Government, the
HBF and the Future Homes Hub enhances
our understanding and ability to implement
future policies. We collaborate with Local
Authorities, partners and expert consultants
to achieve consensus and cost-eective
outcomes. Anticipated costs related to the Future
Homes Standard are included in new project
acquisition appraisals.
Technology
Transition to low carbon technology
As we adopt lower carbon technologies in our
homes, customers may encounter unfamiliar
systems. Rising demand could strain supply and
result in a shortage of skilled labour for installation
and maintenance, potentially leading to additional
after-sales costs. Additionally, certain locations
may face electrical capacity constraints on the grid,
necessitating infrastructure upgrades.
Highest impact scenario: Disorderly transition
Increased cost of sales and
potential for reduced revenue
through project delays
Time horizon: Medium to
long term
Potential impact under
disorderly transition:
Short term: Low
Medium term: Low
Long term: Low
We engage with our supply chain to review low
carbon technologies for our homes and we are
trialling low carbon heating solutions prior to the
implementation of the Future Homes Standard.
We collaborate with Local Authorities and energy
providers to address potential electrical capacity
constraints. By engaging in early discussions,
we aim to anticipate and plan for infrastructure
requirements early in the planning process.
Market
Increasing cost of raw materials
Growing global demand for materials with lower
embodied carbon, driven by governments and
corporations seeking emissions reduction, poses a
potential risk. This heightened demand may lead to
increased prices for raw materials, such as timber.
Escalating physical risks may also lead to disruption
within the supply chain, further impacting material
availability and costs.
Highest impact scenario: Disorderly transition
Increased cost of sales
Time horizon: Medium to
long term
Potential impact under
disorderly transition:
Short term: Low
Medium term: Moderate
Long term: Moderate
We regularly engage with our supply chain partners
to mitigate material availability risks and assess their
climate risk and sustainability performance.
Crest Nicholson 47 Annual Report and financial statements 2023
Strategic Report
Risk Management
A. Processes for identifying and assessing
climate-related risks
Climate-related risks and opportunities are
reviewed as part of our Group-wide Risk
Management Framework. Our governance
structure, including the Board, Executive
Committee and divisional boards conduct
formal risk assessments semi-annually.
In FY22 we conducted a comprehensive
climate change risk assessment in
collaboration with external consultants
and our Climate Change Working Group.
This involved a peer review, internal
expertise and consultant support to develop
an extensive list of climate-related risks and
opportunities. Each risk was evaluated based
on likelihood, potential impact to the Group
and the relevant timeframe.
In FY23 we used the same external
consultant to conduct a review, utilising
qualitative and quantitative modelling
techniques to assess the impacts of climate
change over short, medium and long-term
time periods. Our risk assessment considered
current and emerging regulations, evolving
consumer preferences, modelling on physical
climate change impacts and potential future
carbon pricing mechanisms. The outcome
of this review was a short list of prioritised
risks and opportunities, accompanied by
gathering information to quantify their
potential financial impacts under dierent
climate scenarios.
B. Processes for managing
climate-related risks
Climate change is classified as a principal
risk, underscoring its significance to our
strategy. To eectively manage the most
material climate-related risks, we leverage a
combination of internal expertise from across
the Group and external specialists.
TCFD continued
Physical risks
Risk description Financial driver Management response
Chronic physical
Rising mean temperatures
Higher temperatures could increase the risk of
overheating within our homes. As a result, there
may be greater mitigation requirements that could
impact the specification of our homes.
Highest impact scenario: Hot house earth
Increased cost of sales
Time horizon: Long term
Potential impact under hot
house earth:
Short term: Low
Medium term: Low
Long term: Moderate
Our Group Technical team collaborates closely with
energy consultants to mitigate the risk of overheating
through thoughtful design considerations.
Key factors such as window size, orientation and
ventilation are reviewed to limit solar gains in the
summer while providing adequate means to remove
heat from the home.
Changing precipitation patterns
Changing precipitation patterns may lead to
more frequent occurrences of droughts and
floods. This may impact planning requirements,
necessitating greater focus on flood mitigation and
water eciency requirements.
Highest impact scenario: Hot house earth
Increased cost of sales
Time horizon: Long term
Potential impact under
hot house earth:
Short term: Low
Medium term: Low
Long term: Moderate
Flood risk assessments are conducted for all
developments during the land acquisition process to
identify and address flood mitigation requirements.
To mitigate water stress, our homes are designed
to use less than 105 litres per person per day,
surpassing current Building Regulations. Our Land
teams collaborate closely with the Group Technical
team to assess planning requirements and ensure
project deliverability.
Opportunities
Risk description Financial driver Management response
Products and services
Greater demand for sustainable homes
As the world transitions towards net-zero we
anticipate there will be greater demand for energy
ecient and low carbon homes. The availability of
financial tools, such as green home mortgages, is
expected to further drive the demand for homes
with lower carbon footprints.
Highest impact scenario: Orderly transition
Increased revenue through
greater demand for low
emission products
Time horizon: Short to long term
Potential impact under
orderly transition:
Short term: Moderate
Medium term: Moderate
Long term: High
We are actively reducing emissions associated with
the operational use of our homes while increasing
energy eciency. As a result, the majority of our
homes qualify for green mortgages. We provide
explanations of energy ecient features to
customers during the sales process.
Green finance
There is increased ability to attract green finance,
such as sustainability linked loans that provide
access to lower interest rates. Additionally,
investors are increasingly considering climate-
related risks, opportunities and progress in
reducing emissions when reviewing portfolios.
Highest impact scenario: Orderly transition
Increased access to finance at
lower cost
Time horizon: Long term
Potential impact under
orderly transition:
Short term: Low
Medium term: Moderate
Long term: Moderate
We maintain open and transparent communication
with investors, informing them about our strategy
and performance. Additionally, our Revolving Credit
Facility is linked to our sustainability performance.
Crest Nicholson 48 Annual Report and financial statements 2023
Our risk management process involves a
thorough consideration of climate-related
risks, examining their potential impact on our
strategy in both the short term and beyond.
To address these risks, we are committed
to designing and implementing necessary
mitigating actions. For a detailed breakdown
of our existing risk mitigation actions, please
refer to our climate risk table on pages 47
to 48.
More information on our risk management
process, which includes the consideration
of climate-related risks, can be found on
page 41.
C. Processes for identifying, assessing
and managing climate-related risks are
integrated into the organisation’s overall risk
management
As one of our principal risks, climate change
is integrated into our Risk Management
Framework. During the semi-annual review
of principal risks by the Board, Audit and Risk
Committee and Executive Committee, climate
change is considered within the evolving
risk landscape alongside other key risks.
These discussions and assessments play an
important role in the broader evaluation of
the ongoing viability of the Group.
For more information on our principal risks
and the Risk Management Framework see
pages 35 to 42.
Metrics and targets
A. Metrics used to assess climate-related
risks and opportunities in line with its
strategy and risk management process, and
C. Targets used to manage climate-related
risks and opportunities and performance
against targets
We monitor and disclose a range of
metrics and targets as part of our ongoing
commitment to assess and manage climate-
related risks and opportunities. These metrics
are chosen to directly address the climate
challenges and opportunities the Group
faces. We focus on areas where our actions
can have the most substantial impact,
providing a targeted and eective approach
to climate risk management.
Target/metric Performance
Link to climate-related
risks and opportunities
Climate action
GHG emissions
Reduce absolute scope
1 and 2 GHG emissions
by 60% by 2030
(FY19base year)
55% reduction in absolute scope 1 and 2 GHG emissions
compared to FY19.
— Carbon pricing mechanisms
— Emerging regulations
— Greater demand for sustainable homes
— Green financing and
partnership opportunities.
Reduce scope 3 GHG
emissions intensity
by 55%by 2030
(FY19base year)
3% increase in scope 3 GHG emissions per sq. m completed
floorarea compared to FY19.
Achieve net zero
acrossthe value chain
by 2045
Reduction in GHG emissions as detailed above.
Continued supply chain engagement and investigating
furthercarbon reduction opportunities.
Environmental Impact
Rating of our homes
96% of our homes built in FY23 received an Environmental
Impact rating of A or B.
Energy
Procure 100% renewable
electricity by 2025
89% of scope 2 electricity is procured from renewable taris. — Carbon pricing mechanisms
— Greater demand for sustainable homes
— Green financing and
partnership opportunities.
Natural resources and waste
Waste
Reduce waste intensity
(t/100 sq. m) by 15% by
2025 (FY19 base year)
14% increase in waste intensity compared to FY19. — Carbon pricing mechanisms
— Greater demand for sustainable homes
— Green financing and
partnership opportunities.
Divert at least 95% ofwaste
from landfill
Diverted 98% of waste from landfill.
Water
Homes designed to use
105 litres per person
perday (lpppd)
Standard house type specification is 105 lpppd. — Changing precipitation patterns
— Greater demand for sustainable homes.
Crest Nicholson 49 Annual Report and financial statements 2023
Strategic Report
B. Scope 1, 2 and 3 greenhouse gas emissions and energy consumption statement
GHG scope 1 and 2 emissions data
FY23
Location-based
FY23
Market-based
FY22
Location-based
FY22
Market-based
Scope 1 (tCO
2
e) 2,848 2,848 3,070 3,070
Scope 2 (tCO
2
e) 956 202 1,379 234
Total scope 1 and 2 (tCO
2
e) 3,803 3,050 4,449 3,304
Scope 1 and 2 intensity (tCO
2
e/100 sq. m) 2.09 1.68 1.82 1.35
GHG scope 3 emissions data
FY23
Location-based
FY22
Location-based
Scope 3 (tCO
2
e) 479,972 593,055
Purchased goods and services
and capital goods 170,073 185,898
Use of sold products 300,334 393,328
Other scope 3
1
9,565 13,829
Scope 3 intensity (tCO
2
e/sq. m) 2.64 2.42
Energy consumption data FY23 FY22
Scope 1 and 2 Group-wide energy use (kWh) 24,027,259 26,162,348
Scope 1 and 2 energy use intensity (kWh/100 sq. m) 13,203 10,683
1 Other scope 3 emissions have been grouped together within the table. The categories included are: 3. Fuel and energy-related activities; 4. Upstream transportation and distribution;
5.Waste generated in operations; 6. Business travel; 7. Employee commuting; 12. End of life treatment of sold products.
TCFD continued
GHG emissions calculation
methodology
We have reported on the emission sources
required under the Companies Act 2006
(Strategic Report and Directors’ Reports)
Regulations 2013. These sources fall within
our operational control. GHG emissions are
also referred to as carbon emissions within
the report.
In accordance with the GHG Protocol’s
Corporate Standard, we have reported
both location and market-based scope 2
emissions. Location-based emissions are
calculated using the Government’s GHG
Conversion Factors for Company Reporting.
Market-based emissions are calculated
using tari specific factors from our energy
suppliers, which may be more or less carbon
intensive than the location-based factor.
All electricity and gas data from sites and
oces under our control is supplied by our
utilities management partner. For non-plot
supplies, they visit sites on a quarterly
basis to obtain meter readings. Plot data
is obtained at the point of handover to the
customer. Shared oce data is obtained
from the relevant management company
responsible for the oce utilities and is
apportioned based on the floor area we
occupy. Site diesel and LPG data is obtained
directly from suppliers. Business travel data
is obtained from both fuel-card data and our
expense claim system.
Scope 3 emissions are reviewed in
accordance with the GHG protocol and
include nine categories relevant to our
Group operations. The most significant
categories are category 1 ‘purchased goods
and services’, category 2 ‘capital goods’
and category 11 ‘use of sold products’.
Category 1 includes emissions associated
with our supply chain that are not accounted
for in our standard house type material bill
of quantities. They are calculated using
a spend-based approach. Category 2
includes all material included in our bill of
quantities and emissions are calculated
using the OneClick LCA tool. Category 11
includes emissions related to regulated
and unregulated energy. Emissions from
regulated energy are calculated using the
dwelling emission rate, which is calculated in
line with Building Regulations. Emissions from
unregulated energy are based on guidance
given by the RICS professional statement
for whole life carbon assessment for the
built environment and adapted to estimate
for residential energy consumption in the
absence of primary data.
For operational joint ventures we have
included GHG emissions from our own
site compounds for the parts of the
sites we are developing, and the homes
delivered by ourselves. We use the GHG
Protocol Corporate Accounting and
Reporting Standard (revised edition) and
emission factors from UK Government’s
GHG Conversion Factors for Company
Reporting 2023.
Streamlined Energy and Carbon
Reporting disclosure
Our Streamlined Energy and Carbon
Reporting disclosure includes GHG data in
line with our methodology above. Our annual
energy consumption data covers scope 1
and 2 components and includes our site and
oce electricity, gas, diesel and LPG and
business travel with our Group-operated
fleet. All figures relate to emissions and
energy consumed in the UK. For details
on our actions taken to reduce energy
consumption see pages 21 to 23.
Verification statement by Verco Advisory
Services
Verco Advisory Services Ltd has reviewed
Crest Nicholson’s GHG calculations using
the World Resources Institute (WRI) and
World Business Council for Sustainable
Development (WBCSD) GHG Protocol:
A Corporate Accounting and Reporting
Standard. Verco has provided limited
assurance for all emission scopes and
operational energy consumption data against
ISO 14064. Based on its review of Crest
Nicholson’s GHG emissions inventory for
1 November 2022 to 31 October 2023, Verco
has determined that there is no evidence that
the GHG assertion is not materially correct.
Furthermore, Verco finds no evidence that
Crest Nicholson’s assertion is not a fair and
accurate representation of Crest Nicholson’s
actual emissions. Verco finds that the
information submitted by Crest Nicholson
is consistent with the WRI/WBCSD GHG
Protocol’s methodology and reporting
guidance, and conforms to generally
accepted GHG accounting standards.
Crest Nicholson 50 Annual Report and financial statements 2023
Non-financial and sustainability
information statement
The following table summarises the information required by sections
414CA and 414CB of the Companies Act 2006 and sets out where
relevant information can be found throughout this report.
1 Policies and standards are available on our corporate website: www.crestnicholson.com
Reporting requirement
Description of policies and standards
1
Related principal
risks
Relevant information to
understand our impact, policy,
due diligence and outcomes Page
Environmental
matters
— Sustainability policy
— Climate change policy
— Sustainable procurement policy
— Sustainable timber policy
— Supply Chain Code of Conduct.
Our policies are designed to support
activities that preserve and enhance
the natural environment.
2 Safety, Health &
Environment
9 Laws, policies
and regulations
10 Climate change
Protecting the environment
Task Force on Climate-
related Financial Disclosures
Principal risks and
uncertainties
21–24
43–50
35–42
Employees — Corporate health and safety policy
— Speaking Up policy
— Equality and diversity policy.
Our policies set out our commitment to
developing our employees and to providing
a safe and diverse working environment.
2 Safety, Health &
Environment
7 Attracting and
retaining our
skilled people
Stakeholder relations
Safety, Health & Environment
Our people
Principal risks and
uncertainties
Board and leadership
diversity
16–19
27
28–29
35–42
71
Human rights — Anti-slavery and human tracking statement
— Human rights policy
— Speaking Up policy
— Supply Chain Code of Conduct
— Privacy policy.
Our policies set out our commitment to human
rights and the steps taken to reduce risk.
2 Safety, Health &
Environment
3 Supply chain
7 Attracting and
retaining our
skilled people
Stakeholder relations
Operate our business
responsibly
Whistleblowing
16–19
26
80
Social matters — Sustainability policy
— Supply Chain Code of Conduct.
Our policies demonstrate our commitment to
maintaining high social standards throughout
our value chain and delivering lasting societal
value for our stakeholders.
2 Safety, Health &
Environment
4 Customer service
& quality
12 Combustible
materials
Stakeholder relations
Making a positive impact
on our communities
Our people
Principal risks and
uncertainties
16–19
25
28–29
35–42
Anti-bribery and
corruption
— Anti-bribery and corruption policy
— Speaking Up policy
— Supply Chain Code of Conduct.
Our policies detail the expected conduct
of our employees and supply chain.
9 Laws, policies
and regulations
Anti-fraud and anti-bribery
Whistleblowing
80
80
Business model 14–15
Non-financial KPIs 31
Principal risks and
uncertainties
35–42
Climate-related
financial disclosures
43–50
Crest Nicholson 51 Annual Report and financial statements 2023
Strategic Report
Viability statement and Going Concern
In accordance with the UK Corporate Governance Code, the
Directors and the Executive Leadership Team have assessed
the Group’s current position and its emerging and principal
risks and uncertainties over a longer period than the
12 months required by the going concern statement.
The following statement is made in
accordance with the UK Corporate
Governance Code. The Board
considers that a three-year period
continues to remain an appropriate
timeframe for this assessment.
How we assess our viability
While the nature of the material issues,
opportunities and risks faced by the Group
limits the Directors’ ability to reliably
predict the longer term, detailed trading
and cash flow forecasts are maintained and
regularly scrutinised over the three-year
period. The Group owns or controls a high
proportion of the land required to meet unit
forecasts during this time and is therefore
able to forecast future cash outflows with a
reasonable degree of confidence based on
current market conditions.
The Group also benefits from a forward
order book of sales which provides a level
of confidence in near-term revenue delivery.
These inputs allow the Group to maintain
a rolling three-year forecast for the income
statement, balance sheet, cash flow and key
financial ratios for every periodic reporting
date. These forecasts are considered to be
the ‘base case’ for performance assessment.
In recognition of the challenging economic
backdrop throughout FY23, characterised by
high inflation, high interest rates and reduced
levels of disposable income, the Directors
have reduced their expectations for FY24
trading. Accordingly, a prudent volume of
home completions and achieved selling
prices have been forecast into the base case
for next year.
During FY22 the Group completed a new
Sustainability Linked Revolving Credit
Facility (RCF) for £250.0m which expires in
October 2026. Despite the reductions in
financial forecasts factored into the base
case, the Group is forecast to comfortably
comply with all its RCF and senior loan note
debt covenants across the viability period.
The Directors have also concluded that
there is adequate financial headroom, and
appropriate mitigations if needed, to manage
through a much tougher market scenario
while continuing to meet the Group’s
combustible materials obligations and deliver
the Group’s growth ambitions, albeit over a
longer timeframe. Furthermore the Group
has assumed that the RCF can be refinanced
in the near over the viability period, given it
currently expires in October 2026.
Stress testing viability through simulated
scenarios
While the Group’s base case forecast
provides assurance that its financial
performance and position remains strong for
the foreseeable future, the Directors have
then applied stress tests to this forecast
(without double counting those already
embedded in the base case), to satisfy
themselves that this will remain true in more
challenging market conditions.
The identification of these plausible adverse
trading conditions has been derived from the
Group’s principal risks set out on pages 35
to 42, and their impact on the solvency and
liquidity of the Group. The most likely source
of this challenge lies in the severity and
duration of the UK macro-economic outlook.
If high inflation persists then confidence
in the housing market will remain weak.
Mortgage lending will remain expensive,
compounding the aordability challenge,
particularly for first time buyers or those with
low levels of equity.
If consumers believe the housing market is
about to undergo a significant correction they
postpone their buying intentions until further
clarity as to the market’s health emerges.
For those house sellers who have no choice
about the timing of their sale, either because
of unaordable and rising mortgage costs
or the impact of life events, they have no
option but to cut the price of their property
to achieve a sale. This in turn leads to a more
widespread lack of confidence in the market
as buyers seek bigger discounts and lenders
protect themselves through reduced home
valuations and increased stress testing of
their own. The Directors have therefore
modelled stress tests relating to further
volume and prices declines than those
assumed in the base forecast.
In addition, the construction sector has
experienced high levels of build cost inflation
throughout FY22 and much of FY23. In the
final quarter of FY23 build cost inflation
has broadly ceased, but it is possible that
high levels of build cost inflation return and
therefore the Directors have also modelled a
third stress test to reflect this possibility.
In addition to applying the impact of each of
these stress tests, the Directors have also
considered the impact of a ‘plausible but
severe’ downside case which includes the
sales price and sales volume falls detailed
above applying together.
In all scenarios, individually and in aggregate,
the Group continues to remain compliant
with its debt covenants without the need
to fully implement the eect of all available
mitigations to achieve this.
Finally, the Directors have then also
exaggerated each of the three stress
tests referred to above to a level beyond
that which is considered to be a plausible
‘downside’ scenario, to find the point at which
any of these stress tests would cause a
covenant failure.
Conclusion
Based on the results of this assessment, the
Directors have a reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall
due over the period of their assessment to
31 October 2026.
Going Concern
Having assessed the principal risks and all
other relevant matters, the Directors consider
it appropriate to adopt the going concern
basis of accounting in preparing the financial
statements of the Company.
Further details can be found in note 1 to the
consolidated financial statements.
Crest Nicholson 52 Annual Report and financial statements 2023
In this section
54 Corporate Governance Report
70 Nomination Committee Report
74 Audit and Risk Committee Report
81 Directors’ Remuneration Report
99 Directors’ Report
Strong
governance to
deliver our strategy
Good corporate governance
practices and strong leadership
are essential for delivering
long-term sustainable success
to our stakeholders.
Governance
Crest Nicholson 53 Annual Report and financial statements 2023
Governance
and Directors’ Report
As Chairman of Crest Nicholson,
I am pleased to present this year’s
Corporate Governance Report. The
following pages explain the eective
leadership of the Group and the
oversight and application of high
governance standards as we deliver
our strategy.
Trading conditions have become increasingly
dicult for the housebuilding sector and the
Group’s performance has been impacted
by a number of external factors. The Board
has had to carefully review and adapt the
Group’s strategy to respond to the changes
in the trading environment. By making
tough decisions, we have positioned Crest
Nicholson, so that we can continue to
operate eectively and deliver long-term
sustainable growth.
Our culture
The Board plays an important role in setting
the Group’s strategy, purpose, culture
and values. The Board spends time at
our meetings reflecting on these areas.
Each Director recognises their role in
setting the tone from the top to embed the
Group’s values.
The Board encouraged management
to undertake a review of the Group’s
culture. During the year an independent
consultant was appointed and they spent
time talking and listening to a cross-section
of employees about the business and its
culture. The work is ongoing but preliminary
reports have provided positive feedback
on our culture. This has enabled the Board
to better understand where culture is
performing well and where there are areas
for further development.
Board changes
During the year Duncan Cooper informed the
Board of his intention to leave the Group and
Lucinda Bell decided to retire from the Board.
I would like to thank Duncan and Lucinda for
their contribution to the Group during their
time on the Board.
We were delighted to welcome Bill Floydd
to the Board as Group Finance Director on
13 November 2023 and Maggie Semple as
Non-Executive Director on 1 January 2024.
Details on the appointment process and the
induction procedures are set out on page 73.
The Board continues to be diverse with
Directors from a range of backgrounds
and experience. The Board met the FTSE
Women Leaders requirements for Board
gender diversity.
Chairman’s introduction
Governance overview
Board leadership andcompanypurpose
Outlines the leadership of Crest Nicholson,
the main Board activities and how the
Board has considered its responsibilities
to its stakeholders.
Division of responsibilities
Provides an overview of the governance
framework of the Group, composition of
the Board, roles of each Director, Board
balance, delegation and Non-Executive
Director independence.
Composition, succession andevaluation
Outlines the Board’s evaluation process
and outcomes and includes the report of
the work of the Nomination Committee for
the year.
Audit, risk and internal control
Describes the role of the Board and the
Audit and Risk Committee in ensuring the
integrity of the financial statements, how
they monitor the eectiveness of the Group’s
internal controls, and the assessment of the
external auditor.
Remuneration
Provides detail of the remuneration
arrangements for the Directors and
the workforce during the year.
For more information
Chairman’s introduction – 54
Board of Directors – 56
Executive Leadership Team – 58
Our purpose, values and culture – 59
Our stakeholders – 61
Employee engagement – 63
Board activity – 64
For more information
Board evaluation – 68
Nomination Committee Report – 70
For more information
Board composition – 66
For more information
Audit and Risk Committee Report – 74
For more information
Remuneration Committee Chair letter – 81
Alignment with strategy – 83
Remuneration at a glance – 84
Summary of the Remuneration Policy – 85
Implementation of the Policy in FY24 – 86
Annual Report on remuneration – 89
Crest Nicholson 54 Annual Report and financial statements 2023
The Board takes its responsibility for the
Group’s long-term sustainable success
seriously, recognising that it generates
value for shareholders, while contributing
more widely to society.”
Board eectiveness
The Board undertook an internal evaluation
this year to review its eectiveness and
performance. The results are set out on
pages 68 to 69 and an action plan has
beendeveloped to implement the findings
ofthe review.
Sustainability
We continue to focus on operating
sustainably. During the year the Group’s new
science-based targets, aimed at reducing
the Group’s carbon footprint, were validated
by the Science Based Targets initiative.
The Board received regular updates on
progress against these targets and other
sustainability matters.
Stakeholder engagement
Stakeholder engagement is a priority for
the Board. The Board received reports on
stakeholder groups and engagement with
them at each meeting.
Extensive discussions were held on how
the Group performed against industry
benchmarks and it received feedback on
customer and supplier relations.
The Board was pleased Crest Nicholson
achieved accreditation as a Living Wage
Employer. In addition, we received the Gold
Award for The 5% Club due to the Group’s
focus on training and supporting trainees
joining the industry. These achievements
demonstrate our continued commitment to
all our employees and those who work within
our supply chain.
Shareholder engagement
An important area of stakeholder
engagement is dialogue with shareholders.
I have been pleased to meet with a number of
our shareholders during the year to discuss
a range of topics and understand their views
and their priorities.
We invite shareholders to our AGM in 2024.
Further details are set out in the Notice of
AGM which accompanies this Annual Report.
On behalf of the Board, I would like to thank
shareholders for their continued support and
the Board welcomes further engagement
during 2024.
Iain Ferguson CBE
Chairman
Iain Ferguson
CBE
Chairman
Compliance with the UK Corporate Governance Code
The Group complied in full with the UK Corporate Governance Code
(Code) for the financial year ended 31 October 2023.
The Code is available on the FRC’s website, www.frc.org.uk
Crest Nicholson 55 Annual Report and financial statements 2023
Governance
and Directors’ Report
Board of Directors
Key to Committee membership
A
Audit and Risk Committee
N
Nomination Committee
R
Remuneration Committee
E
Executive Committee
Chair of Committee
Board composition
1
One Chairman
independent on appointment
Two Executive
Directors
Four independent
Non-Executive
Directors
1 2 3
4 5 6
7
1 As at 23 January 2024.
Tenure (years) 0–1 1–2 2–3 3–4 4–5 5–6 6–7
Iain Ferguson
Peter Truscott
Bill Floydd
Octavia Morley
David Arnold
Louise Hardy
Maggie Semple
Board tenure
1
Crest Nicholson 56 Annual Report and financial statements 2023
1 Iain Ferguson CBE
Chairman
N R
Appointed September 2019
Experience: Iain was Chief Executive Ocer
of Tate & Lyle plc, later chairing Berendsen
plc and Stobart Group Ltd. He was also
Senior Independent Director of Balfour
Beatty plc and Non-Executive Director at
Greggs plc.
Iain is currently Chairman of Genus plc
and externally managed investment trust,
Personal Assets Trust plc. In addition,
Iain was Lead Independent Director at
the Department for Environment, Food
and Rural Aairs (DEFRA), Chair of
Wilton Park (Agency of the Foreign and
Commonwealth Oce) and a Member of the
PricewaterhouseCoopers LLP UK Advisory
Board. In 2003 Iain became a Commander
of the British Empire for his services to the
food industry.
What Iain brings to the Board: Iain is a highly
experienced public company Chairman, Non-
Executive Director and former FTSE 100 CEO.
He has extensive and diverse leadership
experience and a sound and practical
understanding of corporate governance.
Iain has a deep appreciation of capital
markets and investor sentiment which
he brings to Board deliberations, in
addition to financial expertise and
construction experience.
External appointments: Chairman of Genus
plc and Chairman at externally managed
investment trust Personal Assets Trust plc
and Pro Chancellor, Cranfield University
4 Octavia Morley
Senior Independent Director
N RA
Appointed May 2017
Experience: After working in management
roles at companies including Asda Stores Ltd,
Laura Ashley plc and Woolworths plc, Octavia
was Chief Executive then Chair at LighterLife
UK Ltd, Managing Director at Crew Clothing
Co. and Chief Executive at OKA Direct Ltd.
Octavia also served as a Non-Executive
Director and Chair of the Remuneration
Committee at John Menzies plc.
What Octavia brings to the Board: Octavia
has a variety of experience in senior
operational and non-executive roles in retail
and multi-site companies, both privately
owned and publicly listed. She brings
customer experience insight to the Board,
gleaned through her previous retail and
consumer roles.
External appointments: Chair of Banner Ltd,
Senior Independent Director of Marston’s plc
and Non-Executive Director of Ascensos Ltd
2 Peter Truscott
Chief Executive
E
Appointed September 2019
Experience: Peter was formerly Chief
Executive of Galliford Try plc. Peter also
worked at Taylor Wimpey plc for 30 years
where he held various positions including
divisional Chairman. He was also a member
of its Group Management Team. Previously,
he worked for CALA Homes.
What Peter brings to the Board: Peter has
extensive experience in the housebuilding
industry across a range of models and
tenures. He brings valuable operational
and public company experience to lead
the Group and is highly experienced at
delivering a broad range of housing needs
to stakeholders.
External appointments: Non-Executive
Director of Anchor Housing Group
5 David Arnold
Non-Executive Director
N RA
Appointed September 2021
Experience: David is Chief Financial Ocer
of Grafton Group plc, having joined Grafton
in September 2013. He was previously
Group Finance Director of Enterprise plc,
the UK maintenance and support services
business, from 2010 to 2013 and Group
Finance Director of Redrow plc, from 2003
to 2010. David has previously held senior
finance positions with Six Continents plc and
Tarmac plc.
What David brings to the Board: David is an
established plc Board director, who brings
extensive finance, property and commercial
experience to the Group.
External appointments: Chief Financial
Ocer of Grafton Group plc
6 Louise Hardy
Non-Executive Director
N RA
Appointed January 2018
Experience: Louise was European Project
Excellence Director at Aecom and
Infrastructure Director for CLM, which was
the consortium partner for the London 2012
Olympic Delivery Authority. Louise has been
a Non-Executive Director at the Defence
Infrastructure Organisation for the Ministry of
Defence. Louise is a fellow of the Institution
of Civil Engineers and of the Chartered
Management Institute.
What Louise brings to the Board: Louise
has a wealth of relevant experience in the
delivery of complex infrastructure projects
and experience as a non-executive director
of other publicly listed companies. Louise is
the Non-Executive Director responsible for
employee engagement.
External appointments: Non-Executive
Director of Severfield plc, Balfour Beatty plc
and Travis Perkins plc
3 Bill Floydd
Group Finance Director
E
Appointed November 2023
Experience: Bill joined the Group from a
consumer-focused listed background having
been Chief Financial Ocer at Watches of
Switzerland Group plc and Rank Group plc.
Prior to this, he was the Chief Financial Ocer
responsible for the UK & Ireland business of
Experian plc and held a number of senior finance
roles at Logica plc. Bill is a chartered accountant,
having qualified with Price Waterhouse.
What Bill brings to the Board: Bill brings a
wealth of senior financial and commercial
expertise having previously served as Chief
Financial Ocer across a range of sectors.
He has extensive experience within the public
listed environment and strong leadership
qualities essential to delivering growth.
External appointments: None
7 Dr Maggie Semple OBE
Non-Executive Director
N RA
Appointed January 2024
Experience: Formerly an academic, Maggie
began advising governments on education
in 1990s. She went on to hold several Non-
Executive Director positions in dierent
organisations such as Her Majesty’s
Court Service, the Criminal Cases Review
Commission, the Ministry of Justice (Chair of
Audit, Risk & Compliance) and McDonald’s
Restaurants. Currently, Maggie is a Non-
Executive Director at Phoenix Holdings
plc and Jamaica National Bank UK Ltd.
She is also the owner of three business – The
Experience Corps Limited, a global niche
consultancy firm, Maggie Semple Limited,
a luxury bespoke womens-wear brand and
is the co-founder of I-Cubed Group Limited.
Maggie is an author and she writes on
inclusion matters.
What Maggie brings to the Board: Maggie
has a wealth of experience in executive and
non-executive roles across a number of
dierent sectors and oers great insight to
the Board.
External appointments: Non-Executive
Director of Phoenix Group Holdings plc
and Jamaica National Bank UK Limited,
Chief Executive of The Experience Corps
Limited, Owner of Maggie Semple Limited,
Co-Founder of I-Cubed Group Limited and
Honorary Bencher of Middle Temple
Departures since 31 October 2023
Duncan Cooper, Group Finance Director,
on 13 December 2023.
Lucinda Bell, Non-Executive Director, on
31 December 2023.
Crest Nicholson 57 Annual Report and financial statements 2023
Governance
and Directors’ Report
Executive Leadership Team
Peter Truscott
Chief Executive
See biography on page 57
Bill Floydd
Group Finance Director
See biography on page 57
David Marchant
Group Operations Director
Joined ELT March 2019
Experience: David has over 36 years’
construction and housebuilding industry
experience in design and leadership roles.
He was previously a Group Director of
Bellway plc where he was responsible for
group design, technical, R&D, procurement,
commercial and quality strategies. Prior to
that David spent 25 years in engineering
design practice as a structural engineer
and at the National House Building Council
(NHBC). At the NHBC he was a Director of
their Approved Inspector business.
David is a structural engineer and
chartered builder.
Penny Thomas
Group Company Secretary
Joined ELT January 2024
Experience: Penny joined Crest Nicholson
in September 2023 and is a chartered
company secretary and governance
professional. She has significant
experience as a company secretary in
FTSE 250 companies, including the real
estate sector. Penny spent 14 years at
Shaftesbury plc, and more recently at
SEGRO plc, Moonpig Group plc and Close
Brothers Group plc.
Jane Cookson
Group HR Director
Joined ELT January 2021
Experience: Jane joined Crest Nicholson
in June 2002 as an HR Manager and
became HR Director in January 2013.
Jane has a deep understanding of the
industry, the Group and its people.
Jane has responsibility for all areas of HR
including diversity and inclusion, talent and
performance management.
Jane is MCIPD qualified and has been
in the housebuilding industry for over
20 years.
Heather O’Sullivan
Group General Counsel
Joined ELT September 2023
Experience: Heather joined Crest
Nicholson in November 2019 as Company
Solicitor leading to her appointment as
Group General Counsel in September
2023. Heather has significant experience
in the housebuilding sector having
specialised in the field since qualification
in 1998. She previously worked both in-
house for Linden Homes and Galliford Try
Partnerships and, prior to that, for leading
UK housebuilder clients in private practice.
Kieran Daya
Chief Operating Ocer
Joined ELT January 2021
Experience: Kieran joined Crest Nicholson
in January 2020 as Managing Director
of the Partnerships and Strategic
Land Division and joined the ELT
shortly thereafter.
In January 2024 Kieran was appointed
Chief Operating Ocer. He is a qualified
solicitor who has worked with some of the
country’s largest developers. Kieran has
experience in significant land acquisitions,
working on joint ventures and partnership
deals having taken a lead on some of the
larger transactions in the housebuilding
industry within recent years.
Crest Nicholson 58 Annual Report and financial statements 2023
Our purpose, values and culture
Our culture
The Board monitors the culture of the Group through a range of
indicators including:
— Safety, Health & Environment (SHE):
The Board wants all colleagues and
others aected by the Group’s activities
to be healthy and go home safely to
their families every day. The Board
is updated regularly on SHE matters,
incidents and on new or ongoing
investigations and their outcomes.
— Engagement with employees
The Board creates opportunities for
the Non-Executive Directors to meet
employees at various times during
the year through visits to the Group’s
oces and sites.
Louise Hardy, the Non-Executive
Director responsible for employee
engagement, attends Employee Voice
and other forums to engage with
employees. She shares employees’
views in Board meetings.
— Employee policies
The Board and its Committees review
key employee policies to ensure they
appropriately capture and reflect the
Group’s values and culture.
— Customer experience
This is considered and assessed
at every meeting using customer
satisfaction survey responses.
Recommendation scores are regularly
reported to the Board and discussed.
— Supplier activity
The Board reviews how the Group
supports and manages subcontractors
and constituents of the supply
chain. This includes an awareness
of challenges in the supply chain.
The Group’s payment practices are
monitored by the Board.
— Business conduct
The Board reviews business conduct
including whistleblowing reports and
Internal Audit reviews. The Board can
identify and address any incidents and
areas for improvement.
Our purpose
Building great places for our customers,
communities and the environment.
We invest in placemaking, delivering
attractive homes and incorporating
sustainable and energy-ecient
features in our developments.
We strive to make a positive dierence
to people’s lives.
Our values
The Board recognises the importance of taking the lead to enhance
the Group’s culture. It embodies the Group’s values by actions taken
within the Boardroom, as follows:
Leaving a positive legacy
The Board considers financial and non-
financial KPIs to assess performance.
The Board supports management
in delivering great placemaking and
high quality homes to our customers,
which in turn generates long-term
sustainable performance.
Being the best we canbe
The Board expects high performance
leadership and focus in meetings.
There is a commitment to deliver strong
operational and financial performance.
Time is spent developing succession
plans so that the Group has the
right talent both now and
in the future.
Championing our people
The Board sponsors a number of
initiatives to support the development
of the Group’s employees.
Employees presenting at Board meetings
always receive a warm welcome, are
listened to and given time to ask
and respond to questions.
Working together
Non-Executive Directors draw upon their
own personal knowledge and experience
to support the Executive Directors in
finding solutions to deliver
the Group’s strategy.
Doing the right thing
The Board sometimes needs to make
decisions at pace but it will always reflect
and consider the Group’s stakeholders.
Directors treat each other with respect
and open dialogue and constructive
challenge is welcomed in meetings.
1
2
4
5
3
Crest Nicholson 59 Annual Report and financial statements 2023
Governance
and Directors’ Report
Our purpose, values and culture continued
Workforce culture perception study
The Board recognises the importance of a
strong culture which is essential for delivering
the Group’s purpose. Culture shapes the
Group’s operations, engagement with its
stakeholders and impacts the delivery of the
Group’s strategy.
The Board initiated a culture perception
study of the Group’s workforce undertaken
by an independent third party. The aim
was to consider how employees feel about
working at Crest Nicholson and highlight any
opportunities for change.
Following completion of this process, a
summary of the feedback was presented to
the Board.
The results highlighted the perception of
the Group’s culture by internal and external
stakeholders and the opportunities for
improvement. The recommendations
were considered and acknowledged by
the Board.
The Board agreed that the next step was
to encourage senior management to be
involved in developing the solutions and
that the Annual Leadership Conference
provided this opportunity for the team to
work together. See opposite.
The Board agreed the below process for conducting this study:
One to one
interviews with the
Board and Senior
Leadership Team
One to one
interviews with
external partners
Focus groups
with employees
Benchmarking
against peers
1 2 3 4
Annual Leadership Conference
The Annual Group Conference was held in November 2023 for members of the
ELT and senior management. Time was spent considering the outcome of the
culture perception study. The meeting recognised the positive aspects from the
study. Attendees considered opportunities to strengthen the Group’s culture
and way of working across the workforce. Everyone was asked to suggest
improvements to be incorporated into an action plan for the Board to consider.
This feedback will be consolidated and used to frame a culture action plan, the
progress of which will be monitored by the Board.
How the study was conducted
2023 Annual Leadership Conference
Crest Nicholson 60 Annual Report and financial statements 2023
Crest
Nicholson
stakeholders
Investors
Government
and other
bodies
Customers
Our people
Suppliers
Communities
and the
environment
Our stakeholders
The Group’s stakeholders are an integral
part of the business model. The Board and
senior management engage directly with
stakeholders in dierent ways to understand
what is important to them and to reflect their
interests in the Group’s long-term strategy.
The Group’s key stakeholders are set
out below.
Our Section 172 statement together with
additional information about our key
stakeholders and why they are important to
us is on pages 16 to 19.
Consideration of stakeholders in decision
making is illustrated in the following case studies.
Expansion plans and land acquisition
At the Group’s full-year results in January 2023, the Group reported
strong progress with divisional expansion plans in Yorkshire and
East Anglia, and continued investment in land.
As 2023 progressed, the UK economy and the housebuilding
industry in particular observed challenging trading conditions.
Some housebuilders withdrew from the land acquisition market.
The Board decided to continue acquiring land with the support of
a strong balance sheet. The Group progressed acquisitions of high
quality sites in desirable locations such as Brackley, Windsor and
Oxford to add to the land portfolio.
Following further monitoring of market conditions which had
deteriorated, the Board decided that it would moderate the pace
of growth across the Group. The Board agreed to incorporate the
East Anglia division into the existing Eastern division but retain the
Yorkshire division, with 300 to 350 units anticipated during 2026.
The Board monitors the external environment and the decisions
that have been made, mean the Group is well-positioned to trade
through changing market conditions.
Roadmap to restore Crest’s five-star customer experience
The Board monitors the Group’s customer satisfaction survey results
which drive the achievement of a five-star rating under the Home
Builders Federation (HBF) scheme.
In 2022 the Group’s customer service standards fell below
the Board’s expectations and understandably, our customers
reflected this in lower NHBC customer satisfaction survey ratings.
Recognising the importance of the Group’s customers and delivery of
a high quality product, the Board asked management to implement
a customer service recovery plan in tandem with the oversight
of the implementation of the New Homes Quality Code (NHQC).
Following significant investment in FY23, in people, processes and
systems, there are encouraging signs that quality and customer
service standards are improving. If this level of service can be
maintained and the divisions can build upon the work initiated to
improve customer experience, Crest Nicholson will be on track to
regain its HBF five-star status in 2025.
Regular updates have been provided to the Board on the
implementation of the NHQC and the Board receives progress
updates on the customer service recovery plan at each
Board meeting.
Link to our stakeholders
Investors Our people Customers
Link to our stakeholders
Investors Customers
Communities and environment
Brackley, Northamptonshire
Crest Nicholson 61 Annual Report and financial statements 2023
Governance
and Directors’ Report
Our stakeholders continued
Shareholder engagement
The Chief Executive and Group Finance
Director engage proactively and
constructively with shareholders throughout
the year.
The Chairman and Senior Independent
Director are available to shareholders
to discuss governance and strategic
matters. During the year the Chairman and
Senior Independent Director consulted
with the Group’s major investors about
governance matters.
Committee Chairs are available to engage
with shareholders on significant matters
related to their area of responsibility.
AGM
All Directors, including the Chairs of the
Committees, attend the AGM and are
available to answer shareholder questions.
The Notice of AGM and related information
are circulated to all shareholders at least 20
business days before the meeting.
The AGM enables the Directors to meet with
individual shareholders.
Engagement with lenders
We meet with our lenders and keep them
updated throughout the year about the
financial and operational progress of the
Group. During the year time was spent
discussing sustainability and governance
matters and providing details of the Group’s
results as well as market feedback.
Investor relations
The Head of Investor Relations is the
principal contact for institutional
shareholders, sell-side analysts and the
financial media.
The Chief Executive, Group Finance Director
and Head of Investor Relations manage and
develop the Group’s external relationships
with shareholders.
They follow a comprehensive programme
of investor meetings and calls, particularly
following the release of full and half-year
results and trading updates. There are
formal events throughout the year, along
with a regular series of one-to-one and
group meetings.
Regular updates and feedback is provided
to the Board.
The Group’s Investor Relations programme
The Chief Executive or Group Finance Director attended
62 investor meetings, engaging with over half of current
shareholders (by shareholding value).
The Group’s investor website is kept up to date with analyst
consensus forecasts and trading updates on the Group’s strategy.
Timetable
Event Date
FY23 results
announcement
23 January 2024
FY23 investor
roadshow
23 to 29 January 2024
AGM 19 March 2024
HY24 results
announcement
13 June 2024
HY24 investor
roadshow
13 to 18 June 2024
FY24 year end 31 October 2024
Key themes discussed included the Group’s strategy and the progress
against its priorities, the housebuilding sector, capital allocation, dividend
policy and other matters raised by individual parties.
Investor roadshows were organised in person or virtually,
with investors primarily based in the UK.
Crest Nicholson 62 Annual Report and financial statements 2023
Employee engagement
Employee engagement is important for the Board
to understand the views of employees and for the
development of the Group’s culture. By listening to
employees’ views, the Board can address any concerns.
Employee Voice
I met with the Employee Voice
Forum six times during the year
and have been pleased with how
these forums have matured over
the course of the last year since
our initial meetings. The output
from the meetings has been
invaluable to the Board.”
Louise Hardy
Non-Executive Director responsible
for employee engagement
Our Employee Voice Forum is chaired by
Louise Hardy and made up of volunteers
from across the divisions.
Communication with employees is an
important topic across all the Employee
Voice Forums. Work has been undertaken
to improve communications, including an
employee newsletter, ‘The Exchange’.
An internal communications manager has
been recruited to develop and manage
employee communication strategies at
Group and divisional levels.
Once implemented, we expect these
strategies to evolve as we continue our
work to understand and develop our
corporate culture.
Anity Groups
Our Anity Groups were launched in 2022,
to empower our people to raise concerns that
impact them, so that we can make positive
change for our people.
The Disability Anity Group has developed
its objectives and working principles,
and made change to the way site plans
are labelled.
Colleagues and customers with sight
impairments, colour blindness and/or dyslexia
can find identifying the correct site plan
challenging, especially in busy environments.
By making a simple change to include
symbols and icons as well as numbers
and words as identifiers on-site plans, we
aim to make life on-site more inclusive for
our people.
Board site visits
In September the Board and I visited
our Ackender Hill development in Alton,
Hampshire, a development of 290, two to
five bedroom, houses with one-third of the
development complete and the remainder
still under construction.
Situated in the South division, we were
introduced to the site and sales teams.
The team talked to us about their overall
performance. They explained the challenges
and opportunities at the development we
were visiting. We heard about the sales
strategy for Ackender Hill, who our typical
customers are and what they are looking for
when searching for their new home.
We also had the pleasure of sharing
lunch with the site team, listening to their
experiences of working at Crest Nicholson
and at Ackender Hill, before being taken
on a walk round the development by the
site manager.
As part of our Board visits,
I always look forward to talking with
employees as we walk about site.
Their openness and pride in their job
is something I’m really proud of.”
Iain Ferguson CBE
Chairman
I was pleased to join the Disability
Anity Group as executive sponsor
this year. The level of engagement
and positivity from all the groups
has been inspiring. The other ELT
sponsors and I all look forward to
working with the Anity Groups
moving forward.”
Peter Truscott
Chief Executive
Crest Nicholson 63 Annual Report and financial statements 2023
Governance
and Directors’ Report
Strategy, operations andfinance
Meetings of the Board
The Board held six scheduled meetings
during the year. Set out below are the topics
that the Board received updates on and
made decisions about.
In between scheduled meetings, the Board
held monthly update calls, which enabled the
Board to consider operational performance
and external market developments.
Time was also scheduled for the Non-
Executive Directors to meet without the
Executive Directors present.
Conflicts of interest
The Board has a policy to identify and
manage Directors’ conflicts or potential
conflicts of interest, including those
resulting from significant shareholdings,
so that the influence of third parties
does not compromise or override
independent judgement.
Directors’ interests were reviewed by the
Board at each meeting. New conflicts arising
between meetings are dealt with at the
time between the Chairman and the Group
Company Secretary. The Board confirmed
that there are no appointments or interests
held by the Directors that are current conflicts
of interest, or that the Board considers will
be conflicts in the future. Should conflicts of
interest arise in future, measures will be put in
place accordingly.
How time was spent
A Strategy, operations and finance 40%
B Governance and legal 20%
C Leadership and people 20%
D Internal control and risk management 20%
A
B
C
D
External appointments
and overboarding
Careful consideration was given to
each of the Non-Executive Directors’
existing commitments and time required
to fulfil their obligations to the Group
including with respect to any changes to
external appointments.
Iain Ferguson holds two Chair mandates in
FTSE 250 listed entities (Crest Nicholson
Holdings plc and Genus plc). He holds
a further Chair mandate at an externally
managed investment trust, Personal
Assets Trust plc. Taking into account the
externally managed nature of the trust
and the corresponding reduction in time
commitment required compared to FTSE
250 appointments, the Board is satisfied
that the third appointment represents
half the commitment of a FTSE 250 Chair
appointment. The external appointments do
not impede the Chairman’s ability to allocate
sucient time to the Company to discharge
his responsibilities. The Board remained
satisfied that these appointments do not
result in overboarding and do not count as
conflicts of interest.
Board Strategy Day
Each year the Board dedicates a day to
reflect on the Group’s strategy. It considers
the appropriateness of the current
strategy and the operating and economic
environment. Time is spent reviewing
performance of the delivery of strategy
and how the strategy is being received
by investors.
This year’s Strategy Day began with
an overview of the macro-economic
environment from the Group’s real estate
advisors, Savills plc. They provided external
insight on the housing market as well as
key trends and the outlook for the future.
A further external speaker provided insight
into investor sentiment for the sector.
The Board reflected upon the drivers
impacting the planning environment and the
challenges that the PSL team faces.
There was an update on regulatory changes
including the Future Homes Standard and
the NHQC.
The Board spent time considering the
Group’s customer experience and initiatives
to improve this.
The external consultant appointed to
undertake the workforce culture perception
review presented alongside the Group
HR Director on the output of their work.
The Board discussed the next steps and
agreed to consider a culture action plan to
implement proposals from the review at its
next meeting.
Matters considered
— Continuously reviewed progress
against the Group’s strategy and
considered the housing market and
ongoing economic uncertainty
— Monitored trading performance
throughout the year
— Reviewed SHE performance and
initiatives to reduce slips, trips and falls
— Reviewed the Group’s annual budget
including current market consensus and
build cost experience
— Considered the Group’s financing
arrangements, capital allocation and
tax strategy
— Reflected on the land market and
considered the Group’s approach to
land acquisition
— Reviewed the Group’s customer
experience performance
— Considered progress against the
Group’s sustainability targets.
Outcomes
— Approved the annual budget, business
plan and KPIs
— Reviewed and approved the Group’s
FY22 and HY23 financial statements
— Approved the Group’s FY22
Annual Report
— Approved a FY22 final dividend and
HY23 interim dividend
— Approved the active approach to
land purchase and growth to the
land portfolio
— Approved the implementation of a
customer experience plan.
Stakeholders considered
Investors
Our people
Supply chain
Customers
Communities and environment
Government and other bodies
Board activity
Crest Nicholson 64 Annual Report and financial statements 2023
Governance and legal Leadership and people Internal control and
risk management
Matters considered
— Regular updates on significant legal
matters relating to the Group
— Continual review of the Group’s
approach and remedial work in relation
to building safety and combustible
materials matters
— A legal and governance update
including developments in
corporate reporting
— Reviewed the anti-slavery and human
tracking statement for publication
— Received reports on engagement
with investors and other stakeholders
throughout the year
— Continued to focus on the composition,
balance and eectiveness of the Board
— Considered Group succession planning
— Carried out an internally facilitated
Board evaluation covering the
Board’s eectiveness, processes and
ways of working and review of the
Chairman’s performance
— Received regular updates from the
Chairs of the Audit and Risk Committee,
Nomination Committee, Remuneration
Committee, SHE Committee and
Sustainability Committee
— Regular feedback from, and discussion
with, the Non-Executive Director
responsible for employee engagement.
Outcomes
— Considered the impact on stakeholders
in the Board’s decision making
— Reviewed compliance with the Code
through robust decision making
— Approved and published the anti-
slavery and human tracking statement
for FY23
— Progressed a range of agreed actions
arising from the FY22 Board evaluation
— Concluded that the Board and its
Committees continued to operate
eectively during FY23 and set actions
for FY24.
Stakeholders considered
Investors
Our people
Supply chain
Communities and environment
Matters considered
— Received regular updates in relation
to people, employee engagement and
diversity and inclusion activities
— Regular feedback from Employee
Voice meetings
— Regularly reviewed the Group’s
employee voluntary turnover rate and
initiatives to reduce this
— Considered the Group’s culture and
how this is implemented across
the workforce
— Anity Group updates.
Outcomes
— Development of the Group’s
cultural framework
— Empowered the Anity Groups.
Stakeholders considered
Investors
Our people
Matters considered
— Debated the risk appetite and
significant and emerging risks
— Reviewed the Group’s risk
management framework, principal risks
and uncertainties
— Provided oversight to the Operating
Framework Review.
Outcomes
— Considered and approved the Group’s
risk management framework
— Approved the principal and
emerging risks
— Confirmed the Group’s viability
statement and going concern status.
Stakeholders considered
Investors
Our people
Supply chain
Customers
Attendance at scheduled Board meetings
Director Board
Audit and Risk
Committee
Nomination
Committee
Remuneration
Committee
Iain Ferguson 6/6 – 3/3 5/5
Peter Truscott 6/6 – – –
Duncan Cooper 6/6 – – –
Octavia Morley 6/6 4/4 3/3 5/5
David Arnold 6/6 4/4 3/3 5/5
Lucinda Bell 6/6 4/4 3/3 5/5
Louise Hardy 6/6 4/4 3/3 5/5
Crest Nicholson 65 Annual Report and financial statements 2023
Governance
and Directors’ Report
Iain Ferguson CBE
Chairman
Peter Truscott
Chief Executive
Bill Floydd
Group Finance
Director
Octavia Morley
Senior Independent
Director
David Arnold, Louise Hardy
and Maggie Semple OBE
Independent Non-Executive Directors
Penny Thomas
Group Company
Secretary
The Board Roles and responsibilities
The Board sets the Group’s strategy
to promote the long-term sustainable
success of the Group in line with the
purpose, values and culture.
The Board provides leadership within a framework
of strong governance, risk management and
eective controls. It oversees the performance
and progress of the Group against business plans,
utilising KPIs to support it in its assessment.
The Board has a schedule of matters reserved
for its own decision which includes setting
profit expectations and dividend policy and
approving major acquisitions, capital expenditure
and financing.
— Leads the Board, major shareholder and other
stakeholder engagement
— Supports the Chief Executive’s management of
the business
— Applies independent and objective judgement
— Sets agendas that enable appropriate coverage of
all areas material to the Board and which support
eective and balanced decision making
— Ensures that the Board receives accurate and
timely information to aid decision making
— Facilitates an environment for eective and
constructive relationships between all Directors
— Drives a culture that supports constructive
discussion, challenge, debate and decision making
— Contributes to the Board’s succession planning,
induction and composition deliberations while
promoting equality, opportunity, diversity
and inclusion
— Ensures the views of stakeholders are considered
appropriately in Board discussions
— Responsible for the eectiveness of the Board and
its governance
— Prioritises the development of the Group’s strategy.
— Responsible for the leadership of the Group and
implementing the Group’s strategy
— Maintains communication with the Chairman in
relation to strategic considerations
— Manages the overall performance of the
business and provides eective leadership to
members of the ELT
— Proposes and leads the delivery of strategy as
agreed by the Board
— Leads the Executive Committee which oversees
operational and financial performance
— Communicates and provides feedback about
the implementation of Group policies and their
impact on behaviours and culture
— Leads and supports the Group’s divisions and its
support functions
— Engages with institutional shareholders and key
stakeholder groups including the Government
— Responsible to the Board for sustainability
policies and practices of the Group.
— Provides leadership, direction
and management of Group
Finance and oversees divisional
financial control functions
— Responsible for the Group’s
financial statements, financial
control mechanisms and
tax strategy
— Delivers investor relations
communications to
capital markets
— Manages the Group’s risk
profile and establishes eective
internal controls
— Oversees the implementation
of the Group’s risk
management actions
— Manages the Group’s
relationship with the
external auditor.
— Acts as a sounding board for
the Chairman and a trusted
intermediary for other Directors
— Available to discuss concerns
with stakeholders that cannot
be resolved through the normal
channels of the Chairman or the
Executive Directors
— Responsible for
leading the Chairman’s
performance evaluation.
— Bring an external perspective, sound judgement
and objectivity to the Board’s deliberations and
decision making
— Scrutinise, measure and review the performance of
the Executive Directors
— Constructively challenge and assist in the
development of Group strategy
— Provide independent insight, support and any
specialist advice
— Monitor the implementation of the Group’s
strategy within its risk and control framework and
consider the integrity of financial reporting.
— Provides advice and assistance
to the Chairman and
other Directors
— Supports the Chairman on
shareholder governance and
engagement matters
— Develops agendas for
Board meetings
— Oversees processes for
providing information to
the Board
— Advises the Board on all
corporate governance matters
— Considers Board eectiveness
and Directors’ training needs in
conjunction with the Chairman
— Ensures compliance with
relevant statutory and
regulatory requirements.
Executive Committee
Provides executive leadership to
deliver the Group’s strategy and
manages the operations of the Group
on a day-to-day basis.
— Monitors SHE compliance and responses to
incidents and near misses
— Continually focuses on customer service and
quality performance
— Leads operational and financial matters
— Develops and monitors the Group’s
sustainability strategy
— Considers legal matters, business ethics and
culture and how this operates within the Group
— Oversees the People strategy including, talent
management, diversity and inclusion initiatives
and employee engagement.
Management committees
Divisional boards
Safety, Health & Environment
Committee
Sustainability Committee
Each division is run by a divisional board
comprising directors responsible for
specific disciplines.
They consider the operational matters and key
risks of the division, monitor and control costs
at a divisional level and ensures high levels of
customer service and SHE performance.
Further detail on our divisions can be found
on page 3.
The SHE Committee oversees the management
of the Group’s SHE risks. It monitors performance
against the Group’s SHE strategy and sets
associated policies, procedures and initiatives.
The Sustainability Committee oversees the
management of the Group’s sustainability risks.
It monitors performance against the Group’s
sustainability strategy and recommends
associated targets, policies and initiatives to
the Board.
Board Committees
Audit and Risk Committee
Nomination Committee Remuneration Committee
Oversees external financial reporting and
disclosures, and monitors internal controls
and risk management. The Audit and Risk
Committee reviews the eectiveness
and independence of the external and
internal auditors.
Reviews the balance, diversity, independence
and eectiveness of the Board. The Nomination
Committee oversees the selection and
appointment of new Directors to the Board and
monitors succession planning for the Board and the
ELT, alongside talent management.
Sets the remuneration policy for the Board and
ELT, with focus on aligning remuneration with
the enhancement of shareholder value and
delivery of the Group’s strategy.
The Remuneration Committee considers
employee pay, when setting remuneration for
the Executive Directors.
Board composition
There is a clear corporate governance framework to enable
decision making at appropriate levels within the Group.
Crest Nicholson 66 Annual Report and financial statements 2023
Iain Ferguson CBE
Chairman
Peter Truscott
Chief Executive
Bill Floydd
Group Finance
Director
Octavia Morley
Senior Independent
Director
David Arnold, Louise Hardy
and Maggie Semple OBE
Independent Non-Executive Directors
Penny Thomas
Group Company
Secretary
The Board Roles and responsibilities
The Board sets the Group’s strategy
to promote the long-term sustainable
success of the Group in line with the
purpose, values and culture.
The Board provides leadership within a framework
of strong governance, risk management and
eective controls. It oversees the performance
and progress of the Group against business plans,
utilising KPIs to support it in its assessment.
The Board has a schedule of matters reserved
for its own decision which includes setting
profit expectations and dividend policy and
approving major acquisitions, capital expenditure
and financing.
— Leads the Board, major shareholder and other
stakeholder engagement
— Supports the Chief Executive’s management of
the business
— Applies independent and objective judgement
— Sets agendas that enable appropriate coverage of
all areas material to the Board and which support
eective and balanced decision making
— Ensures that the Board receives accurate and
timely information to aid decision making
— Facilitates an environment for eective and
constructive relationships between all Directors
— Drives a culture that supports constructive
discussion, challenge, debate and decision making
— Contributes to the Board’s succession planning,
induction and composition deliberations while
promoting equality, opportunity, diversity
and inclusion
— Ensures the views of stakeholders are considered
appropriately in Board discussions
— Responsible for the eectiveness of the Board and
its governance
— Prioritises the development of the Group’s strategy.
— Responsible for the leadership of the Group and
implementing the Group’s strategy
— Maintains communication with the Chairman in
relation to strategic considerations
— Manages the overall performance of the
business and provides eective leadership to
members of the ELT
— Proposes and leads the delivery of strategy as
agreed by the Board
— Leads the Executive Committee which oversees
operational and financial performance
— Communicates and provides feedback about
the implementation of Group policies and their
impact on behaviours and culture
— Leads and supports the Group’s divisions and its
support functions
— Engages with institutional shareholders and key
stakeholder groups including the Government
— Responsible to the Board for sustainability
policies and practices of the Group.
— Provides leadership, direction
and management of Group
Finance and oversees divisional
financial control functions
— Responsible for the Group’s
financial statements, financial
control mechanisms and
tax strategy
— Delivers investor relations
communications to
capital markets
— Manages the Group’s risk
profile and establishes eective
internal controls
— Oversees the implementation
of the Group’s risk
management actions
— Manages the Group’s
relationship with the
external auditor.
— Acts as a sounding board for
the Chairman and a trusted
intermediary for other Directors
— Available to discuss concerns
with stakeholders that cannot
be resolved through the normal
channels of the Chairman or the
Executive Directors
— Responsible for
leading the Chairman’s
performance evaluation.
— Bring an external perspective, sound judgement
and objectivity to the Board’s deliberations and
decision making
— Scrutinise, measure and review the performance of
the Executive Directors
— Constructively challenge and assist in the
development of Group strategy
— Provide independent insight, support and any
specialist advice
— Monitor the implementation of the Group’s
strategy within its risk and control framework and
consider the integrity of financial reporting.
— Provides advice and assistance
to the Chairman and
other Directors
— Supports the Chairman on
shareholder governance and
engagement matters
— Develops agendas for
Board meetings
— Oversees processes for
providing information to
the Board
— Advises the Board on all
corporate governance matters
— Considers Board eectiveness
and Directors’ training needs in
conjunction with the Chairman
— Ensures compliance with
relevant statutory and
regulatory requirements.
Management committees
Divisional boards
Safety, Health & Environment
Committee
Sustainability Committee
Each division is run by a divisional board
comprising directors responsible for
specific disciplines.
They consider the operational matters and key
risks of the division, monitor and control costs
at a divisional level and ensures high levels of
customer service and SHE performance.
Further detail on our divisions can be found
on page 3.
The SHE Committee oversees the management
of the Group’s SHE risks. It monitors performance
against the Group’s SHE strategy and sets
associated policies, procedures and initiatives.
The Sustainability Committee oversees the
management of the Group’s sustainability risks.
It monitors performance against the Group’s
sustainability strategy and recommends
associated targets, policies and initiatives to
the Board.
Land acquisition process
There is a clear dedicated approval process for
acquiring land.
There are three key stages:
— Assessment and feasibility stage
— Bid stage
— Contract stage.
The Investment Committee provides the relevant
authority to acquire land.
The process enables the Group to act quickly
while ensuring an appropriate level of diligence is
applied to significant capital allocation decisions.
Board Committees
Audit and Risk Committee
Nomination Committee Remuneration Committee
Oversees external financial reporting and
disclosures, and monitors internal controls
and risk management. The Audit and Risk
Committee reviews the eectiveness
and independence of the external and
internal auditors.
Reviews the balance, diversity, independence
and eectiveness of the Board. The Nomination
Committee oversees the selection and
appointment of new Directors to the Board and
monitors succession planning for the Board and the
ELT, alongside talent management.
Sets the remuneration policy for the Board and
ELT, with focus on aligning remuneration with
the enhancement of shareholder value and
delivery of the Group’s strategy.
The Remuneration Committee considers
employee pay, when setting remuneration for
the Executive Directors.
Further detail on the work of the
Audit and Risk Committee can
be found on pages 74 to 80
Further detail on the work of the
Nomination Committee can be
found on pages 70 to 73
Further detail on the work of the
Remuneration Committee can
be found on pages 81 to 98
Crest Nicholson 67 Annual Report and financial statements 2023
Governance
and Directors’ Report
Board evaluation cycle
FY23 activity in response to the FY22 Board evaluation
Board evaluation
FY21
Externally facilitated
evaluation carried out by
Gould Consulting (who
have no connection with
the Group or Directors)
FY22
Internally facilitated
evaluation led by
the Chairman
FY23
Internally facilitated
evaluation led by
the Chairman
Culture and values
— Initiated a culture perception study
— Provided opportunities for the
Non-Executive Directors to meet
with members of the ELT outside of
formal meetings
— Enhanced feedback and
regular reporting of employee
engagement activities.
Board meetings
— The Board continued the use of update
calls between Board meetings
— Spent further time on ‘horizon scanning’
emerging risks facing the Group.
Succession planning
— Board and ELT succession planning
continued to be a key priority
— Investment in the Crest Academy at both
entry-level and senior management.
In accordance with the Code, the Board undertakes a formal
and rigorous evaluation annually to assess the eectiveness of
its Directors, its Committees and the Board as a whole. The evaluation
process is externally facilitated every three years. This year’s
evaluation process was conducted internally led by the Chairman
and facilitated by Gould Consulting.
Crest Nicholson 68 Annual Report and financial statements 2023
The evaluation process concluded that the Board and its Committees operated eectively and
had made good progress with its actions in the prior year. The Board agreed to focus on the
following matters during FY24.
Culture and values
— The Group will continue
to build on the work
undertaken on culture
during FY23. A culture
action plan will be
developed. See page 60
— The Board will continue to
prioritise opportunities for
Non-Executive Directors
to meet with members
of the ELT outside of
formal meetings.
Succession planning
— The Board, ELT and
divisional boards’
succession plans will
continue to be a key
priority in FY24
— The Chairman to oversee
the onboarding for new
members of the Board
including the Group
Finance Director and
Non-Executive Director.
The induction programme
for Bill Floydd and Maggie
Semple is set out on
page 73.
Strategic Priorities
— The Board will strengthen
its focus on customers and
quality to deliver five-star
customer experience.
Committee evaluations
— Each Board Committee
continues to operate
eectively and all
recommendations are
covered in the Board
action plan.
Stage 3
– November 2023
The Board agreed this year’s process would again be an internal evaluation led by
the Chairman.
Following good engagement with Gould Consulting with the external evaluation in FY21
and their support to the Chairman during the FY22 evaluation, the Nomination Committee
proposed that their services be used for the internal evaluation this year. There was a tailored
questionnaire in a similar form to last year which enabled year-on-year comparison to standard
questions together with additional questions to address current topics of interest to the Board.
The Chairman agreed the form of questions.
It was agreed that review of the Chairman’s performance would be led by Octavia Morley
inher capacity as Senior Independent Director.
The evaluation was conducted as follows:
— All Directors completed the questionnaire online. Questions covered key Board matters with
questions also covering each of the Board Committees
— A shorter survey was completed by the ELT
— The results were analysed, summarising the comments and identifying key themes, which
were shared at a meeting with the Chairman
— One-to-one meetings were held by the Chairman with each of the Directors
— A Non-Executive Director meeting was led by the Senior Independent Director to consider
the Chairman’s performance, with the Chairman not present.
The Chairman presented the output from the evaluation at the following Nomination
Committee and Board meetings.
The Senior Independent Director presented the output of the Chairman’s performance from
the meeting with the Non-Executive Directors.
The Board considered the key findings and agreed an action plan.
3
4
1
2
Board evaluation process
Nomination
Committee
and Board
discussion
Stage 1 – July 2023
Meeting with the
Nomination Committee
and Board
Output
Focused
questionnaire
and meetings
Stage 2
– September 2023
Stage 4 – FY24
Crest Nicholson 69 Annual Report and financial statements 2023
Governance
and Directors’ Report
Nomination Committee Report
An appropriately balanced Board and
Executive Leadership Team with the right skills
experience and diversity, is essential for our
performance both now and in the future.
Iain Ferguson CBE
Nomination Committee
Chair
David Arnold
Non-Executive
Director
Maggie Semple OBE
Non-Executive
Director
Louise Hardy
Non-Executive
Director
Octavia Morley
Senior Independent
Director
For further information on the search and
selection processes for both the Group
Finance Director and Non-Executive Director
see page 73.
Diversity and inclusion
We continue to recognise and embrace
the benefits of having a diverse Board and
senior management team. The dierent
perspectives, backgrounds and experiences
enhance Board discussions and bring
tangible value to the long-term future of Crest
Nicholson. While appointments are made on
merit, we consider background, experience,
age, ethnicity and gender in our reviews
of the composition of the Board and the
Executive Committee.
Iain Ferguson CBE
Nomination Committee Chair
Membership
The Committee has been chaired by Iain
Ferguson, the Chairman of the Company,
since 2019. All other members of the
Committee are Non-Executive Directors.
Lucinda Bell was a member of the
Committee until 31 December 2023.
Maggie Semple joined the Committee
on1 January 2024.
Individual meeting attendance is set out
on page 65.
Attendees
The Chief Executive, Group HR Director and
Group Company Secretary are invited to
attend scheduled Committee meetings.
Committee overview
I am pleased to present this year’s
Nomination Committee Report. The report
sets out how the Committee discharged
its responsibilities during the year, which
includes ensuring the Group has eective
leadership, with the right balance of skills,
experience, diversity, independence and
knowledge at the Board and Executive
Leadership Team levels.
Board changes
In July 2023 we announced that Duncan
Cooper, our Group Finance Director would be
resigning from the Group. Duncan left Crest
Nicholson in December 2023. During his
tenure he played a vital role in the strategic
and operational turnaround of the business.
The Committee are grateful for Duncan’s
significant contribution to the Group and
we wish him all the best for the future.
The Committee undertook a search
process for a new Group Finance Director.
Bill Floydd was appointed on 13 November
2023 and brings significant chief financial
ocer experience from the listed
companies environment.
In November 2023 Lucinda Bell advised
the Board it was her intention to step
down as Non-Executive Director having
completed six years with the Company.
The Committee thanks Lucinda for her time
and commitment to the Board during her
tenure. The Committee commenced a search
process for a Non-Executive Director and
was pleased to welcome Maggie Semple to
the Board on 1 January 2024.
Committee members
Crest Nicholson 70 Annual Report and financial statements 2023
Key responsibilities and activities of
the Committee
The Committee is responsible for reviewing
the structure, size and composition of the
Board to ensure that it remains eective,
balanced and qualified to deliver the Group’s
strategy. To achieve this, the Committee is
responsible for the nomination, induction and
evaluation of Directors.
The Committee is also responsible for
succession planning for the Executive
Directors, ELT and senior management.
The Committee leads the Board’s approach
to diversity and inclusion and identifies and
oversees its initiatives in this area.
Highlights and key decisions
made during the year
— The Committee led the selection and
recruitment process for the appointment of
a new Group Finance Director, considering
carefully the Group’s priorities for the
medium to long term
— Concluded the search for a Non-
Executive Director
— Considered Executive Committee
composition, including the changes to its
membership during the year
— Supported and endorsed the Group’s
diversity and inclusion initiatives, which
included the development of the Anity
Groups, that were launched during FY22
— Reviewed and approved the Board and
Leadership Diversity Policy, and the
approach to meeting its targets
— Agreed and made recommendations to
strengthen succession plans, including
specific development and coaching needs
for key talent
— Reflective of the current market
challenges, reviewed the talent
management programmes, balancing
financial constraints with the need to
develop and support the Group’s key talent
— Oversaw the Board and Committee
internal evaluation process and reviewed
the results
— Reviewed the Committees’ composition,
and agreed that they remain appropriate
— Reviewed the Committee’s terms
of reference.
Developing talent
The Committee remains committed to
investment in the Crest Academy, which was
launched in 2021 to support and develop
employees. While the external environment
remains challenging, the Committee needs
to ensure that when the market recovers the
Group can respond to market need eectively
and that the Group has committed, capable
employees who have the capacity to deliver
results. Further detail on developing our
people can be found on pages 28 to 29.
Succession planning
The Committee plays a vital role in the
eectiveness of the Board and its ability to
deliver the long-term success of the Group.
This includes continually reviewing the
balance of skills, experience, independence
and knowledge to ensure the right individuals
are in place to support the eective planning
and implementation of the Group’s strategy.
Along with considering Board succession, the
Committee also reviews the capability of the
ELT and senior management roles, so that
there is a talented and diverse pipeline of
future leaders.
The Committee considers succession plans for
ELT members and divisional board members.
These succession plans are complemented
by a performance and development review
process. The Group partners with a specialist
external advisor, to provide training and
coaching programmes for the Group’s
nominated talent. Through a structured
approach to development opportunities, the
Group is committed to focusing on retaining
and developing its high-potential individuals
and emerging talent.
Emergency succession planning
The Committee considered the Emergency
Succession Plan for the ELT. This is a high-
level contingency plan to respond to an
immediate and unexpected lack of availability
of the Chief Executive, another member of
the ELT, or a divisional Managing Director,
where such absence would be reasonably
expected to be more than two weeks.
Board and Leadership Diversity
Policy
The Group has a Board and Leadership
Diversity Policy which is reviewed annually
by the Committee and applied in a similar
way to senior management. The Policy
reflects a recognition that a diverse Board,
Board Committees and leadership improves
operational performance. The Policy has
targets for at least:
— 40% of the Board to be female
— At least one of the Senior Board positions
(comprised of either Chairman, Chief
Executive, Senior Independent Director or
Group Finance Director) to be female
— One Director to be appointed to the Board
from an ethnic minority background by end
of 2024 (in line with the Parker Review)
— 40% female representation across senior
management by end of 2025
— 13% ethnic minority background
representation across senior management
by end of 2027.
The full terms of reference for theCommittee can be found at
www.crestnicholson.com/investors/corporate-governance
The Board meets the requirements of the
Board and Leadership Diversity Policy
and is working towards meeting its senior
management targets.
The policy also outlines the Group’s
recruitment approach that aims to attract
and encourage candidates from diverse
backgrounds. It has a requirement that all
search firms used for Board recruitment are
members of the Voluntary Code of Conduct
for Executive Search Firms and commit to
broadening their search and ensuring that
short lists reflect a clear range of ethnicity,
gender and social characteristics.
The Committee is updated at each of its
meetings on actions being undertaken by
the Group to develop female talent and
talent from other under-represented groups.
In recognition of the barriers women face
when rising to senior management, the Group
has launched a talent programme specifically
designed for females. Further detail is
available on page 28. There are also Anity
Groups that report into a Diversity and
Inclusion Forum, to raise awareness, develop
ideas and feedback concerns related to
their area of focus. Further details of these
initiatives can be found on pages 28 to 29.
How time was spent
A Succession planning 20%
B Diversity and inclusion 15%
C Directors’ appointments 25%
D Shareholder engagement 15%
E Governance matters 15%
F Board evaluation 10%
A
B
C
D
E
F
Crest Nicholson 71 Annual Report and financial statements 2023
Governance
and Directors’ Report
1 The numerical data detailing gender identity and ethnic background is as disclosed by the relevant individuals. The chosen reference date for the purposes of LR9.8R(9)(a), is 31 October for
gender background reporting and 31 December for ethnic background reporting.
2 Chief Executive, Group Finance Director, Chairman and Senior Independent Director.
3 Comprises all members of the Executive Committee as shown on page 58, as well as their direct reports.
4 Comprises all employees of the Group including senior management.
The Board’s skills and experience
The Committee recognises the importance of diversity within the Board, ELT and senior
management teams. Each Director’s skills and experience bring dierent insights and contributions to
the Board and are set out below:
Independence, election and
re-election to the Board
The Committee reviews the eectiveness
and commitment of all Directors before
recommending their election or re-election
toshareholders at the AGM.
The Committee considers the independence
of the Non-Executive Directors.
The Committee discusses the additional
commitments of all Directors (including
the Chairman) before recommending their
approval to the Board. It also considers
potential conflict issues as part of
that assessment.
The Committee has undertaken a review
and is satisfied with the contributions and
time commitment of all the Directors during
the year.
The Board is considered independent.
Bill Floydd and Maggie Semple are standing
for election by shareholders at the AGM, with
all other Directors standing for re-election at
the AGM in March 2024 with the support of
the Board.
Nomination Committee Report continued
Gender identity reporting
1
Number of
Board
members
Percentage
of the
Board
Number of
senior positions
on the Board
2
Number
in executive
management
3
Percentage
of executive
management
3
Number of
employees
4
Percentage
of
employees
4
Men 4 57% 3 31 62% 451 62%
Women 3 43% 1 19 38% 272 38%
Not specified/prefer not to say – – – – – – –
Diversity within the Group
Ethnic background reporting
1
Number of
Board
members
Percentage
of the
Board
Number of
senior positions
on the Board
2
Number
in executive
management
3
Percentage
of executive
management
3
Number of
employees
4
Percentage
of
employees
4
White British or other White
(including minority groups) 7 100% 4 44 88% 600 86%
Mixed/Multiple ethnic groups – – – 1 2% 14 2%
Asian/Asian British – – – 2 4% 26 4%
Black/African/Caribbean/Black British – – – 3 6% 30 4%
Other ethnic group, including Arab – – – – – 4 1%
Not specified/prefer not to say – – – – – 25 3%
Direct experience
Indirect experience
Housebuilding
Industry/
sector
Engineering and infrastructure
Construction
UK listed companies
Remuneration Committee chair experience
Company chair experience
Audit and Risk Committee chair experience
Senior Independent Director experience
Nomination Committee chair experience
Strategy
Management and leadership
Finance
Joint ventures and partnerships
Marketing
Investors
Government and industry
ESG (including climate)
People
Customer service
Supply chain
2
2
3
Stakeholder
experience
3
1
4
3
2
1
1
2
7
7
7
7
7
2
4
4
5
3
3
3
2
5 2
5 2
4
5
GovernanceStrategic and
operational
Crest Nicholson 72 Annual Report and financial statements 2023
Board appointment process
The Committee was responsible for the oversight of the selection process for a new Group Finance Director and Non-Executive Director.
The Committee reviewed and approved detailed descriptions for both roles having considered the particular skills, experience and background
required, mindful of both operational needs and compliance with the Code. The Committee prioritised the Board and Leadership Diversity
Policy and the Parker Review recommendations during both processes.
Bill Floydd’s induction programme
Bill’s induction specifically related to the Group financial controls,
risk management, capital markets and cyber security, and included
the following elements:
— One-to-one meetings with members of the ELT covering strategy,
operational and financial matters, people and culture and values
— Welcome meeting with the Group and divisional Finance teams
providing an overview of roles and responsibilities
— Meeting with the Head of Internal Audit with respect to the FY24
Internal Audit Plan
— Meeting with the external auditor, PwC, to receive an update on
the FY23 audit
— Met the divisional boards and attended divisional meetings
— Visited a wide range of sites across the Group’s divisions
— Introductory meetings with the Group’s corporate advisors
and brokers.
Maggie Semple’s induction programme
Maggie’s induction is focusing on Board and Committee areas and
further detail on Maggie’s induction will be outlined in the FY24
Annual Report.
Induction plans
Tailored induction plans are developed for Directors.
All newly appointed Directors received information on
the following:
We are Crest Nicholson
— Welcome meeting from the Chief Executive on the
Group’s strategy and operational challenges
— Site visits with the ELT and divisional boards
— Specific focused sessions for each Director on their role
within the Group.
Governance and culture
— Welcome meeting from the Chairman on Board operations
and current areas of focus
— Welcome meeting with the Non-Executive Directors
— Meeting with the Group HR Director on People matters
— Briefing from the Group Company Secretary on
Board governance.
There are regular touchpoints with the Chairman and Group
Company Secretary to monitor progress and ensure that
Directors receive all the information required to fulfil their roles.
The search commenced in July 2023 in conjunction with
Russell Reynolds. Russell Reynolds have no connection with
the Company.
A shortlist of candidates was interviewed by the Chairman and
Chief Executive. Bill Floydd was selected to be taken forward
to the final stage of the process. This included meeting with
the Senior Independent Director and Chair of the Audit and
Risk Committee.
Following consideration of the feedback, the Committee went on
to recommend the appointment of Bill Floydd as Group Finance
Director due to his:
— Broad plc experience
— Strong financial leadership
— Proven commercial expertise.
The search commenced in May 2023 in conjunction with Korn
Ferry. A separate division of Korn Ferry acts as independent
advisor to the Remuneration Committee. The Committee, Board
and Remuneration Committee are satisfied that the advice they
receive from Korn Ferry is independent and objective at all times.
After interviewing a range of strong and diverse candidates,
Maggie Semple was selected to be taken forward to the final
stage of the process.
Following consideration of the feedback, the Committee
recommended the appointment of Maggie Semple as Non-
Executive Director due to her:
— Non-Executive Director experience
— Wide-ranging sector expertise
— Extensive interest on customer experience, people
and culture.
Dr Maggie Semple, OBE
Non-Executive Director
Bill Floydd
Group Finance Director
Since joining the Board I have
received a comprehensive induction,
visited several of our sites and met a
number of colleagues which has given
me a detailed insight into the business
as I started my role.”
Bill Floydd
Group Finance Director
Crest Nicholson 73 Annual Report and financial statements 2023
Governance
and Directors’ Report
Audit and Risk Committee Report
The Committee supports the interests of shareholders
and stakeholders by providing independent challenge
and oversight to financial reporting, risk management
and internal control processes.
David Arnold
Audit and Risk Committee
Chair
Committee members
Louise Hardy
Non-Executive Director
Committee overview
As Chair of the Committee, I am pleased to
present this year’s Audit and Risk Committee
Report. I will outline how the Committee
discharged its responsibilities, predominantly
monitoring the integrity of financial reporting,
the eectiveness of risk management and
internal control processes and governance
and compliance matters.
This financial year has been characterised by
a challenging external trading environment
requiring commercial discipline and proactive
management. The Committee oversees the
Group’s risk management processes and
internal controls so that the Group is well-
placed to deliver ongoing value creation for
shareholders and capitalise on future growth
opportunities as they arise.
The Internal Audit function continued to
perform well, and the Committee is pleased
with the support it receives, benefiting from
their insight and challenge.
Following the appointment last year of an
Operational Framework Director, progress has
been made to ensure our Group operating
policies and internal controls are further
developed and appropriate for the organisation.
PricewaterhouseCoopers LLP (PwC) remain
our external auditor. I was in regular contact
with Darryl Phillips, the audit partner, to
discuss the audit process and findings. We are
making arrangements to tender the external
auditor contract during the course of FY24.
As part of our ongoing commitments, under
the Government’s Building Safety Pledge, time
was spent by the Committee on assessing
the appropriateness and composition of the
provision in respect to combustible materials.
More detail is available on page 76.
The Committee were disappointed that
control shortcomings were identified in two
divisions specifically around costs and margin
forecasting. These matters came to light
towards the end of the financial year and the
ELT continue to take steps to remedy these
deficiencies, which the Committee will monitor
over the course of the coming year.
The Group’s Annual Report and financial
statements for FY22 were reviewed by
the Financial Reporting Council (FRC) in
accordance with Part 2 of the FRC Corporate
Reporting Review Operational Review
Operating Procedures. I am pleased to report
that following their review we have considered
their recommendations and reflected
where appropriate.
I am pleased to confirm the Committee
continues to meet the FRC Guidance on
Audit Committees and the FRC Minimum
Standard for Audit Committees. We remain
committed to ensuring that the accountability
principles set out within the Code are applied
and that the interests of shareholders and
other stakeholders are properly protected in
these areas.
Finally, my fellow Committee members and
I would like to extend our thanks to Duncan
Cooper, Group Finance Director, who left the
Group on 13 December 2023 and wish him
well for the future. The Committee and I look
forward to working with Bill Floydd during the
coming year.
David Arnold
Audit and Risk Committee Chair
Membership
The Committee has been chaired by
David Arnold, since September 2021.
All the members are independent Non-
Executive Directors.
David Arnold is the Director with recent
and relevant financial experience.
The Board is satisfied that the Committee
as a whole has competence relevant to
the sector.
Lucinda Bell was a member of the
Committee until 31 December 2023.
Maggie Semple joined the Committee on
1 January 2024.
Individual meeting attendance is set out
on page 65.
Attendees
The Chairman, Chief Executive, Group
Finance Director, Group HR Director,
Group Company Secretary, Group
Financial Controller, the Head of
Internal Audit, Group Tax Director and
representatives from our external auditor,
PwC, are invited to attend scheduled
Committee meetings as required.
Maggie Semple OBE
Non-Executive Director
Octavia Morley
Senior Independent
Director
Crest Nicholson 74 Annual Report and financial statements 2023
Activity during the year
Financial reporting
Reviewed reports from the Group Finance team, management’s significant accounting
judgements and the policies applied, recommendations were made to the Board to approve
the FY22 and HY23 results, associated announcement and the FY22 Annual Report.
Reviewed the basis of preparation of the FY22 financial statements as a going concern as set out in
the accounting policies and recommended that the Board support the going concern statement.
Considered the long-term viability statement in the FY22 Annual Report, with focus on the
judgements, estimates and testing, with a recommendation to the Board to support the long-
term viability statement.
Recommendation made to the Board that the FY22 Annual Report was a fair, balanced and
understandable assessment of the Group’s position and prospects.
External audit
Assessed the eectiveness of the FY22 external audit and concluded that the audit was eective
and agreed that PwC should be proposed for reappointment as the external auditor at the
2023 AGM.
Considered and approved PwC’s Group audit plan for the FY23 financial results and the
recommended Audit Quality Indicators.
Received PwC’s findings from the FY22 external audit and the HY23 interim review.
Recommendation made to the Board to approve the letter of representation to PwC in
respect to the FY22 and HY23 results.
Approved the services and fees for non-audit related services provided by PwC for the FY23
financial year. The Committee agreed that the policy for the provision of non-audit services
by the external auditor remained appropriate.
Negotiated and agreed the statutory audit fee for the FY23 financial year.
Considered and approved the approach for an external audit tender.
Risk management and internal control environment
Reviewed the eectiveness of the risk management activities and the Group’s
internal controls.
Considered the principal and emerging risks together with their associated mitigating
actions. Recommended to the Board the risks to be included in the FY22 and HY23
financial results.
Reviewed progress by management on the Operating Framework Review.
Internal Audit
Reviewed and approved the Group’s Internal Audit Charter.
Agreed that the Internal Audit plan for FY24 and proposed audits were relevant and
appropriate in the light of the Group’s principal and emerging risks.
Considered Internal Audit reports, findings and agreed actions.
Reviewed the scope, quality and eectiveness of Internal Audit. Concluded that the Internal
Audit function has provided independent and objective assurance over the internal controls
based on the Internal Audit Plan.
Governance matters
Terms of reference for the Committee were considered and it was agreed they remained in
line with best practice and complied with the Code.
Monitored compliance in respect to data privacy, anti-money laundering, bribery and
corruption, whistleblowing reports and investigations and other compliance matters.
The full terms of reference for theCommittee can be found at
www.crestnicholson.com/investors/corporate-governance
Key responsibilities and activities
of the Committee
The Audit and Risk Committee is responsible
for reviewing the eectiveness of the Group’s
internal controls and risk management.
This includes the Group’s procedures for
detecting fraud, its processes and controls
for the prevention of bribery and the
eectiveness of the Group’s anti-money
laundering systems.
The Committee monitors and reviews the
independence, objectivity and eectiveness
of Internal Audit. It evaluates and agrees
the Group’s Internal Audit plans and
receives regular update reports on Internal
Audit’s findings.
The Committee monitors the integrity of
the Group’s financial statements and any
significant announcements relating to
its financial performance. This includes
assessing significant financial reporting
judgements contained within the financial
statements and announcements.
The Committee is responsible for monitoring
and reviewing the eectiveness of the
external auditor. The Committee advises
on matters related to the external auditor
including their appointment and re-
appointment, their fees, and reviewing
and monitoring their independence and
objectivity which includes the extent of any
non-audit services provided.
How time was spent
A Financial reporting 20%
B External audit 25%
C Risk management and
internal control environment
20%
D Internal Audit 20%
E Governance matters 15%
A
B
C
D
E
FRC Review
The Group’s Annual Report and financial statements for FY22 were reviewed by the Financial Reporting Council (FRC) in accordance with
Part 2 of the FRC Corporate Reporting Review Operational Review Operating Procedures.
The FRC noted certain matters where it believes users of the Annual Report would benefit from improvements in existing disclosures.
The Committee has reviewed these matters and has ensured that they have been addressed through amendments to the current year
disclosures, where relevant and appropriate. The FRC’s letter only considered compliance with reporting requirements and does not verify
the accounts nor provide any assurance that the Annual Report and financial statements are correct in all material respects and accepts no
liability for reliance on their review by the Group or any third party, including but not limited to shareholders.
Crest Nicholson 75 Annual Report and financial statements 2023
Governance
and Directors’ Report
Key financial and internal control matters
During FY23 the Committee considered the following key financial and internal control matters in relation to the Group’s financial statements
and disclosures with input from management and the external auditor.
Key financial
and internal
control matters How the Committee has addressed these matters
Valuation of
inventory
Inventory is the most significant balance on the consolidated statement of financial position and is held at the lower of
cost and net realisable value (NRV). A forecast is maintained for the NRV of each development and this contains several
key assumptions. Due to the influence of external factors and the cyclical nature of the housing market, there is a risk
that the calculation of the developments’ NRV may be subject to estimation error, leading to inventory being held at an
incorrect value when an impairment charge to reduce its value would be appropriate. Management regularly review the
selling prices and build costs of all the Group’s housing stock, including the impact on future forecasts for developments
not yet under construction, considering latest market valuations. Where forecasts determine that a site may no longer
generate a margin, any impairment is recognised in the consolidated income statement. During FY23 £13.4m of
impairment has been charged, mainly relating to the legacy Farnham development already held at zero margin, and,
£5.8m of impairment has been used in the year on housing units sold, resulting in a net movement in the NRV provision
of £7.6m in the year.
The Committee understands the controls in place concerning NRV, including the minimum hurdle rates management
require before projects are approved and how management monitors NRV on an ongoing basis. Where impairment
has been recognised during FY23, the Committee challenged management to ensure that appropriate assumptions
were in place, in particular around expected levels of sales prices and build costs. The Committee was satisfied that the
inventory carrying value, and associated impairment, was appropriate.
Margin
forecasting and
inventory
The Group’s margin recognition framework is based on the margin forecast for each phase of development.
These margins, which drive the recognition of costs as revenue is taken, reflect estimated selling prices and costs
for each development. This methodology then guides the allocation of total forecast costs, matching both land and
build costs of a development, to each component of revenue. There is a risk that the margin forecast for the site and
the margin subsequently recognised on revenue is not appropriate and reflective of the actual final profit that will be
recognised on a development. Sales prices and build costs are inherently uncertain as they are influenced by changes
in external market factors, such as the availability and aordability of mortgages, changes in customer demand due to
market uncertainty and availability of labour and materials.
The Committee continues to review management’s internal control processes, the main areas of estimation and
challenges management. The Committee reviewed management’s assessment of controls in two divisions which were
not eective during the year, and understood the additional work performed by management to gain comfort over build
cost position.
Combustible
materials
provision
The Group has recognised a net exceptional combustibles materials related charge of £5.3m in the year, in addition
to that recognised in prior years. The year end provision balance is £144.8m. The charges relate to forecast costs
associated with remedial works to be performed on legacy buildings with potential fire safety issues due to combustible
materials and where the Group has a legal or constructive obligation to remediate.
The combustible materials provision has increased by £4.0m in the year. This increase reflects forecast changes in build
costs and the imputed interest on the provision balance, net of amounts spent in the year. As a consequence of signing
the Developer Remediation Contract on 13 March 2023, the Group has entered into contractual commitments with the
UK Government to identify and remediate those buildings it has developed with possible life-critical fire safety defects
going back 30 years to 1992. The Directors have used Building Safety Fund (BSF) cost information, other external
information and internal assessments as a basis for the estimated remedial costs, as well as considering the impacts
of build cost inflation. These estimates are inherently uncertain due to the highly complex and bespoke nature of the
buildings, actual costs diering to the amounts notified by the BSF costed projects, and that fire safety assessments in
progress may require dierent levels of remediation and associated costs than those currently estimated.
This is a highly complex area with judgements in respect of the extent of those properties within the scope of the
Group’s combustible materials guidance and the provision could be extended as the interpretation of Government
guidance continues to evolve or due to cost estimation changes. By contrast, the Group expects to recover some costs
from architects and subcontractors involved in the construction of these schemes but does not recognise these benefits
until they are received.
The Committee reviewed and challenged the appropriateness, quantum, adequacy and completeness of the provision
taking into account Government guidance in this area, experience gained since 2019 and potential exposure over the
population of legacy developments. The Committee agreed that there was no certainty over the potential quantum
of the contingent liability associated with sites not yet identified or provided for. The Committee was satisfied that the
provision and related disclosures are appropriate.
Due to the size and nature of the individual items within the charge, the Committee has agreed with management’s
opinion to continue to treat the combustible materials charge, and associated recoveries, as an exceptional item.
Audit and Risk Committee Report continued
Crest Nicholson 76 Annual Report and financial statements 2023
Viability and going concern
The Committee reviewed management’s
consideration in relation to the prospects of the
Group. It satisfied itself that the going concern
basis of preparation continues to be appropriate
and made recommendations to the Board in this
regard. The Company’s viability statement can
be found on page 52.
Further information on the Group’s going
concern assessment can be found in note 1 to
the consolidated financial statements.
Fair, balanced and understandable
At the request of the Board, the Committee has
considered whether the FY23 Annual Report
and financial statements is fair, balanced and
understandable and whether the information
provided is necessary for stakeholders to
assess the Group’s strategy performance and
business model.
The FY23 Annual Report and financial
statements is focused on the Group’s key
strategic messages and it is important that an
assessment is undertaken to ensure these
messages are fairly summarised and provide an
accurate description of performance.
The fair, balanced and understandable process
was led by the Group Finance Director, supported
by members of Group Finance, Company
Secretariat, Investor Relations, Sustainability,
HR and Marketing functions. This group was
responsible for regularly reviewing the process
and ensuring balanced reporting with appropriate
links between key messages and sections of
the Annual Report and financial statements.
A recommendation was made from this group to
the Committee confirming that they considered
the Annual Report and financial statements to be
fair, balanced and understandable.
The Committee received a full draft of the
Annual Report and financial statements and
provided feedback on it. The draft feedback
was incorporated into the report prior to final
Board approval.
In particular, the Committee considered:
Fair Balanced Understandable
Provided a comprehensive review of the
Group’s activities and its strategy which
was communicated clearly and was
consistent throughout.
Provided a balanced view with
emphasis on both the key positive and
negative points.
Provided a clear and structured framework
for the Annual Report with key messages
appropriately outlined throughout.
Described current operational performance,
including market trends surrounding customer
service levels, market uncertainty, mortgage
availability and aordability and build inflation.
The principal risks faced by the Group and the
actions taken to mitigate this were considered
and explained.
Clearly outlined the key accounting
judgements and estimates in the
Committee’s report, consistent with those
outlined in the financial statements, and
how these reflected the external auditor’s
key audit matters.
Clearly and concisely presented the
information, alongside the Group’s
key performance indicators which
are considered most relevant to the
Group’s stakeholders.
Highlighted key messages in the narrative
report that were aligned with the
financial results.
Reflected appropriate events over the year
and acknowledged the material issues
faced by the Group.
Provided clear linkages and signposting
throughout the report.
Following review, the Committee is satisfied that, taken as a whole, the Annual Report and financial statements is fair, balanced and understandable.
External audit
External auditor
PwC was appointed as external auditor for the
year ended 31 October 2015 following a tender
process in 2014. Darryl Phillips, the Group’s lead
audit partner, is in the fourth year of his tenure
in FY23. The Group is currently undertaking
a tender exercise in accordance with the EU
Audit Regulation and Directive (as it forms part
of UK law), and subject to suitably qualified
tender participants, expects the tender to be
complete by the end of FY24.
The Group complies with the requirements
of the Statutory Audit Services for Large
Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order
2014 with respect to both the approach to the
tender of the external audit and the provision
of non-audit services.
The external audit process
The Committee, on behalf of the Board, is
responsible for the relationship with the
external auditor. PwC presented the strategy
and scope of the FY23 audit alongside
proposed Audit Quality Indicators (AQIs).
AQIs are designed to assess the quality of
the audit and have been developed by PwC
alongside management.
AQIs assist the Committee in measuring both
management’s and PwC’s performance.
Committee meetings allow time for the
Committee and the external auditor to meet
without management being present. PwC also
meet with the Group Finance Director and the
Group Finance team at regular intervals during
the annual audit process.
External auditor eectiveness
An annual review of external audit
eectiveness is undertaken at the conclusion
of the year end audit. The review includes
assessing the audit process and the audit
firm. Feedback on the FY22 audit was
received from Committee members, Chief
Executive, Group Finance Director and
from Group and divisional representatives.
The Committee Chair also requested
PwC review and comment on the Group’s
internal process.
The review concluded that the audit process
and the audit team continue to perform well.
Their key strengths included a good quality
audit plan, with good communication and
with the Committee being kept informed
throughout the process. It was agreed that
going forward the planning process for
the divisional audits would be more clearly
communicated to the divisions.
Independence and non-audit services
The Committee keeps the independence of
the external auditor under regular review.
It considers PwC’s independence at least
once a year, receiving reports from PwC on its
internal quality controls and independence.
In assessing the independence of the auditor
from the Group, the Committee considers
the information and assurances provided by
the auditor confirming that all its partners
and employees involved with the audit are
independent of any links to the Group.
PwC confirmed their continued
independence as external auditor.
The Committee carefully considers the
non-audit services provided by PwC.
Where non-audit services are to be provided
by PwC, both the Group and PwC have
robust processes in place to prevent auditor
independence being compromised.
The Group operates a policy for the provision
of non-audit services that is reviewed annually
and is consistent with the regulatory framework
for statutory audit. The policy sets out the
types of non-audit service for which the use
of the external auditor is prohibited (including
accounting and valuation services) and provides
a list of activities that are ‘Permitted Non-Audit
Services’ that require the specific approval of the
Committee prior to any service being provided.
Crest Nicholson 77 Annual Report and financial statements 2023
Governance
and Directors’ Report
Operational Framework summary plan
The summary plan to complete the Operational Framework project is as follows:
Operational Framework project
Scoping and risk
assessment
Information
gap analysis
Information
gaps closed
Process mapping
and control
identification
Controls testing
and remediation
System design,
build and
implementation
System
go live
Non-audit fees
The Committee has a policy to pre-approve
permitted non-audit services where these are
below £50,000 per year. In the current year
the Committee approved all non-audit services
which were provided. Non-audit services
include PwC’s interim review of the half-
year results which the Committee considers
supports PwC’s work on the statutory full year
audit. PwC also provide non-audit assurance
services for sustainability reporting, Total fees
payable for these non-audit services were
£154,000 (FY22: £95,000). PwC also provides
audit services to the Group’s defined benefit
pension scheme and the associated fees are
met by the scheme. For further information
please see note 5 to the consolidated
financial statements.
2023 2022
Audit fees (£’000) 985 890
Non-audit fees
(£’000) 154 95
Ratio of non-audit
fees to audit fees 0.16:1 0.11:1
External auditor re-appointment
The Committee considers that PwC was
objective and independent throughout FY23
and is proposing that PwC be re-appointed
as external auditor to the Company at the
AGM. There are no contractual obligations
that restrict the Committee’s choice of auditor
and the recommendation is free from third-
party influence.
Risk management and control
environment
The Committee recognises that eective
risk management is key to the long-term
sustainable success of the Group and for
achieving the Group’s strategic priorities.
The Group’s principal and emerging risks are
considered by the Board. The Committee
regularly reviews the eectiveness of the risk
management process on behalf of the Board.
Both the Board and the Committee undertook
dedicated risk review sessions on the Group’s
principal and emerging risks during FY23 and
were satisfied that risk management processes
were appropriate and the control environment
as it applied to material controls was adequate.
There were specific weaknesses in the control
environments within two divisions over costs
and forecasting which were identified towards
the end of the financial year. The ELT continues
to take steps to address these issues which
have had oversight from the Committee.
Risk management approach
Risk review sessions are held at divisional
board level and reviewed and consolidated
into the Executive Committee’s Group risk
review. This then feeds into the information and
assurance processes of the Committee and into
the Board’s assessment of risk exposures and
the strategies to manage these risks.
The Board (with input from the Committee)
has carried out an assessment of the principal
and emerging risks facing the Group and how
those risks aect the prospects of the Group
alongside the mitigations in place.
During the year the Board, with support
from the Committee, reviewed its risk
appetite, which was themed around market,
operational and governance matters.
The Board’s regular review of its risk appetite
ensures the Executive Committee and divisional
boards are better placed in their decision making.
More information about our approach to risk and
our principal risks is found on pages 35 to 42.
To support the Board, the Committee reviews
the Group’s control environment alongside
the principal risks.
Eectiveness of risk management and
internal controls
The Group Finance Director has executive
responsibility for risk management and the
control environment. He is supported in this
role by the Group Head of Internal Audit,
the Group Financial Controller, the Group
Commercial Finance Director, and Group
Company Secretary.
Overall accountability for risk management and
internal controls sits with the Committee, and
they review pertinent risk management and
internal control information at every meeting.
Further details can be found on page 75.
The Group’s internal controls are designed
to mitigate, rather than eliminate, the risk
of not achieving the Group’s strategy
and objectives. As such, they can only
provide reasonable, and not absolute,
assurance against material misstatement
or loss. Further detail of our internal control
framework and assessment is below.
Last year the Group commenced a project to develop its
Operational Framework. The Operational Framework aims to
provide a visual overview of the Group’s end-to-end processes as
well as standardised key operational information that will be used
to induct new joiners, improve productivity for all employees and
provide a consistent operating environment.
During the year the project has focused on reviewing and updating
policies and procedures and producing a consistent set of
operational information for key process areas within the Group.
The project team is identifying and documenting key financial
controls across the Group, so that these are clearly stated within the
Operational Framework and can be regularly monitored and tested.
This work is planned to complete during 2024 and all operational
information will be easily accessible, enabling the Group to continue
to eectively mitigate financial risks and operate in a consistent way.
Audit and Risk Committee Report continued
Crest Nicholson 78 Annual Report and financial statements 2023
Key financial and internal control matters
The Committee considered the following key financial and internal control matters in relation to the Group’s financial statements and disclosures
with input from management and the external auditor.
.
The Group has an internal control framework which defines
roles and responsibilities for managing risks and operating
internal controls at all levels of the Group:
— Policies and procedures are in place for the main functions
of the Group to govern and explain why, what and how
we operate
— Approval levels and limits are governed by the Group’s
Delegated Authority Manual and these are built into the
Group’s financial and operating systems
— Employees are aware of the delegated authority limits set
by the Board and confirm their understanding of relevant
internal policies which are held on the Group’s intranet
— Employees have annual performance development reviews
with training requirements identified and agreed
— The Group operates a Speaking Up (whistleblowing) policy
which includes access to an independent helpline for
anonymous reporting of concerns
— Group Finance has identified divisional key controls which
every division is required to adhere to
— Monthly management reporting and half-yearly financial
reporting processes enable financial performance to be
regularly reviewed against budget and forecasts at both
divisional and Group levels
— Cost and Value Reconciliation (CVR) processes enabling
operational performance for each site to be regularly
reviewed against budget
— A three-year rolling forecast is maintained monthly and a
five-year strategic plan is prepared annually. Scenario plans
and sensitivity analyses are regularly produced and
presented to the Board
— Accounts payable verifies any changes to supplier
bank accounts
— Stage-approval processes are in place for invoices and
transactions and sucient evidence is required by the
Group Finance team which is subject to validation before
payments are made
— Payroll is managed by an experienced team, segregated
from the HR team, with appropriate controls prior to payment
being made. A third-party payroll provider is used for
payroll processing
— All major balance sheet and income statement accounts are
reconciled as part of the monthly management accounting
process and reconciling items are identified and resolved in
the month with detailed variance analysis to prior periods
and budget being performed
— Land for development is only acquired after thorough
due diligence of its commercial potential and risks and
subsequent approval by the Investment Committee
— Board approval is required for high value acquisitions
— We use national supplier agreements and preferred supplier
lists to maintain control of the Group’s major materials and
labour spend
— Work by subcontractors is appropriately tendered and
awarded with background vetting being performed
— Sales discounts and incentives are approved in
line with approval limits, and amendments to sales
prices are restricted to authorised employees in the
finance department
— All financial transactions are recorded and, where required,
approved utilising finance systems or automated workflows
— Role-based access is in place for all financial systems and
there are appropriate security controls in place.
The risks identified with respect to financial fraud and error
are mitigated through the following key controls:
— The Group’s fraud risk register was reviewed in detail during
the year to confirm that risks remain relevant and complete,
and controls remain appropriate
— The Group’s stance on fraud is implemented via several
Group policies and procedures, including the Group’s
Code of Conduct, anti-bribery and corruption, anti-money
laundering, gifts and entertainment, Speaking Up, expenses,
cyber security and share dealing
— Financial systems have appropriate segregation of duties
following predefined approval limits and the ability to
maintain vendors’ details is segregated from purchasing,
goods receipt.
Internal assurance activities
— Board, Board Committees and management committees:
monitor performance against strategy, recommend policies,
procedures and initiatives and oversee the management of
risks and the operation of internal controls
— Internal Audit: the Internal Audit Plan covers the specific
key risks of the Group and is approved by the Committee
annually. The plan is executed by an eective in-house
Internal Audit team
— Functional Forums: each divisional function of the Group
meets on a regular basis to review new and emerging risks,
including new regulations. They also review and update
policies, procedures, and recommend improvements to
internal controls
— Divisional key control attestation: the Managing Directors
and Finance Directors of each division are required to sign
o compliance with the established divisional key controls
every year
— Safety, Health & Environment (SHE) function: drives
continual improvement in SHE performance across the
Group’s sites. It engages with the business via SHE
inspections, the provision of training, information and advice
to all employees and by reporting to the SHE Committee
with the Board considering appropriate SHE-related matters
— Sustainability function: drives continual improvement
in sustainability performance across the Group and is
responsible for driving performance against targets
— Fraud: where instances of fraud are suspected or alleged,
Internal Audit will investigate the circumstances and report
to the Committee and management with agreed actions to
be taken.
External assurance activities
— The external audit performed by PwC. The audit opinion
sets out the scope and nature of their work
— The carbon emissions data receives third-party assurance to
ISO 14064 standard
— We engage external independent safety auditors to conduct
regular and unannounced site safety reviews
— We utilise a Security Operations Centre (SOC) to monitor
the Group’s networks and have Cyber Essentials
Plus certification.
Internal control
framework
The Group’s internal
controls are designed to
mitigate the risk of not
achieving the Group’s
strategy and objectives.
As such, they provide
reasonable assurance
against material
misstatement or loss
Key assurance
activities
The Committee continues to believe that the Group’s risk management and internal control systems, including the control and compliance culture
within the business, provide a reasonable level of assurance that the financial statements are free from material error and misstatement. While two
of the Group’s divisions experienced control shortcomings during the year, which are being addressed, the Committee is satisfied that for all other
divisions of the Group, and at the central level, that the relevant systems and processes have been in place and have operated eectively during
the financial year.
Crest Nicholson 79 Annual Report and financial statements 2023
Governance
and Directors’ Report
Internal Audit
The Internal Audit function is a key element
of the Group’s corporate governance
framework. Its role is to provide independent
and objective assurance, advice and insight
on governance, risk management and
internal control to the Committee, as well
asto the Board and Executive Committee.
There is an in-house Internal Audit team
which reports directly to the Committee
Chair, and is supported by external specialist
resource where required.
The Internal Audit function reviews the
eectiveness and eciency of internal
controls in place, providing assurance that
internal controls remain fit for purpose and
to ensure they are applied consistently
throughout the Group. In addition to
reviewing the eectiveness of these areas
and reporting on aspects of the Group’s
compliance with them, the Internal Audit
function agrees actions with management
toaddress any key observations and
improve processes. Internal Audit monitors
their implementation and reports regularly
totheCommittee on progress made.
Internal Audit plan
The Group’s Internal Audit plan is approved
by the Committee, including the scope of
individual audits which are aligned to the
principal risks faced by the Group. The plan
is continually assessed against progress
and any emerging risks reflecting any
amendments to the plan where necessary.
The Committee considers the internal
control recommendations raised by the
external auditor during the external audit
andincorporates these recommendations
into the Internal Audit plan as appropriate.
An internal audit methodology is in place
which aligns with the Institute of Internal
Auditors Code of Practice and International
Professional Practice Framework (IPPF).
This provides a quality benchmark for
theperformance of internal audit work.
Internal audit reports are reviewed on a
regular basis by the Executive Committee
and management responsible for the area
assessed. Management is responsible
for ensuring actions are implemented as
agreed. Follow up and escalation processes
are in place to ensure recommendations
are implemented and fully embedded in
atimely manner.
There are also a range of functions and
roles which are also an important source
of assurance. These include Company
Secretariat, IT, Group Finance, SHE and
Quality Assurance. The Committee may
request assurance reports from these
functions or explore specific risks and
mitigations with the functional leads.
Processes carried out by these functions
aresubject to review from Internal Audit.
Internal Audit eectiveness
The Committee continually reviews Internal
Audit’s eectiveness considering the quality,
objectivity and expertise of the Internal
Audit function. To support the Committee in
evaluating the eectiveness of the Internal
Audit function, feedback is received from
key stakeholders including the Board,
Committee, ELT, divisional and functional
management. Following an evaluation of
the services provided in respect of Internal
Audit, the Committee confirms that both the
processes and management of the Internal
Audit function are appropriate and eective.
Internal Audit independence
The Committee continually reviews the
independence of the Internal Audit function.
Through reporting lines to the Chair of
the Committee, the Head of Internal Audit
can report any impairment to objectivity
or independence. The Internal Audit
function also liaises with PwC, the external
auditor, discussing relevant aspects of
their respective activities which ultimately
supports the assurance provided to the
Committee and the Board.
Ethical behaviours
The Board and Committee are committed to the
highest standards of ethical behaviour, honesty
and integrity in the Group’s business practices.
Employees and supply chain partners are
made aware of the Group’s strategy and
how their behaviours impact delivery.
Everyone working for the Group is expected
to work in line with the Group’s values.
Anti-fraud and anti-bribery
The Group has an anti-bribery and corruption
policy which all employees must follow and
is supported by mandatory online training
that employees must complete annually.
Supporting policies and processes exist to
monitor compliance and prevent bribery being
committed on the Group’s behalf. As part of
this, employees are required to comply with
the Group’s gifts and entertainment policy
which only permits employees to accept or
give proportionate and reasonable hospitality
for legitimate business purposes.
The Group has in place robust anti-money
laundering policies, processes and oversight,
supported by anti-money laundering
guidance and training to all divisions.
The Group operates and maintains several
policies and procedures which set out what
is expected of employees and supply chain
partners to protect themselves as well as the
Group’s reputation and assets. These policies
and procedures are supported by online
training which employees are required to
complete on a regular basis. Supply chain
partners are required to agree to the
Group’s Supply Chain Code of Conduct.
The Committee oversees the implementation
of these policies, reviews any incidents
arising and training progress.
FY23 Internal Audit plan
A risk-based Internal Audit plan
is developed in consultation with
the Executive Committee and key
stakeholders, assessing key risks and areas
of strategic development, any emerging
themes from previous audit work and
evaluation against external benchmarks.
The plan is subject to further review and
ultimate approval by the Committee.
The FY23 Internal Audit plan focused
on specific key and emerging risk areas
across the Group. Key examples during
the year included:
— A rolling audit programme assessing
the eectiveness of monthly
divisional build cost reviews and
associated controls
— An audit of the design and operating
eectiveness of controls and
improvement areas to factor in the
move to a new HR and payroll system
— A focused review to assess the design
and operating eectiveness of IT
general controls covering key financial
and forecasting systems
— Agile programme audits and
advisory controls to support the
ERP implementation
— A review of compliance with
requirements with the New Homes
Quality Code and Part L of the
Building Regulations
— A review of eectiveness of Group
and divisional arrangements over
validation of the strategic land bank,
its progression, transfer and divisional
land development monitoring
and reporting
— A review focusing on the maturity and
quality of reporting and eectiveness
of controls over reporting and
disclosures of sustainability-
related risks.
Speaking Up
The Board is responsible for the Group’s
arrangements with regard to reporting
incidents and allegations and receives
updates on any matters raised at each of its
meetings. The Committee is responsible for
reviewing the adequacy and eectiveness of
the Group’s whistleblowing arrangements.
The Group’s Speaking Up policy has
been written in an accessible language
to support employees, supply chain and
subcontractors and is made available at all
sites. Employees and supply chain partners
are encouraged to report any concerns of
malpractice in an open and honest way.
The policy provides details of a free
independent helpline that can be used to
report concerns and includes confidential
support services that individuals could use if
they need assistance in making a report.
Audit and Risk Committee Report continued
Crest Nicholson 80 Annual Report and financial statements 2023
Committee members
Committee overview
Directors’
Remuneration Report
David Arnold
Non-Executive
Director
Louise Hardy
Non-Executive
Director
Octavia Morley
Chair
Iain Ferguson CBE
Chairman
FY23 remuneration outcomes
Annual bonus
The FY23 bonus was based 50% on
adjusted profit before tax, 20% on net
cash, and 30% on a range of non-financial
measures focusing on customer service,
voluntary employee turnover, reduction in
waste and SHE leadership.
As a result of performance during the year
which was impacted by persistently high
inflation and rising interest rates along
with build cost movements, the adjusted
profit before tax and net cash targets were
not achieved.
Good progress was made against the
ESG targets related to employee turnover.
The metric for reduction in waste was
achieved as total construction waste
decreased. However, waste intensity
increased partly due to the reduced number
of completions. The Committee decided to
override the formula and reduce the award
to zero for this measure as this was a more
appropriate outcome. The threshold for the
customer service metric was not met.
The Group’s performance resulted in an
overall formulaic payout level against the
non-financial measures. However, the
Committee agreed with management
that no annual bonus would be paid as
the financial metrics had not been met.
The Committee therefore exercised
discretion to reduce the bonus to nil.
Membership
Octavia Morley has chaired the Committee
since October 2017. Members of the
Committee are independent Non-Executive
Directors and the Chairman, who was
independent on appointment.
Lucinda Bell was a member of the
Committee until 31 December 2023.
MaggieSemple joined the Committee
on1January 2024.
Individual meeting attendance is set out
on page 65.
Attendees
Other regular attendees at meetings at
the invitation of the Committee include the
Chief Executive, Group HR Director, Group
Company Secretary and Korn Ferry.
I am pleased to introduce our Directors’
Remuneration Report for the year ended
31 October 2023.
The Directors’ Remuneration Policy (Policy)
that was set out in the 2022 Annual Report
received strong support from shareholders
at our 2023 AGM. 97.28% of shareholders
approved its adoption. A summary of the
Policy is included in this report on page 85.
The Policy contained no significant changes
to the existing remuneration framework and
it is our view that the Policy works eectively,
is aligned to the Group’s strategy and
provides a good link between reward and
performance. The Policy applied to the FY23
remuneration outcomes.
FY23 saw weaker performance in our
key financial measures due to generally
challenging economic conditions and market
uncertainty demonstrated by a lack of
mortgage availability and lower confidence
in the housing market. We continued to
progress our key strategic objectives and
took proactive steps to reduce the cost base
of the Group.
Maggie Semple OBE
Non-Executive
Director
How time was spent
A Remuneration policy and disclosure 15%
B Risk and reward 25%
C Annual remuneration discussions 30%
D Governance 30%
A
B
C
D
Crest Nicholson 81 Annual Report and financial statements 2023
Governance
and Directors’ Report
Directors’ Remuneration Report continued
FY24 remuneration approach
For FY24 we propose to make minimal
changes to the performance measures for
variable pay while ensuring that they are
subject to stretching performance targets
linked to the Group’s strategy and outlook.
Salary
The average salary increase applied in January
2024 was 2.6% for employees. The Committee
and Peter Truscott agreed that there would be
no increase to his salary in 2024. Bill Floydd
does not qualify for an increase in 2024 as he
recently joined the Group.
Annual bonus
The annual bonus opportunity will remain
unchanged, based on 70% financial measures
(adjusted profit before tax and net cash)
and 30% non-financial measures (customer
service and waste reduction).
LTIP
The performance measures will remain
unchanged with 50% TSR, 35% ROCE and
15% ESG measures to incentivise further
reductions in scope 1 and 2 emissions
by FY26.
The Committee has reviewed the LTIP
measures to ensure that these combined
measures continue to align with the
strategy of the Group as well as meeting
the Committee’s priority for simplicity
and transparency.
It is intended to make awards to Executive
Directors at 150% of salary as in prior years.
The Committee will review this decision in
light of the prevailing share price at the date
of grant. The Committee would consider a
potential scale-back at the time of vesting
depending on conditions at that time.
LTIP
The 2021 LTIP award measured performance
over the three financial years FY21 to FY23.
Actual performance against target is set
out below:
Target range (to be
achieved in FY23) Performance Vesting
TSR Median
to Upper
Quartile
Below
median
0.0% out
of 40.0%
ROCE 17% – 20% 6.3% 0.0% out
of 30.0%
EBIT
1
14.5% – 16.5% 6.7% 0.0% out
of 30.0%
1 EBIT Margin
The 2021 LTIP award will lapse in full.
In considering remuneration for FY23,
the Committee is satisfied the Policy
has operated as intended in relation to
performance and remuneration outcomes
for FY23.
The Committee considered overall
performance and the incentives payable
across the Group, the relativities in pay
between employees and Executive Directors,
noting the impact of roles and seniority on
pay, and the wider stakeholder experience.
Board Changes
Duncan Cooper stepped down from his role
as Group Finance Director on 13 December
2023. His leaving arrangements are in line
with the Policy and treatment for leavers
and is set out on page 94 of this report.
No discretion was used by the Committee
when agreeing these arrangements.
Bill Floydd joined as Group Finance Director
with eect from 13 November 2023.
The Committee agreed a remuneration
package in line with the Policy and this is set
out below. His fixed pay is lower than that
of Duncan Cooper had he remained in post.
His variable pay will be in line with Policy and
he will receive an award of options in 2024
under the LTIP at the same time as Peter
Truscott and on the same basis.
The total remuneration package provides:
— Salary of £400,000 per annum.
— Annual bonus opportunity of 125% of salary
— LTIP award of 150% of salary
— Pension of 6% of salary
— Benefits aligned with wider workforce.
Committee engagement
We consider shareholder feedback and
employee experience and apply best
practice in our approach to remuneration.
I am available to shareholders to discuss
remuneration matters.
— Remuneration structures
are set out clearly in the
Remuneration Report
— Performance targets
are fully disclosed
(retrospectively, where
commercially sensitive)
— Simple methodology for
annual bonus and LTIP
— Clearly articulated
measures, targets
and narrative in the
Remuneration Report
— Discretion can be applied
to variable pay outcomes to
ensure these are consistent
with the underlying
Group performance and
stakeholder experience
— Withholding and recovery
terms apply to variable pay
— Higher weighting to variable
pay with delivery of higher
variable pay at higher
performance levels
— Link to strategy set out
against performance
measures in the
Remuneration Report
— Committee discretion to
override outcomes
— Strategic KPIs link reward
to strategy and align with
stakeholders and employees
— People, ESG targets
and SHE focus on non-
financial priorities
— Bonus scheme framework
and measures align to
employee schemes
Our approach
to remuneration
Alignment with culture
Risk
Proportionality
Clarity
Predictability
Simplicity
— Award limits set out in Policy
and Remuneration Report
— Illustration of the application
of the Policy for the following
year reported annually
Crest Nicholson 82 Annual Report and financial statements 2023
Conclusion
I would like to thank our shareholders for
their ongoing support on our approach to
remuneration. During the year there were no
remuneration-related matters that required
shareholder engagement. The Committee
continues to welcome shareholder feedback
and will proactively engage in relation to
any significant changes to the application
of our Policy. We will continue to align our
remuneration approach with our strategy and
ensure that all measures will be subject to the
achievement of stretching targets.
We hope that you will be able to support the
advisory vote on the Directors’ Remuneration
Report at the 2024 AGM.
Octavia Morley
Remuneration Committee Chair
23 January 2024
The full terms of reference for the
Committee can be found at
www.crestnicholson.com/investors/
corporate-governance
Fair Pay
Employee remuneration continued to be an
area of focus for the Committee during the year.
We reviewed how pay and benefits cascade
through the Group along with the measures
used for the wider employee bonus plans and
how they operate. We were pleased to see that
there continued to be good alignment with the
Executive Directors.
We are pleased to have been formally
accredited by the Living Wage Foundation
during FY23. This is a significant step
towards our commitment to our employees,
including those who work in our supply chain,
their wellbeing and directly aligns with our
values and aspirations for fairness and social
responsibility. The real Living Wage exceeds
the Government’s National Minimum Wage, is
independently calculated based on the cost
of living, and extends to all Crest Nicholson
employees and subcontractors.
We ensure our employees’ remuneration
packages are attractive, aligned to
our strategy and to enable us to retain
our workforce.
Activity during the year
— Engaged with employees on
remuneration matters
— Considered FY23 bonus scheme outcomes
and final vesting of LTIP awards
— Reviewed the pay of Executive Directors
and Chairman
— Determined the annual bonus scheme
structure for FY24
— Reviewed 2023 AGM outcomes and
feedback from shareholders
— Determined leaver terms for an
Executive Director and other senior
management roles
— Agreed remuneration for incoming
Company Secretary and Executive Director
— Considered FY24 LTIP measures
and targets
— Reviewed employee pay and benefits.
Looking ahead
— Ongoing consideration of employee pay
taking into account the current cost-of-
living challenges
— Monitor performance of in-flight incentive
awards during the year and consider
FY24 outcomes
— Consider annual bonus and LTIP measures
and targets for FY25
— Review ESG measures link to remuneration
in context of the Group’s strategy.
Alignment with strategy – FY23 performance
Links to strategy Performance Achievement against target
Annual bonus
Adjusted profit before tax (50%)
4
£41.4m
Net Cash (20%)
4
£64.9m
Customer service (15%)
4
87.00%
Reduction in voluntary employee turnover (7.5%)
1
19.39%
Reduction in waste metric (7.5%)¹
2
6.47%
SHE Leadership (-10%)
3
LTIP
TSR (40%)
2
4
Lower
ROCE (30%)
4
6.3%
EBIT Margin (30%)
4
6.7%
Key
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
4
Financial Targets
See pages 10 to 11
Link to Strategic Priorities
Placemaking & Quality
Land Portfolio
Operational Eciency
Five-Star Customer Service
Multi Channel Approach
Threshold Stretch
1 While total construction waste decreased in FY23, waste intensity increased partly due to the reduced number of completions. The Committee decided to override the formula and reduce
the award to zero for this measure as this was a more appropriate outcome.
Crest Nicholson 83 Annual Report and financial statements 2023
Governance
and Directors’ Report
Remuneration at a glance
Remuneration
FY23
Peter Truscott Duncan Cooper
Total pay
(single figure)
Details on
page 89
1. Fixed £769,177
2. Variable £0
3. Total pay £769,177
1. Fixed £437,833
2. Variable £0
3. Total pay £437,833
FY23 outcomes
vs performance
scenarios
Fixed remuneration
Bonus and LTIP
FY23 Performance scenarios
1
Expected minimum performance
FY23 Actual performance
Total pay (Single Figure)
Expected maximum performance
Expected on-target performance
£774,000
£769,177
£2,708,000
£1,741,000
FY23 Performance scenarios
1
£441,000
Expected minimum performance
£437,833
FY23 Actual performance
Total pay (Single Figure)
£1,526,000
Expected maximum performance
£984,000
Expected on-target performance
1 Each Directors’ Remuneration Report contains performance scenario graphs for the following year. The scenario graphs presented here are those previously
published on page 110 of the Annual Integrated Report 2022.
2023 LTIP
Details on
page 87
Awarded 150% salary
Subject to the achievement of performance conditions
Awarded 150% salary
Subject to the achievement of performance conditions
FY23 annual
bonus outcome
Details on
page 91
£0 £0
Not eligible for bonus due to leaver status
FY21 LTIP
outcome
Details on
page 91
0% of the award will vest in 2024 Award forfeited due to leaver status
Shareholding
Details on
page 92
132% 68%
48% 152%
Progress towards holding requirement Balance to achieve 200% shareholding requirement
Remuneration
for FY24
2024 LTIP
Details on
page 86
Award of 150% salary
Performance measures
TSR 50%
ROCE 35%
ESG 15%
FY24 annual
bonus
Details on
page 87
Maximum 125% salary
1
2
1 Financial 70%
Adjusted operating profit before tax 40%
Net cash 30%
2 Non-financial 30%
Customer service and quality 20%
Waste reduction 10%
SHE Leadership up to -10%
Our employees
Details on
page 96
Sharesave participation
across all plans
51%
Average salary
increase for 2024
2.6%
Crest Nicholson 84 Annual Report and financial statements 2023
Element of remuneration 2024 2025 2026 2027 2028 Link to Strategy Framework
Fixed Base salary Attracts, retains and incentivises
the best people in the market to
execute the Group’s strategy.
Provides an appropriate level of
fixed remuneration without over-
reliance on variable elements.
Reviewed annually or when change in position or
responsibility. Increases usually in line with market
and general increases across the Group.
Benefits A range of competitive benefits in line with what is
available to our employees.
Pension
contribution
Payable in line with the pension contribution
available to the majority of the workforce, currently
6% of salary.
Non-
Executive
Director fees
Remunerates appropriately based
on an individual’s experience, time
commitment and responsibilities.
Non-Executive Directors’ fees are paid in cash and
are not performance related.
Additional fees may be payable in relation to extra
responsibilities or time commitments undertaken.
Variable Annual
bonus
Cash Deferral period Incentivises and rewards individuals
to execute the Group’s strategy and
achieve objectives linked to the
Strategic Priorities and Foundations.
Deferred element encourages longer-
term shareholding and links part of
annual bonus payment to the further
success of the Group and stakeholder
and shareholder interests.
The maximum bonus opportunity is capped at 150%
of salary for Executive Directors, with on-target
performance receiving 50% of maximum and up
to 25% of the maximum payable for threshold
performance. Two-thirds of the bonus is paid in
cash. One-third of the bonus is paid in shares
(post tax, national insurance and other statutory
deductions) and subject to a holding period of three
years (Deferred Shares).
Long-term
incentive
Performance period Holding period Incentivises shareholder value
creation and execution of the
strategy over the longer term.
Drives and rewards achievement
of key long-term Group objectives
aligned with the strategy and with
shareholder interests.
Contributes to building a meaningful
shareholding by aligning interests
with wider shareholders.
Awards take the form of nil-cost options or
conditional share awards. LTIP awards normally
vest on the third anniversary of grant subject to
achievement of performance measures and (other
than in good leaver situations) provided the Director
remains in oce with the Company.
Award levels will be at a maximum of 200% of salary.
Amounts equivalent to any dividends or shareholder
distributions made during the vesting period may
be awarded in respect of vested or exercisable LTIP
awards, normally in the form of shares.
A two-year post-vesting holding period will apply to
all vested LTIP awards.
Illustration of application of Policy in FY24
The remuneration package for the
Executive Directors is designed
to provide an appropriate balance
between fixed and variable
performance-related components,
with a significant proportion of the
package weighted towards long-
term variable pay.
The Committee remains satisfied
that the composition and structure
of the remuneration packages
is appropriate, clearly aligns
with financial and operational
performance as well as the Group’s
strategy, purpose, values and KPIs.
The Committee reviews this on an
annual basis.
The composition and structure
of the remuneration package
for Executive Directors in three
performance scenarios is set out in
the chart shown right.
Key and assumptions
Minimum
Fixed remuneration consisting of
current annualised salary, pension
(plan contribution or cash supplement)
and benefits.
Target
Fixed remuneration as detailed above,
plus 50% of maximum as target bonus
opportunity, and vesting of 50% of the
maximum LTIP award.
Maximum
Fixed remuneration together with the
maximum annual bonus opportunity of
125% and vesting of 100% of LTIP award
representing 150% of salary.
The graph also shows what would happen
should Crest Nicholson’s share price
increase by 50%, increasing the value of
LTIP awards.
Other than illustrating 50% share price
growth, share price movement and
dividend accrual are excluded.
Summary of the Directors’ Remuneration Policy
Below is a summary of the Policy that was approved by shareholders at the Company’s AGM on 23 March 2023. The Policy is set out in full in
the 2022 Annual Report and can be found at www.crestnicholson.com/investors/results-centre
Fixed pay Annual bonus LTIP LTIP with 50% share price growth
£2,704,000
£0k £500k £1,500k £2,500k £3,500k
Peter Truscott
Maximum
Minimum
Target
£3,231,000
£771,000
£1,737,000
100%
45% 25% 30%
29% 32% 39%
£0k £500k £1,500k £2,500k £3,500k
Bill Floydd
£1,495,000
Maximum
Minimum
Target
£1,785,000
£432,000
£963,000
100%
45% 25% 30%
29% 32% 39%
Crest Nicholson 85 Annual Report and financial statements 2023
Governance
and Directors’ Report
Implementation of the Policy in FY24
Executive Directors’ base salary
Executive Director salary increases are generally aligned to the average increase for the wider workforce. In FY24, the increase will be
2.6% of salary. There was no salary increase for Peter Truscott and Bill Floydd does not qualify for an increase as his salary was set for FY24
on appointment.
Executive Directors can elect whether to contribute some of the benefit directly into the Group’s defined contribution pension plan and receive
any balance (or all the benefit) as cash.
Non-Executive Directors’ fees
Non-Executive fees are reviewed on an annual basis. However, no fee increases were made for FY24.
Director Role FY24 fee (annual)
Iain Ferguson Chairman £212,180
David Arnold Non-Executive Director £63,654
Louise Hardy Non-Executive Director £59,941
Octavia Morley Senior Independent Director £72,672
Maggie Semple Non-Executive Director £54,636
1 Includes an additional fee of £9,018 for role as Chair of the Audit and Risk Committee.
2 Includes an additional fee of £5,305 for role as Non-Executive Director responsible for employee engagement.
3 Includes an additional fee of £9,018 for each role of Chair of the Remuneration Committee and Senior Independent Director.
Note: Lucinda Bell’s remuneration for the period 1 November to 31 December 2023 will be disclosed in the FY24 annual report.
Director Salary (annual) Change
Peter Truscott No increase awarded in January 2024 2024 £702,975 0%
Bill Floydd No increase awarded in January 2024 2024 £400,000 N/A
Note: Duncan Cooper’s remuneration for the period 1 November to 31 December 2023 will be disclosed in the FY24 annual report.
Pension and incentives
Director Pension or cash equivalent Annual bonus LTIP
Peter Truscott 6% of salary 125% of salary 150% of salary
Bill Floydd 6% of salary 125% of salary 150% of salary
1 6% is the rate applicable to the majority of the employee workforce.
Crest Nicholson 86 Annual Report and financial statements 2023
LTIP
Peter Truscott and Bill Floydd will be granted an LTIP award with a face value of 150% of base salary. Awards are subject to a three-year
performance period and a two-year post vesting holding period.
Following careful consideration of the structure and weightings of its LTIP for FY23, and taking account of the Group’s longer-term outlook the
Committee has retained TSR measured against the FTSE 250 and certain sector peers, ROCE and a measure of Absolute scope 1 and 2 carbon
emissions. All measures are considered to promote the long-term success of the Group:
Annual bonus
The annual bonus opportunity will remain at 125% of salary for FY24.
Targets are considered to be commercially sensitive and will be disclosed in the FY24 Directors’ Remuneration Report. The Committee will
review performance under the annual bonus in the context of wider stakeholder experience over the performance period when determining
bonus payments.
As per the Policy, one-third of any bonus earned will be paid in shares which are subject to a three-year holding period.
The Committee has reviewed and agreed the combination of measures and weighting in line with the Group’s strategy and these are set out
below. The Committee is satisfied that the annual bonus scheme framework is applied in a similar way to employees across the Group, tailored
to roles and functions.
Performance measure Measure detail Links to strategy
Weighting (% of total
bonus opportunity)
Financial
Adjusted profit before tax Performance is measured between threshold
and maximum
4
40
Net cash Performance is measured between threshold
and maximum
4
30
Non-financial
Customer service and quality Customer satisfaction survey score for FY24
measured between threshold and maximum
4
20
Environment, Social and
Governance
Reduction in waste intensity
1
2
10
SHE Leadership Assessment of SHE leadership during the year
3
A downward
adjustment of up to
10% may be applied
Performance measure % of award
Threshold
(25% of element)
Maximum
(100% of element) Links to strategy
TSR (FTSE 250 and sector peers) 50 Median Upper Quartile
2
4
ROCE FY26 35 10.5% 15%
4
ESG: Absolute scope 1 and 2
carbon emissions FY26
15 4,260 tCO
2
e 3,834 tCO
2
e
2
Key
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
4
Financial Targets
See pages 10 to 11
Link to Strategic Priorities
Placemaking & Quality
Land Portfolio
Operational Eciency
Five-Star Customer Service
Multi Channel Approach
Crest Nicholson 87 Annual Report and financial statements 2023
Governance
and Directors’ Report
TSR is measured using the companies comprising the FTSE 250 index (excluding investment trusts) as at 1 November 2023 (50%) and a
selection of sector peers (50%). The FY24 peer group comprises Barratt Developments plc, Bellway plc, The Berkeley Group plc, MJ Gleeson
plc, Persimmon plc, Redrow plc, Taylor Wimpey plc and Vistry Group plc.
For both TSR elements, performance will be measured on a straight-line basis between a threshold of median TSR (earning 25% of the element)
and a maximum at upper quartile TSR (earning 100% of the element).
TSR provides a focus on the Company’s relative TSR performance against the sector and the stock market generally.
ROCE will reward strong operational eciency and margin accretion and will be an adjusted measure as defined on pages 161 to 162. The ROCE
range represents a significant improvement in performance from the FY23 ROCE and has been calibrated carefully to take into account the
business plan and operating environment.
The ESG measure targets a reduction in absolute scope 1 and 2 emissions. Achievement of the maximum target would have the eect of
accelerating the path to the Group’s 2030 target by approximately three years. The reduction in absolute scope 1 and 2 emissions is also a
target under the Group’s Sustainability Linked Revolving Credit Facility (see page 20 for further information).
The Committee intends to grant awards at the normal policy level of 150% of base salary, but will consider the grant level at the time of the
award taking into account the share price level at grant. The final vesting value of any awards will be considered carefully by the Committee at
that time to ensure the value delivered to participants remains appropriate relative to the performance of the Group, shareholder experience,
and employee workforce impact over the performance period. In particular the Committee will ensure that no undue windfall gains are made as
a result of share price movements and there will be full disclosure of this determination in the Directors’ Remuneration Report.
Implementation of the Policy in FY24 continued
Crest Nicholson 88 Annual Report and financial statements 2023
The information in this Report is audited where this is indicated, and otherwise unaudited.
FY23 remuneration payable to Executive Directors (audited)
Pay for performance FY23 (audited)
Annual bonus targets and outcomes
The FY23 annual bonus scheme followed a similar format to previous years with adjusted profit before tax and cash generation (70%) as
well as non-financial measures (30%) focusing on customer service, voluntary employee turnover, reduction in waste and SHE leadership.
While appropriately stretching targets had been set based on forecasts relating to the financial and market outlook at the end of 2022, as set
out in the Financial Review on pages 32 to 34, persistently high inflation and rising interest rates along with build cost movements meant that
the adjusted profit before tax and net cash targets were not met this year.
During the period, the Group continued to make good progress reducing voluntary employee turnover but did not perform as strongly with
respect to customer service with performance below the 90% threshold. The metric for reduction in waste was achieved as total construction
waste decreased. However, waste intensity increased partly due to the reduced number of completions. The Committee decided to override
the formula and reduce the award to zero for this measure as this was a more appropriate outcome.
The Committee considered the SHE leadership shown by the Executive Directors during the year and taking into account a range of factors
including, divisional performance and leadership, and the levels and severity of accidents, the Committee considered that appropriate
leadership had been demonstrated. As such, no deduction was necessary under this annual bonus measure.
Despite the achievement of some annual bonus scheme metrics during the period, the Committee exercised discretion and agreed that the
bonus payable was nil in light of the experience of shareholders and to align outcomes with employees generally.
1 Further information about our customer service performance can be found on page 8.
FY23 Non-Executive Directors fees (audited)
Annual Report on remuneration
Salary
£000
Benefits
2
£000
Bonus
£000
LTIPs
3
£000
Retirement
benefits
£000
Total pay
£000
Total fixed
Pay £000
Total
variable
pay £000
Peter Truscott FY23 697 26 – – 46 769 769 –
FY22 666 25 670 340 67 1,768 758 1,010
Duncan Cooper
5
FY23 392 23 – – 23 438 438 –
FY22 374 22 376 143 22 937 418 519
1 Salary: Where salaries are adjusted for benefits which are provided via salary exchange, such salaries are quoted as the gross figure disregarding the eect of salary exchange.
2 Benefits: The figure shown includes the value of car benefit, private medical insurance, group income protection, personal accident, life assurance and an annual health check.
3 LTIPs: Last year’s LTIP figure has been restated to reflect the actual value of the award and share price at the time of vesting (being 231.694 pence per share on 8 March 2023).
4 Retirement benefits: Salary supplement of 6% (employee majority rate). No Director has a prospective interest in a defined benefit scheme.
5 Leaving arrangements: In accordance with our Policy and the scheme rules, no annual bonus is payable and LTIPs will lapse as a result of resignation.
FY23
£000
FY22
£000
Iain Ferguson 211 205
David Arnold 63 62
Lucinda Bell 54 53
Louise Hardy 60 58
Octavia Morley 72 70
Crest Nicholson 89 Annual Report and financial statements 2023
Governance
and Directors’ Report
Annual Report on remuneration continued
Measure
(Weighting)
Description and link
to strategy
Threshold
(20%
1
of
maximum)
On-target
(50% of
maximum)
Stretch and
maximum
(100% of
maximum)
% of maximum
bonus
achieved % of salary
Financial Adjusted profit
before tax (50%)
Adjusted profit before tax as
defined on page 1.
4
£76m £80m £100m 0 0
Net cash (20%) Cash and cash equivalents
plus noncurrent and
current interest bearing
loans and borrowings as at
31 October 2023.
4
£182.9m £192.5m £240.6m 0 0
Non-
financial
Customer service
and quality (15%)
The 12-month NHBC
‘recommend your
housebuilder’ score
for FY23.
4
90% 92% 94% 0 0
Environment, Social and Governance objectives:
Reduction
in voluntary
employee turnover
(7.5%)
Resignations or retirements
during the year as a
proportion of total
employees, compared
to the position at
31 October 2022.
1
27% 25% 23% 7.5 9.38
Reduction in waste
(7.5%)
Reduction in waste in FY23
compared to FY22. See page
23 for further information on
the Group’s action to manage
and minimise waste.
2
2
0% 3% 5% 7.5 9.38
SHE leadership
(-10%)
A downwards adjustment
of up to 10% of the bonus
achieved should SHE
leadership fall below the
standard expected by
the Group.
3
Less up to 10% adjustment
Total bonus 14.32 17.90
£41.4m
£64.9m
87.0%
6.47%
Actual
Actual
Actual
Actual
Actual
Actual
Pay for performance in FY23 continued (audited)
The maximum target for each element was set to stretch and further challenge the Executive Directors. Achievement was calculated on a
straight-line basis between threshold and target, and target and maximum/stretch with a maximum bonus potential of 125% of salary. The results
for each element of the annual bonus incentive are set out below:
Link to Strategic Priorities
Placemaking & Quality
Land Portfolio
Operational Eciency
Five-Star Customer Service
Multi Channel Approach
Link to Foundations
1
People
2
Sustainability & Social Value
3
Safety, Health & Environment
4
Financial Targets
19.39%
1 10% for financial measures. 20% for non-financial measures.
2 While total construction waste decreased in FY23, waste intensity increased partly due to the reduced number of completions. The Committee decided to override the formula and reduce
the award to zero for this measure as this was a more appropriate outcome.
Crest Nicholson 90 Annual Report and financial statements 2023
LTIP targets and outcomes (audited)
The FY21 LTIP award, granted on 8 February 2021, was based on performance over the three years ended 31 October 2023 and would have
become exercisable from 8 February 2024 (subject to the Directors still being in employment or otherwise having been a good leaver) had
the performance targets been reached. The table below sets out details of the measures, performance targets and actual performance which
resulted in 0% of the awards vesting.
Measure Weighting Threshold (25%) Maximum (100%) Actual performance % of award achieved
TSR in FY23
1
40% Median Upper Quartile
Below Median
compared to both peer
groups 0.0%
ROCE in FY23
2
30% 17% 20% 6.3% 0.0%
EBIT margin in FY23
3
30% 14.5% 16.5% 6.7% 0.0%
Total 100% – – – 0.0%
1 Measured using the companies comprising the FTSE 250 index (excluding investment trusts) as at 1 November 2020 (one-third) and a selection of sector peers (two-thirds). The 2021 peer
group comprises Barratt Developments plc, Bellway plc, Countryside Properties plc, Vistry Group plc, Persimmon plc, Redrow plc, and Taylor Wimpey plc.
2 ROCE has been calculated using unrounded numbers. ROCE presented in the financial statements and elsewhere in the Annual Report has been calculated using numbers rounded to
£0.1m.
3 Adjusted EBIT Margin as defined on page 30.
The targets were considered stretching in light of the strategy, three-year business plan and market outlook at the time of award. High inflation,
rising interest rates, poor mortgage availability along with the withdrawal of Government support for first time buyers, resulted in a worsening
trading environment over the last year. Consequently these performance measures were not met.
Scheme interests awarded during the financial year (audited)
This table sets out the FY23 awards granted to Executive Directors under the LTIP for the performance period 1 November 2022 to
31 October 2025.
Award
1
Type Date of grant
Number of
shares
Face value
of award
2
£000 % of salary
% of award
receivable at
threshold
Peter Truscott Performance Nil-cost option 27.01.23 432,369 1,054 150 25
Duncan Cooper³ Performance Nil-cost option 27.01.23 242,792 592 150 25
1 Performance conditions in each case measured in FY25: 50% relative TSR (threshold median to maximum upper quartile), 35% average ROCE (threshold 17% to maximum 23%),
15% reduction in scope 1 and scope 2 carbon emissions (threshold 4,300 tCO
2
e to maximum 3,870 tCO
2
e)
2 Face value calculated based on 243.88 pence, the average of the closing middle market share price for the five dealing days preceding the date of grant.
3 Duncan Cooper’s outstanding awards lapsed on cessation of his employment on 13 December 2023.
This table sets out the FY23 awards granted to Executive Directors under the deferred bonus plan (DBP) in respect of the deferred element
of their FY22 annual bonus as set out on page 112 of the 2022 Annual Report. The deferred shares will vest after three years subject to
continued employment.
Award
1
Type Date of grant Number of shares
Face value
of award
2
£000
% of
bonus
payable
Peter Truscott Service Nil-cost option 27.01.23 90,664 221 33
Duncan Cooper³ Service Nil-cost option 27.01.23 50,911 124 33
1 There are no performance conditions attached to the award. The award will accrue dividend equivalents in accordance with the rules of the scheme. The amount of dividend equivalent to
be awarded as shares upon vesting will be adjusted according to the number of shares that vest, pro rata.
2 Face value calculated based on 243.88 pence, the closing middle market share price for the five preceding dealing days of the grant date.
3 Duncan Cooper’s outstanding awards lapsed on cessation of his employment on 13 December 2023.
Crest Nicholson 91 Annual Report and financial statements 2023
Governance
and Directors’ Report
Annual Report on remuneration continued
Directors’ shareholdings at the end of the financial year (audited)
There have been no changes to Directors’ interests between 31 October 2023 and 22 January 2024.
Shares held, including
connected persons at
31 October 2023
Outstanding share
awards
1
at
31 October 2023
with performance
conditions
Outstanding
share awards
1
at
31 October 2023
without performance
conditions
Total share
interests at
31 October 2023
Shareholding
2
as a percentage
of salary and share
price of 160 pence at
31 October 2023
Iain Ferguson 150,000 N/A N/A 150,000 N/A
Peter Truscott 491,659 1,050,497 164,261 1,706,417 132%
Duncan Cooper³ 69,522 589,894 92,239 751,655 48%
David Arnold 15,250 N/A N/A 15,250 N/A
Lucinda Bell 11,650 N/A N/A 11,650 N/A
Louise Hardy – N/A N/A – N/A
Octavia Morley 5,600 N/A N/A 5,600 N/A
1 Share awards take the form of nil-cost options other than Sharesave awards which are fixed price options. There are no conditional or restricted share awards. There were no vested but
unexercised share awards at 31 October 2023.
2 Shareholding includes shares held including connected persons, outstanding share awards without performance conditions (e.g. DBP) net of tax and excludes outstanding share awards
with performance conditions (e.g. LTIP).
3 Duncan Cooper’s outstanding awards lapsed on cessation of his employment on 13 December 2023.
Directors’ shareholdings and share interests
Share ownership plays a key role in aligning Executive Directors’ interests with the interests of shareholders over the long term. The Policy
requires Executive Directors to build up and maintain a significant shareholding in the Company of 200% of salary. On cessation of employment,
they are required to continue to hold the lower of their shareholding requirement or their shareholding at the date of leaving for a period of two
years. Under the Policy, shares owned outright and deferred shares (because they no longer have performance conditions attached) count
towards the shareholding requirement. Duncan Cooper will be required to retain his shareholding until 13 December 2025.
The chart below shows the Executive Directors’ current shareholdings together with unvested DBP awards and the illustrative eect if 50% of
outstanding LTIP awards vested in the future. Shares which are not owned outright are shown net of tax (i.e. excluding that proportion of those
shares expected to be sold on vesting to settle the associated tax liability).
Director
Peter Truscott
Duncan Cooper
0% 20%
111.9% 19.8% 31.7%
28.2% 19.8% 31.7% 120.3%
36.6%
40% 60% 80% 100% 120% 140% 160% 180% 200%
Shares owned outright Unvested DBP/SAYE shares Eect of 50% of LTIPs vesting Shareholding requirement
Executive Directors’ alignment to share price
The table below contains the value of shares currently held by the Executive Directors, those awarded under the DBP but not yet released (on a
post-tax basis) and Sharesave. It illustrates the Executive Directors’ alignment to share price movement through their ordinary shareholdings.
Shares
owned outright
Unvested DBP
shares (post-tax)
Total
shares
Indicative value on
31 October 2023
(£)
Consequence of a +/-
£1 share price change
(£)
Peter Truscott 491,659 87,058 578,717 925,948 578,717
Duncan Cooper 69,522 48,887 118,409 189,454 118,409
1 Value calculated using the share price of 160.0 pence as at 31 October 2023.
Crest Nicholson 92 Annual Report and financial statements 2023
Executive Directors’ scheme interests at the end of the financial year (audited)
The LTIP awards have performance criteria attached to them in accordance with the Policy and as set out in the Directors’ Remuneration Report.
The DBP awards do not have any performance criteria attached to them.
Outstanding
share
options/
awards at
31 October
2022
Date
of grant Granted Exercised Lapsed
Outstanding
share
options/
awards at
31October
2023
Market
price on
award
£
Exercise
price
£
Market
price at
exercise/
vesting
£
Gain
receivable
£
Date
exercisable
or capable of
vesting Expiry date
Peter Truscott
LTIP
2020 253,016 20.02.2020 9,669
1
146,551 116,134 – 5.138 Nil 2.317 339,550 20.02.2023 19.02.2030
2021 297,364 08.02.2021 – – – 297,364 3.279 Nil – – 08.02.2024 07.02.2031
2022 320,764 28.01.2022 – – – 320,764 3.131 Nil – – 28.01.2025 27.01.2032
2023 – 27.01.2023 432,369 – – 432,369 2.439 Nil – – 27.01.2026 26.01.2033
DBP
2020 240 28.02.2020 15
1
255 – - 4.530 Nil 2.317 591 28.02.2023 27.02.2030
2022 73,597 28.01.2022 – – – 73,597 3.064 Nil – – 28.01.2025 27.01.2032
2023 – 27.01.2023 90,664 – – 90,664 2.439 Nil – – 27.01.2026 26.01.2033
Duncan Cooper
LTIP
2020 106,558 28.02.2020 4,072
1
61,720 48,910 – 5.138 Nil 2.317 143,002 20.02.2023 19.02.2030
2021 166,981 08.02.2021 – – – 166,981 3.279 Nil – – 08.02.2024 07.02.2031
2022 180,121 28.01.2022 – – – 180,121 3.131 Nil – – 28.01.2025 27.01.2032
2023 – 27.01.2023 242,792 – – 242,792 2.439 Nil – – 27.01.2026 26.01.2033
DBP
2020 320 28.02.2020 21
1
341 – – 4.530 Nil 2.317 790 28.02.2023 27.02.2030
2022 41,328 28.01.2022 – – – 41,328 3.064 Nil – – 28.01.2025 27.01.2032
2023 – 27.01.2023 50,911 – – 50,911 2.439 Nil – – 27.01.2026 26.01.2033
1 Dividend equivalents granted during the year.
2 Duncan Cooper’s outstanding awards lapsed on cessation of his employment on 13 December 2023.
Crest Nicholson 93 Annual Report and financial statements 2023
Governance
and Directors’ Report
Annual Report on remuneration continued
Loss of oce payments (audited)
Duncan Cooper left the Group on 13 December 2023. His remuneration arrangements were treated in line with the shareholder approved
Policy. He will not receive any compensation for loss of oce. In line with the rules of the annual bonus and executive share schemes, he is not
eligible for an annual bonus payment in respect of FY23 (including his time served in respect of FY24), and his outstanding awards under the
LTIP made in 2021, 2022 and 2023 will lapse. His DBP options in respect of the annual bonus for the financial years ended 30 October 2021
and 2022 will also lapse. His two-year post employment shareholding requirement, which requires him to hold shares equivalent to the lower of
200% of salary on cessation or his actual shareholding, commenced on 13 December 2023.
Payments to past Directors (audited)
There were no payments to past Directors made during the year.
External directorships
Subject to Board approval, Executive Directors may hold one non-executive position outside of the Group that complements and enhances
their current role. Any fees may be retained by the Director.
During the year, Peter Truscott served as a Non-Executive Director of Anchor Housing Group (appointed September 2020), for which he
receives and retains an annual fee of £35,000.
Directors’ service contracts and letters of appointment
Executive Directors have contracts of employment providing for a maximum of nine months’ notice from either party. Non-Executive Directors
have letters of appointment for an initial three-year term and generally serve two to three terms. The required notice is three months’ from
either party.
Date of appointment Notice period
Unexpired term remaining
31 October 2023
Peter Truscott 9 September 2019 Nine months Terminable on nine months’ notice
Bill Floydd 13 November 2023 Nine months Terminable on nine months’ notice
Iain Ferguson 16 September 2019 Three months Terminable on three months’ notice
David Arnold 1 September 2021 Three months Terminable on three months’ notice
Lucinda Bell 25 May 2018 Three months Terminable on three months’ notice
Louise Hardy 24 January 2018 Three months Terminable on three months’ notice
Octavia Morley 1 May 2017 Three months Terminable on three months’ notice
Maggie Semple 1 January 2024 Three months Terminable on three months’ notice
The Group has the right to terminate the contracts of Executive Directors by making a payment in lieu of notice. Any such payment will typically
reflect the individual’s salary, benefits in kind and pension entitlements. Further information is found on page 109 of the Remuneration Policy set
out in the 2022 Annual Report.
Crest Nicholson 94 Annual Report and financial statements 2023
Performance graph and table
The graph below illustrates the Company’s total shareholder return performance relative to the constituents of the FTSE 250 Index (excluding
investment trusts) from 31 October 2013. As a member of the FTSE 250 (since joining the index on 24 June 2013), the Committee considers this
to be an appropriate comparator.
350
£
250
150
50
300
200
100
0
Oct ’14Oct ’13 Oct ’16Oct ’15 Oct ’18Oct ’17 Oct ’21 Oct ’22 Oct ’23Oct ’20Oct ’19
Crest Nicholson FTSE 250 (excl. investment trusts)
Historical Chief Executive remuneration
The table below sets out total Chief Executive remuneration for FY23 and prior years, together with the percentage of maximum annual bonus
outcome and the percentage of maximum LTIP vested in that year.
£000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Chief Executive total remuneration 1,313 4,127 2,345 2,150 714
2
1,495
3
739 1,422 1,768 769
Annual bonus % of maximum 100 82 82 84 0 3.5 0 84 80 0
Long-term incentive plan award % of
maximum N/A
1
100 100 100 25 0 0 0 54 0
1 No long-term incentive plans vested or had a performance period ending in FY14.
2 Based pro rata, on salaries and total remuneration of Stephen Stone to 21 March 2018 and Patrick Bergin from 22 March 2018 to 31 October 2018.
3 Based pro rata, on salaries and total remuneration of Patrick Bergin to 26 March 2019, Chris Tinker from 26 March 2019 to 8 September 2019 and Peter Truscott from 9 September 2019.
It also includes the cost of buy-out arrangements for Peter Truscott.
Relative importance of spend on pay
The table below shows how employee remuneration costs compare to distributions made to shareholders in FY22 and FY23.
This includes data for all employees, including those who were promoted, had salary changes, were new starters or received incentive-based
remuneration, as well as pay in respect of individuals who left during the year but had some service. Distributions to shareholders for FY22 and
FY23 are made up of cash paid to shareholders in each respective year.
The increase in total spend on pay is reflective of a competitive labour market leading to increases to pay generally over the course of the year,
good financial performance in FY22 that led to annual bonuses being paid in February 2023 and the FY20 LTIP options partially meeting their
performance targets and vesting in February 2023. The level of distributions to shareholders reflects the decision to hold the dividend payment
at the same level as FY22.
The measures shown below are those specified by the applicable disclosure requirements and total spend on pay reflects actual expenditure in
the year.
Total spend on pay
2023
202 2
£56.3m
£49.0m
Change
£7.3m
15%
Distributions to shareholders by way of dividend
2023
202 2
£43.5m
£38.4m
Change
£5.1m
13%
1 Total spend on pay is calculated using cash amounts paid to employees in FY22. This is dierent to the disclosure in note 6 of the financial statements that uses accrued amounts which will
be paid in future periods.
Crest Nicholson 95 Annual Report and financial statements 2023
Governance
and Directors’ Report
Annual Report on remuneration continued
Our approach to Fair Pay
The Committee reviews the remuneration framework applicable to all employees annually, ensuring that the Policy framework applies in a very
similar way across the Group in terms of types of benefits and variable pay relative to role grades and disciplines. This ensures alignment across
the Group and encourages shared goals and objectives.
When making remuneration decisions for Executive Directors, the Committee considers the wider economic environment and conditions
within the Group. In particular, the Committee is sensitive to pay and employment conditions across the employee workforce and carefully
considers the broader employee salary increase budget when making reward decisions for Directors. The Committee also considers industry
benchmarking in the context of monitoring its overall position regarding Director and employee pay.
Cascade of remuneration across the Group
The table below summarises the information the Committee received as part of its annual review process and shows how remuneration
compares across the Group in a transparent and fair way.
Executive Directors
Executive Directors of the
Company.
Senior management
Executive Leadership Team
(other than Executive Directors)
and other senior roles.
Management
Management roles below
senior management.
Wider employee workforce
All other roles
Base salary Base salary is set with reference to the specific nature of the role and responsibility, individual experience and
performance, relative to other Group employees and market practice among other UK housebuilders. This
is normally reviewed and increased with reference to cost of living, inflation, role benchmarking and Group
performance. Other than where other wage rates apply such as apprentices, all employees are paid at or above
the voluntary real Living Wage.
Matters considered during the year
After consideration of Group performance and wider economic factors such as inflation and role benchmarking,
the average annual salary increase across the Group for FY24 was 2.6%. The Group’s HR team regularly reviews
base pay across the Group and compares this to market analysis and will continue to do so in FY24.
Benefits The Group’s benefit programme applies to all employees in a similar way including access to healthcare
coverage and life assurance. Certain benefits have a service requirement or have enhanced cover for
management roles and above. Employees have access to a real-time total reward statement via our MyReward
platform which also allows them to access and manage their benefits.
Matters considered during the year
The Committee considered the Group’s benefits programme, noting that it continued to be in alignment across
the Group.
Pension All employees are initially auto-enrolled into the Group pension plan with a 6% employer contribution or have the
ability to opt in. Employees can opt to increase or decrease their contribution amounts. The maximum employer
contribution is 10% depending on employee contribution level and service. The majority of employees receive an
employer contribution of 6%. More than 94% of our employees are members of the Group pension plan.
Matters considered during the year
The Committee reviewed the Group’s pension contribution framework and considered that budgetary headroom
would be more appropriately focused on base salaries
Annual bonus Yes Yes Yes Yes
Matters considered during the year
Where performance targets have been met, payments under employee schemes will be made. These are
consistent with the performance of the Executive Directors’ scheme.
Share schemes Sharesave + LTIP Sharesave + LTIP Sharesave only Sharesave only
Matters considered during the year
The performance measures for the 2020 LTIP were considered and were not met. The Committee approved
the launch of the 2023 Sharesave scheme to all employees which had 41% participation this year. The 2020
Sharesave matured in September and participants were able to exercise their options. We were pleased to see
a significant number of employees in the scheme opt to become Crest Nicholson shareholders and retain their
shares.
Employee engagement
At the Employee Voice forums Louise Hardy, Non-Executive Director responsible for employee engagement, engaged with forum members on
remuneration matters. As part of the 2023 Policy review, forum members were also shown how the reward package cascades across the Group
along with how the variable reward plans and their measures were developed. Forum members feedback was sought on how culture should be
taken into account when setting pay, whether employees understood their bonus schemes or had ideas on other measures that could be used
and whether there were any concerns about the 2023 Policy.
At the divisional updates regularly hosted by the Chief Executive, employees were also encouraged to participate by asking questions
(anonymously in advance or in person), and remuneration concerns were regularly addressed. The Committee was pleased that 41% of eligible
employees joined the 2023 Sharesave scheme and that employee participation across all share schemes remained at 51%. The Committee
considers Sharesave to be a valuable mechanism that provides employees with a path to share ownership. The Committee will continue to
review employee pay structures and levels during FY24.
Crest Nicholson 96 Annual Report and financial statements 2023
Chief Executive to employees pay ratio for FY23
This year the Company has adopted Option B to calculate the ratio for FY23 and subsequent years following changes to internal systems, which
no longer collates the required data to use Option A. This is our fourth year publishing a Chief Executive pay ratio and previous years are below
for comparison. We will continue to build this up over time to show a rolling 10-year period.
Year Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio
31 October 2020 Option A Ratio 25:1 17:1 11:1
31 October 2021 Option A Ratio 46:1 32:1 21:1
31 October 2022 Option A Ratio 55:1 37:1 25:1
31 October 2023 Option B Ratio 16:1 12:1 10:1
Employees’ total pay £49,026 £66,376 £78,776
Employees’ salary £38,500 £51,667 £66,354
To calculate Option B, the latest available gender pay gap data (i.e. from April 2023) was used to identify three Group employees whose hourly
rates of pay were at the 25th, 50th and 75th percentiles of all Group employees. The total remuneration for the three employees at each
percentile was calculated as at 31 October 2023 on the same basis as the Chief Executive single total figure of remuneration (see page 89).
The remuneration of employees above and below the selected employees was also reviewed to ensure that they were the best equivalents for
each percentile.
Employee pay includes such items as overtime, commission, bonus
and any long-term incentives. Benefits include company car or car
allowance, private medical and employer pension contributions. Other than any bonus elements, all other payments are included on a cash
basis. The bonus elements are for the bonus earned during FY23.
The Executive Directors’ Policy is designed taking into account the remuneration arrangements, policies and practices throughout the Group
and when reviewing the implementation of the Policy, the Committee ensures outcomes throughout the Group are fair and appropriate.
The Committee considers the median pay ratio is consistent with the Group’s wider policies on employee pay, reward and progression.
The ratio has decreased this year because the Chief Executive did not receive any incentive payments for FY23, as explained earlier in this
report. In FY22 the bonus payout was 80% of maximum and LTIP vesting was 54% of maximum.
Percentage change in Directors’ remuneration
The table below sets out the percentage change between FY19 and FY20, FY20 and FY21, FY21 and FY22, and FY22 and FY23 for salary,
benefits and annual bonus of Directors compared with a selected cohort of employees. The parent company, Crest Nicholson Holdings plc,
does not have any direct employees. However, we disclose on a voluntary basis the comparison of the pay decisions taken by the Committee
for Directors against the experience of the wider workforce using a comparator group of employees.
To provide the best like-for-like comparison, this group of employees have similar employment terms to the Executive Directors and have not
joined or left employment during the latest comparison period. The average increase in salary of 7.11% for the cohort of employees during FY23
is due to role changes, promotions and market rate adjustments during the year. The average increases for benefits and bonus are aected by
these salary and role changes.
% change in basic salary/fees % change in benefits % change in bonus
7
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
2022 to
2023
2021 to
2022
2020 to
2021
2019 to
2020
Peter Truscott 4.7% 2.5% 0.0% 35.2% 3.6% 1.7% -0.3% -6.1% -100.0% -1.9% 100.0% -100.0%
Duncan Cooper 4.7% 2.5% 1.4% 7.6% 1.2% 0.4% 4.6% 18.4% -100.0% -1.9% 100.0% -100.0%
Iain Ferguson 3.0% 2.5% 0.0% -26.4% – – – – – – – –
David Arnold 3.0% 2.5% 0.0% – – – – – – – – –
Octavia Morley 3.0% 2.5% 5.5% 8.3% – – – – – – – –
Lucinda Bell 3.0% 2.5% 0.0% 0.0% – – – – – – – –
Louise Hardy 3.0% 2.5% 9.7% 0.0% – – – – – – – –
Average cohort
Employees 7.1% 9.4% 7.1% 2.8% 5.2% 16.5% 11.2% 13.8% -79.3% 4.7% 244.0% -35.0%
1 The figures used for FY19 are the blended salaries for Patrick Bergin, Chris Tinker (who acted as Interim Chief Executive) and Peter Truscott, in respect of their time serving as Chief
Executive. They do not include buy out awards in respect of Peter Truscott.
2 For FY19 we have used annualised amounts in respect of Duncan Cooper.
3 The figure used for FY19 is the salary for Stephen Stone who was Chairman during this period.
4 The figure used for FY20 is the fee for Sharon Flood who served in the same role during this period.
5 The FY21 increase for Octavia Morley reflected her extra responsibilities as Senior Independent Director.
6 The FY21 increase for Louise Hardy reflected her extra responsibilities as Non-Executive Director responsible for employee engagement.
7 An element of employee bonus schemes is based on customer satisfaction scores on 31 January each year which falls after publication of this report. These figures for the cohort group are
calculated using the customer satisfaction score on 31 December in the respective year.
Crest Nicholson 97 Annual Report and financial statements 2023
Governance
and Directors’ Report
Annual Report on remuneration continued
Gender pay gap reporting
During 2022 we saw a decrease in our mean hourly pay gap to 20% (2021: 27%) and our
median hourly pay gap to 13% (2021: 22%). We remain a majority male workforce with men
generally still holding the more senior roles, however, we have seen the number of women
in the upper quartile increase to 25% in 2022 (2021: 20%).
Women account for 39% of our workforce (compared to 37% in 2021) and we are working
hard to increase diversity and gender balance within all roles and at all levels. We have a long
way to go before we achieve a 50:50 male female ratio and believe our fair pay objectives
supported by our policies processes and initiatives will help us get there. More details can
be found on pages 28 to 29. The Committee continues to take into account its gender pay
gap when making pay decisions and works in conjunction with the Nomination Committee to
improve the diversity of employees.
Our Fair Pay Objectives
1
Become an employer of choice for all
in construction and housebuilding
2
Foster a culture of work-life balance
that respects responsibilities outside
of work
3
Remove any barriers to career
progression for all employees
4
Continue to ensure salaries and
bonuses are inclusive regardless
of role.
Advisors to the Committee
The Chief Executive and Group HR Director provide input to the Committee on matters concerning remuneration and the Group Company
Secretary acts as Secretary to the Committee.
The Committee received external remuneration advice in the year from Korn Ferry (total fees £58,668). Korn Ferry was appointed by the
Committee following a competitive selection process in 2018. Korn Ferry is a founder member of the Remuneration Consultants’ Group, which
operates a code of conduct. Fees paid to external remuneration advisors are typically charged on an hourly basis with costs for work agreed in
advance where possible. During the year, Korn Ferry provided professional search services to a separate part of the Company. These services
were carried out by a division separate to the remuneration advisory team.
The Committee manages conflicts of interest by ensuring the relevant member of management or the Committee are not present when
their own remuneration is determined or discussed. Taking into account their work in the year and their relationship with the Company, the
Committee is satisfied that the advice received by Korn Ferry in relation to executive remuneration matters was objective and independent.
Statement of voting at Annual General Meeting
The tables below set out the votes received for the FY22 Directors’ Remuneration Report and Remuneration Policy at the 2023 AGM.
Directors’ Remuneration Report Directors’ Remuneration Policy
Shares voted in favour 179,320,991 94.44% Shares voted in favour 185,680,904 97.28%
Shares voted against 10,567,076 5.56% Shares voted against 5,199,216 2.72%
The Committee welcomes feedback and encourages shareholders to contact the Remuneration Committee Chair via the Group Company
Secretary to provide their views and feedback.
Approval
This Directors’ Remuneration Report was approved by the Board of Directors on 23 January 2024 and signed on its behalf by
Octavia Morley
Remuneration Committee Chair
Crest Nicholson 98 Annual Report and financial statements 2023
Directors’ Report
The Directors present their report for the year
ended 31 October 2023.
The Strategic Report set out on pages 1
to 52 of this Annual Report and financial
statements, together with the Corporate
Governance Report, the reports of the Board
Committees and the Directors’ Remuneration
Report set out on pages 53 to 100 of this
Annual Report and financial statements,
include information that would otherwise
need to be included in this Directors’ Report.
Readers are also referred to the cautionary
statement on the inside front cover of this
Annual Report and financial statements.
Disclosures by Reference
Additional information, which is incorporated
into this Directors’ Report by reference,
including information required by the
Companies Act 2006, Disclosure and
Transparency Rule 7.2, and Listing Rule
9.8.4R, can be located by page reference
elsewhere in this Annual Report and financial
statements as follows:
Content Page(s)
Audit and Risk Committee 74 – 80
Board of Directors 56 – 57
Business model 14 – 15
Directors’ interests 92 – 93
Directors’ responsibilities
statement
102
Dividend 34
Employee engagement 16 – 17, 29,
63
Employee share schemes 140 – 142
Employment of persons with
a disability
63
Financial assets and
liabilities
150
Key performance indicators 30 – 31
GHG emissions 50
Going Concern 115 – 116
Group profit 111
Outlook 5, 8
Principal risks 35 – 42
Stakeholder relation
including Section 172
Statement
16 – 19
Viability statement 52
Articles of Association
The Articles of Association regulate the
internal aairs of the Company and are
available on the Company’s website.
Amendments to the Articles of Association
may be made in accordance with the
provisions of Companies Act 2006 by special
resolution of shareholders.
Powers of Directors
Directors’ powers are conferred on them by
UK legislation and by the Articles.
Election and re-election of Directors
Any Director appointed to the Board during
the year shall hold oce until the next AGM
and shall then be eligible for election.
In accordance with the UK Corporate
Governance Code, the Board proposes the
election of Bill Floydd and Dr Maggie Semple
OBE to the Board at the upcoming AGM in
2024. All other serving Directors will retire
and oer themselves for re-election at the
2024 AGM.
Directors’ and ocers’ liability
insurance
The Company maintains Directors’ and
ocers’ liability insurance for the Directors.
The Company has granted indemnities to the
extent permitted by law to the Directors and
to the Directors of Crest Nicholson Pension
Trustee Limited, which acts as trustee to the
Group’s defined benefit pension scheme.
Share capital
As at 31 October 2023 there are 256,920,539
ordinary shares of 5 pence in issue. No ordinary
shares were issued during the financial year.
Rights and restrictions attached to
shares and restrictions on transfers
Subject to the provisions of relevant statutes,
and without prejudice to any rights attached
to any existing shares or class of shares:
— Any share may be issued with such rights
or restrictions as the Company may by
ordinary resolution determine or, subject to
and in default of such determination, as the
Board shall determine
— In any general meeting, on a show of
hands, every member who is present in
person shall have one vote, and on a poll
every member present in person or by
proxy shall have one vote for every share
of which they are the holder
— There are no specific restrictions on
transfer of shares, other than where these
are imposed by law or regulations.
The Company is not aware of any
arrangements between shareholders that
may result in restrictions on the transfer of
securities or voting rights.
Power to issue or buy back own
shares
At the AGM in March 2023 the Company’s
shareholders delegated to the Directors
the following powers in relation to the issue
or market purchase by the Company of
its shares:
— Authority to allot shares in the Company
up to an aggregate nominal amount of
£4,282,008 (equivalent to one-third of the
Company’s issued share capital)
— Authority to allot a further one-third of
the Group’s issued share capital up to an
aggregate nominal amount of £4,282,008
(equivalent to one-third of the Company’s
issued share capital) in connection with a
pre-emptive oer by way of a rights issue
— Authority to disapply pre-emption rights
up to an aggregate nominal amount of
£1,284,602 (equivalent to 10% of the
Company’s issued share capital) with the
authority for a further disapplication of
pre-emption rights up to an aggregate
nominal amount of £256,920 (equivalent to
2% of the Company’s issued share capital)
to be used only for the purposes of a follow
on oer as described in the Pre-Emption
Group’s Statement of Principles 2022 on
Disapplying Pre-Emption Rights (Statement
of Principles 2022)
— Authority to disapply pre-emption rights
up to an aggregate nominal amount of
£1,284,602 (equivalent to 10% of the
Company’s issued share capital) for
transactions which the Board determines
to be an acquisition or other capital
investment as defined in the Statement
of Principles 2022, with the authority for
a further disapplication of pre-emption
rights up to an aggregate nominal amount
of £256,920 (equivalent to 2% of the
Company’s issued share capital) to be
used only for the purposes of a follow
on oer as described in the Statement of
Principles 2022
— Authority to make market purchases of its
own shares up to a maximum aggregate
number of 25,692,053 (equivalent to 10%
of the Company’s issued shares).
These standard authorities will expire on
30 April 2024 or at the conclusion of the next
AGM, whichever is earlier.
AGM
The AGM will be held on 19 March 2024.
Details and arrangements for the meeting
together with the resolutions to be proposed
will be set out in the Notice of Annual General
Meeting which accompanies the Annual
Report and financial statements and is
available on our website.
Crest Nicholson 99 Annual Report and financial statements 2023
Governance
and Directors’ Report
For details on the resolutions and explanatory
notes, please refer to the Notice of AGM
which will be posted to shareholders and
made available at www.crestnicholson.com/
investors/shareholder-centre
Employee Share Ownership Trust
As at 31 October 2023 the Group’s Employee
Share Ownership Trust (ESOT) held 600,256
ordinary shares for the purposes of satisfying
awards under the Company’s share and
incentive plans. The ESOT has waived rights
to a dividend now and in the future.
Policies and procedures
Policies and procedures, including operating
and financial controls, are detailed in
the Group’s policies and procedures
manuals. There are approval processes in
relation to the acquisition of land and the
commencement of development projects.
All land acquisitions go through a rigorous
approval and assessment process at
Group level.
Substantial shareholdings
Set out below are the percentage interests in ordinary share capital of the Company, disclosable under the Disclosure Guidance and
Transparency Rules, that were notified to the Company as at 31 October 2023 and 22 January 2024.
Shareholder
31 October 2023
% of voting rights held
22 January 2024
% of voting rights held
Shanlis Investment Unlimited 0.00 6.03
Lorsden (Jersey) Limited 6.03 0.00
BlackRock, Inc 5.32 5.32
Boldhaven Management LLP 5.03 5.03
Janus Henderson Group plc 5.01 5.01
Liontrust Asset Management plc 4.94 4.94
Norges Bank 3.92 3.92
Disclosure of information to the auditor
The Directors who held oce at the date of approval of the Directors’ Report confirm that, so far as they are each aware, there is no relevant
audit information of which the Group’s auditor is unaware. Each Director has taken all the steps they ought to have taken as a Director to make
themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information.
Appointment of auditor
PricewaterhouseCoopers LLP (PwC) was re-appointed at the 2023 AGM and is willing to seek re-appointment this year.
Resolutions to re-appoint PwC will be proposed at the 2024 AGM.
Approval
The Directors’ Report was approved by the Board of Directors on 23 January 2024 and signed on its behalf.
Penny Thomas
Company Secretary
Significant contracts
The Group does not have any contracts that
are considered alone to be essential to the
business of the Group. The Group does,
on occasion, make significant purchases
of goods and services from a sole supplier
where this is deemed necessary for
eciency, practicality or value. However, it
does so only after a tender or appropriate
selection process and in the context of the
level of risk such sole supply might bring.
Financial risk management
Note 24 to the consolidated financial
statements set out the Group’s approach to
financial risk management including financial
credit and liquidity risk.
Political donations
The Group made no political donations
during the year (FY22: nil).
Events after the balance sheet date
There were no significant events after
the balance sheet date.
Branches
The Group has no branches outside the
United Kingdom.
Change of control
The Group has in place several agreements
with its lending banks, private placement note
holders, joint venture partners, Government
authorities (such as Homes England), private
investors and customers, which contain
certain termination rights that would have
an eect in the event of a change of control.
The Directors believe these agreements to
be commercially sensitive and consider that
their disclosure would be seriously prejudicial
to the Group.
The Group’s share schemes contain
provisions that, in the event of a change of
control, would result in outstanding options
and awards becoming exercisable.
There are no agreements between the
Group and its Directors or employees
providing for compensation for loss of oce
or employment that occurs because of a
takeover bid.
Directors’ Report continued
Crest Nicholson 100 Annual Report and financial statements 2023
In this section
102 Statement of Directors’ responsibilities
103 Independent auditors’ report
111 Consolidated income statement
111 Consolidated statement of comprehensive income
112 Consolidated statement of changes in equity
113 Consolidated statement of financial position
114 Consolidated cash flow statement
115 Notes to the consolidated financial statements
156 Company statement of financial position
157 Company statement of changes in equity
158 Notes to the company financial statements
161 Alternative performance measures (unaudited)
163 Historical summary (unaudited)
164 Shareholder services and Glossary
FY23 financial
statements
Financial statements
Crest Nicholson 101 Annual Report and financial statements 2023
Financial statements
Statement of Directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable law
and regulation.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group financial
statements in accordance with UK-adopted
international accounting standards and the
Company financial statements in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’, and
applicable law).
Under company law, Directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of aairs of the Group
and Company and of the profit or loss of
the Group for that period. In preparing
the financial statements, the Directors are
required to:
— Select suitable accounting policies and
then apply them consistently
— State whether applicable UK-adopted
international accounting standards have
been followed for the Group financial
statements and United Kingdom
Accounting Standards, comprising
FRS 101, have been followed for the
Company financial statements, subject
to any material departures disclosed and
explained in the financial statements
— Make judgements and accounting
estimates that are reasonable and prudent,
and
— Prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for
safeguarding the assets of the Group and
Company and hence for taking reasonable
steps for the prevention and detection of
fraud and other irregularities.
The Directors are also responsible for
keeping adequate accounting records that
are sucient to show and explain the Group’s
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and Company
and enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may dier from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report and financial statements, taken as a
whole, is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Group’s
and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed on pages 56 to 57 confirm
that, to the best of their knowledge:
— The Group financial statements, which
have been prepared in accordance with
UK-adopted international accounting
standards, give a true and fair view of the
assets, liabilities, financial position and
profit of the Group
— The Company financial statements, which
have been prepared in accordance with
United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair
view of the assets, liabilities and financial
position of the Company, and
— The Strategic Report includes a fair review
of the development and performance of
the business and the position of the Group
and Company, together with a description
of the principal risks and uncertainties that
it faces.
In the case of each Director in oce at the
date the Directors’ Report is approved:
— So far as the Director is aware, there is
no relevant audit information of which
the Group’s and Company’s auditors are
unaware, and
— They have taken all the steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that the
Group’s and Company’s auditors are aware
of that information.
On behalf of the Board
Peter Truscott
Chief Executive
23 January 2024
Crest Nicholson 102 Annual Report and financial statements 2023
Report on the audit of the
financial statements
Opinion
In our opinion:
— Crest Nicholson Holdings plc’s Group
financial statements and Company financial
statements (the “financial statements”)
give a true and fair view of the state of the
Group’s and of the Company’s aairs as at
31 October 2023 and of the Group’s profit
and the Group’s cash flows for the year
then ended;
— the Group financial statements have been
properly prepared in accordance with
UK-adopted international accounting
standards as applied in accordance with
the provisions of the Companies Act 2006;
— the Company financial statements have
been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, including FRS 101
“Reduced Disclosure Framework”, and
applicable law); and
— the financial statements have been
prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements,
included within the Annual report and
financial statements 2023 (the “Annual
Report”), which comprise: the Consolidated
and Company statements of financial position
as at 31 October 2023; the Consolidated
income statement, the Consolidated
statement of comprehensive income, the
Consolidated cash flow statement and the
Consolidated and Company statements of
changes in equity for the year then ended;
and the notes to the financial statements,
which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting
to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK)
are further described in the Auditors’
responsibilities for the audit of the financial
statements section of our report. We believe
that the audit evidence we have obtained is
sucient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we
declare that non-audit services prohibited
by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in note 5 of
the consolidated financial statements, we
have provided no non-audit services to the
Company or its controlled undertakings in the
period under audit.
Independent auditors’ report
to the members of Crest Nicholson Holdings plc
Our audit approach
Context
Crest Nicholson Holdings plc is a residential housebuilder listed on the London Stock Exchange. The Group is wholly UK based. The Group is
susceptible to external macro-economic factors such as government regulation, mortgage availability and changes in the wider housing sector
such as customer demand, supply chain availability and build cost inflation. This is particularly relevant for our work in the areas of margin
forecasting and recognition and valuation of inventory. During the year ended 31 October 2023, the Group’s revenues and profits have decreased
from the prior year, reflecting a lower level of home completions and reduction in profit margins. The Group has recorded an additional net
exceptional charge in relation to the combustible materials provision and a legal provision. Our audit procedures, as set out below in the related
key audit matters, focused on the appropriateness of the significant accounting estimates made by management.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Overview
Audit scope
— We conducted an audit of the complete financial information of each of the five revenue-generating housebuilding divisions, which form
the majority of the Group. Specific balances and financial statement line items were audited within additional reporting units based on
their size. Revenue, the carrying value of inventory, pensions and the combustible materials provision, amongst other items, were tested
at the Group level.
Key audit matters
— Valuation of inventory at the lower of cost and net realisable value (“NRV”) (Group)
— Margin forecasting and recognition (Group)
— Accounting for the combustible materials provision (Group)
— Valuation of intercompany receivables (Company)
Materiality
— Overall Group materiality: £4,800,000 (2022: £6,400,000) based on approximately 5% of a 3-year average of the Group’s profit before
tax and exceptional items (2022: based on 5% of the current year profit before tax and exceptional items).
— Overall Company materiality: £1,800,000 (2022: £2,200,000) based on approximately 1% of total assets.
— Performance materiality: £3,600,000 (2022: £4,800,000) (Group) and £1,350,000 (2022: £1,650,000) (Company).
Crest Nicholson 103 Annual Report and financial statements 2023
Financial statements
Independent auditors’ report continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by the auditors, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing
the eorts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation of inventory at the lower of cost and net realisable value
(“NRV”) (Group)
Refer to Note 1 (Accounting policies) and Note 18 (Inventories) of the
Consolidated financial statements, and the Key financial and internal
control matters section of the Governance Report.
Inventory is the most significant balance in the consolidated
statement of financial position and is held at the lower of cost
and net realisable value (“NRV”). While the cost of inventory is
relatively straightforward to determine, the NRV of a development
isjudgemental, based on forecasts of costs and sales prices.
Due to the size of the balances and the judgemental nature of the
forecasts we determined that the valuation of this financial statement
line item was assessed as a significant risk for the audit and therefore
an area of focus for our work.
Our audit procedures included:
— Confirming and updating our understanding of management’s
process for preparing a margin forecast for each development,
consistent with the risk associated with the margin forecasting and
recognition process (see key audit matter below);
— Evaluating and testing management’s controls over the approval
of the initial forecasts and the monitoring of updates required
to the forecasts over the course of the development’s life,
including attendance at build cost control meetings at all divisions.
Where controls could not be relied upon, which was the case in two
of the divisions (see further detail in the Key financial and internal
control matters section of the Governance Report), a high level
of substantive evidence was sought from the procedures set out
immediately below;
— Testing the appropriateness and accuracy of the inputs into the
development forecasts, for example by comparing sales prices and
costs to market research, quotes or purchase orders. As part of our
audit procedures, we also had discussions with site surveyors and
other individuals outside the finance function;
— Understanding the composition of the inventory balance,
specifically the level of completed but unreserved units, to confirm
if completed units are held at the appropriate value. Assessing the
level of post year end reservations and comparing forecast sales
prices to actual sales prices achieved or to external market data to
determine that this audit evidence supports the valuations at the
period end;
— Evaluating future margins to be recognised on sites with low
margins or high levels of completed and unreserved units at the
year end date;
— Evaluating the carrying value of part exchange stock by verifying
sales values to post-year end reservations;
— Assessing the accuracy of the NRV charge recognised in the
period by testing management’s latest estimates of costs and sales
prices, including movements post year end, and confirming the
appropriateness of the NRV utilised during the year; and
— Testing management’s NRV models to confirm the mathematical
accuracy of the workings.
Crest Nicholson 104 Annual Report and financial statements 2023
Key audit matter How our audit addressed the key audit matter
Margin forecasting and recognition (Group)
Refer to Note 1 (Accounting policies) of the Consolidated financial
statements and the Key financial and internal control matters section
of the Governance Report.
The Group’s margins are recognised on a plot by plot basis by
reference to the margin forecast across the related development
site. The margin per site reflects the best estimates of sales prices
and costs at that time. There is a risk that the margin forecast for the
site, and consequently the margin recognised on each unit sale, is
incorrect and not reflective of management’s current best estimate
of the future final margin that will be recognised on a development.
As a result, profit margins could be manipulated or subject to
error through the high level of management estimation involved
in ensuring the accuracy and completeness of an individual site
forecast, and the monitoring of these estimates over time.
Sales prices and build costs are inherently more uncertain as
they are influenced by changes in external market factors, such
as government regulations, the availability and aordability
of mortgages, changes in customer demand due to market
uncertainty or build cost inflation. There is higher uncertainty when a
development is scheduled to be completed over a long timeframe.
Management has implemented internal forecasting controls to
assess land acquisition prior to build commencement and assist with
the initial financial appraisal process. Further controls to monitor the
ongoing costs and sales prices within these forecasts occur on a
regular basis throughout the year.
In view of the high inherent estimation uncertainty and the potential
for manipulation of margin forecasts, we consider the accuracy and
completeness of forecasting and margin recognition across the life
of the site to be a significant financial reporting risk for the Group.
Our audit procedures included:
— Testing management’s controls over the approval of the
initial forecasts;
— Testing management’s forecasting and monitoring controls
for the developments (including attendance at a selection of
management’s internal control meetings) and evaluating samples
ofthe data used in these meetings, including for monitoring
changes to forecasts, to confirm the accuracy of this information.
Where this control could not be relied upon, which was the case
in two of the Divisions (see further detail in the Key financial and
internal control matters section of the Governance Report), a
high level of substantive testing was performed from the relevant
procedures set out below;
— For a sample of sites where we noted variances in forecast
margins compared to the prior year and the current year budget,
substantively testing a sample of the inputs (eg. latest quotes/
tenders) to confirm these were supportable and complete;
— Confirming, through sampling of additions to inventory, that costs
were being allocated to appropriate developments and therefore
impacting the correct site margin;
— Assessing management’s overall historical accuracy of the
forecasts by analysing the changes to margins in the year and
adjustments made to margins through cost of sales. We also
assessed how margins had moved across divisions to consider
whether there were any systemic trends that could indicate
manipulation of forecasts;
— Evaluating, by recalculating a sample of margins and by a test of
controls, that the system correctly calculates the margin following
cost or sales price amendments made by management; and
— Testing any material manual adjustments to margins to ensure
these were appropriate by agreeing these costs/income to third
party support.
Crest Nicholson 105 Annual Report and financial statements 2023
Financial statements
Independent auditors’ report continued
Key audit matter How our audit addressed the key audit matter
Accounting for the combustible materials provision (Group)
Refer to Note 1 (Accounting policies), Note 4 (Exceptional items),
Note 22 (Provisions) of the Consolidated financial statements
and the Key financial and internal control matters section of the
Governance Report.
Since FY19 the Group has held a provision in relation to combustible
materials to comply with the Fire Safety Order where it was
established that one of the Group’s buildings had been non-
compliant at the time of build.
As a consequence of signing the Building Safety Pledge in April
2022, the Group’s obligation to remediate buildings widened to
cover for ‘Life Critical’ safety issues in buildings 11 metres and over
that have been built over the last 30 years.
In March 2023, the Group signed the Developer Remediation
Contract (the “Contract”) which formalised the commitments made
in the signing of the Building Safety Pledge in the prior year. During
the year management has increased the provision, which primarily
reflects changes to cost estimates and scope of works, oset by the
increased impact of discounting. The provision is material, inherently
judgemental and an area of significant estimation uncertainty.
The provision is identified as a critical accounting estimate as
it requires a number of judgements over key assumptions in its
calculation, including the number of properties impacted, the scope
of work required, the estimated cost and the timing of expenditure.
Given the related estimation uncertainty, we identified the valuation
and completeness of the combustible materials provision as a
significant risk for the audit.
Our audit procedures included:
— Inquiring with senior management to understand the impact
of signing the Government’s Developer Remediation Contract
and to understand the movement in the provision in the year.
Evaluating that the approach taken aligns with accounting
standards as well as the impact of signing the Contract;
— Reading and understanding the requirements of the Developer
Remediation Contract, and management’s assessment of the
impact of the contract, to confirm management’s assumptions and
interpretations are reasonable and determine scope of remediation;
— Recalculating and checking the integrity of management’s manual
model to confirm its accuracy;
— Testing the valuation of the provision recognised at the year end.
For sites where the Building Safety Fund (BSF) made full or partial
awards to the BSF applicants and the Group is not performing,
but is paying for, the remediation work we agreed the amounts
provided to correspondence from the BSF to the Group. For the
remaining sites, where the scope of work was already assessed
by the Group, our testing focussed on agreeing the scope of
works to external fire assessment reports and costs to, third party
tenders. On sites where the scope of work is yet to be determined,
we tested management’s assumptions in relation to scope and
estimate of the work through agreeing the scope to draft fire
assessment reports and comparing the costs to other similar sites.
In the absence of this information, we have agreed the amounts
provided to the initial BSF awards as that is the best available
evidence for the estimated cost of remediation on those sites;
— Assessing the completeness of the provision through procedures,
including internet searches on unnotified buildings, trend
analytics on sites by location and comparison of similar buildings
and performing external searches for identified management
companies who have notified the Group which has resulted in the
recognition of a provision to identify other buildings in the public
domain and to assess exposure;
— Assessing the technical capabilities and expertise of the Group’s
employees and consultants involved in assessing the provision;
— Making enquiries of the Group’s General Counsel in relation to
any claims that have come through in relation to fire safety and
reviewing the latest report on claims and assessing the impact of
any fire safety related claims on the provision;
— Reviewing board minutes to check for any fire safety related claims
that are not already factored into the provision;
— Assessing the disclosures made in the financial statements and
considering these both in the context of IAS 37 and expected
disclosures around contingent liabilities; and
— Validating the long-term and short-term split of the provision
based on management’s plans for remediation as well as expected
payments to the BSF. This is based on management’s best estimate
of when the cash is likely to outflow.
Crest Nicholson 106 Annual Report and financial statements 2023
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.
The Group’s financial statements are ultimately a consolidation of 20 reporting units (each of which are deemed to be financial reporting
components) representing the Group’s five geographically-based housebuilding divisions, other smaller trading subsidiaries and the centralised
functions. The reporting units vary in size, but the bulk of the Group’s operations is represented by the five revenue-generating housebuilding
divisions. Consequently, we determined each of these five divisions required an audit of its complete financial information due to its size.
These five reporting units were all audited by the Group engagement team. The reporting units where we performed an audit of the complete
financial information, in addition to the audit of consolidation journals and the audit of specific financial statement line items for other reporting
units, accounted for 100% of the Group’s revenues and 95% of the Group’s profit before tax and exceptional items. We audited exceptional
items, including the combustible materials and legal provisions, at the Group level. The audit of specific financial statement line items included
a further three reporting units, to provide additional coverage over items such as inventory, administrative costs and accruals. Our audit work
across these reporting units, together with the additional procedures performed at the Group level on revenue, the carrying value of inventory,
the consolidation, goodwill, taxation, retirement benefit obligations, payroll expense, finance expense and loans and borrowings gave us the
evidence we needed for our opinion on the Consolidated financial statements as a whole. The audit of the Company financial statements
consisted of the full scope audit of one reporting unit which operates as the holding Company function.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the Group’s and
Company’s financial statements. The risks are primarily transitional and relate to additional regulatory and/or reporting requirements, which may
result in further cost to the Group. These costs, for example by applying the Future Homes Standard to new homes built from 2025, will impact
the whole housebuilding sector and therefore become a feature of house price valuation at that time. The Group will also procure land factoring
in these costs to its future margin appraisals, but there is a risk that for some existing parts of the Group’s land portfolio that these costs have to
be absorbed by the Group. We have evaluated management’s assessment of this risk. Our procedures did not identify any material impact as a
result of climate risk on the Group’s and Company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the eect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall materiality £4,800,000 (2022: £6,400,000). £1,800,000 (2022: £2,200,000).
How we determined it Approximately 5% of a 3-year average of the
Group’s profit before tax and exceptional items
(2022: based on 5% of the current year profit before
tax and exceptional items).
Approximately 1% of total assets.
Rationale for benchmark
applied
Profit before tax and exceptional items is one of
the key measures used by the shareholders in
assessing the performance of the Group and is
a generally accepted auditing benchmark. Using
an average over 3 years is appropriate given the
fluctuation in the Group’s financial performance in
each of these periods, whilst the Group’s statement
of financial position remains relatively consistent.
We believe that total assets is the primary measure
used by the shareholders in assessing the
performance of the entity, which acts solely as
a holding Company, and is a generally accepted
auditing benchmark.
Key audit matter How our audit addressed the key audit matter
Valuation of intercompany receivables (Company)
Refer to Note 5 (Trade and other receivables) of the Company
financial statements.
Intercompany receivables are the largest financial statement line item
in the Company financial statements and are repayable on demand.
The recoverability, and any expected credit losses, of these balances
from other Group companies depends on the ability of the Group as
awhole to generate cash flows to enable future repayment.
Whilst this is not a significant risk for the audit, in the context of the
audit of the Company it is the area of highest audit eort.
Our audit procedures included:
— Testing the outcomes of the Group’s going concern model, in
particular the cash flow forecasts, and confirming that there were
no liquidity issues in the Group that would impact the ability of
subsidiaries to repay amounts due; and
— Verifying the level of cash held by the subsidiaries of the Group and
their ability to repay this on the basis that sucient cash reserves,
and access to further credit facilities, are held to repay the debt
if required.
Crest Nicholson 107 Annual Report and financial statements 2023
Financial statements
Independent auditors’ report continued
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £0.3 million and £4.5 million.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (2022: 75%) of overall materiality, amounting to £3,600,000 (2022: £4,800,000) for the Group financial statements and
£1,350,000 (2022: £1,650,000) for the Company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation
risk and the eectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £240,000 (Group
audit) (2022: £300,000) and £90,000 (Company audit) (2022: £110,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of
accounting included:
— Evaluating the appropriateness of the going concern assessment performed by the directors, including the accuracy of the underlying model
and the principles applied to determine the cash flows;
— Testing of the key assumptions used in the model, including comparison to third party market information where appropriate and confirmation
that the assumptions used in the “severe but plausible” downside scenario were suciently severe to model potential future economic
downturn, above and beyond current market forecasts, and that mitigating actions modelled in this scenario were realistic and appropriate;
— Evaluating the output of the models and considered this in the context of the Group’s covenants on its lending facilities, and in particular
understanding any risk of potential breach of covenants; and
— Ensuring that both the base case and the downside scenario appropriately considered other known risks to the Group, outside the general
assumptions overlayed on underlying trading.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic Report and the Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Crest Nicholson 108 Annual Report and financial statements 2023
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic report and the Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and the Directors’
Report for the year ended 31 October 2023 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and the Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified
for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the
Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material
to add or draw attention to in relation to:
— The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
— The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
— The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material uncertainties to the Group’s and Company’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial statements;
— The directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the
period is appropriate; and
— The directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and
meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the Group and Company was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with
the financial statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of
the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
— The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and Company’s position, performance, business model and strategy;
— The section of the Annual Report that describes the review of eectiveness of risk management and internal control systems; and
— The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Company’s compliance
with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by
the auditors.
Crest Nicholson 109 Annual Report and financial statements 2023
Financial statements
Independent auditors’ report continued
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Statement
of Directors’ responsibilities in respect of
the financial statements, the directors are
responsible for the preparation of the financial
statements in accordance with the applicable
framework and for being satisfied that they
give a true and fair view. The directors are
also responsible for such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
Group’s and the Company’s ability to continue
as a going concern, disclosing, as applicable,
matters related to going concern and using
the going concern basis of accounting unless
the directors either intend to liquidate the
Group or the Company or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined above, to detect
material misstatements in respect of
irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the Group and
industry, we identified that the principal risks
of non-compliance with laws and regulations
related to government guidelines on fire safety
and other health and safety requirements,
employment law, including legislation relating
to pensions, and we considered the extent to
which non-compliance might have a material
eect on the financial statements. We also
considered those laws and regulations that
have a direct impact on the financial statements
such as the Listing Rules and the Companies
Act 2006. We evaluated management’s
incentives and opportunities for fraudulent
manipulation of the financial statements
(including the risk of override of controls), and
determined that the principal risks were related
to management bias, in particular in areas of
significant estimation uncertainty as set out in
note 1 to the consolidated financial statements,
or where management has the ability to post
inappropriate journals. The Group engagement
team shared this risk assessment with the
component auditors so that they could include
appropriate audit procedures in response
to such risks in their work. Audit procedures
performed by the Group engagement team
and/or component auditors included:
— Discussions with the Executive Leadership
Team, Divisional management teams and
the Audit and Risk Committee, review of
internal audit reports and consideration
of known or suspected instances of
non-compliance with laws and regulation
and fraud;
— Evaluation and testing of the operating
eectiveness of management’s controls
designed to prevent and detect
irregularities, in particular their controls
around cost and margin forecasting,
including performing alternative audit
procedures where controls were not
deemed to be eective in the period;
— Challenging the assumptions and
judgements made by management in
determining their significant accounting
estimates, in particular in relation to cost
and margin forecasting and provisions (see
related key audit matters above); and
— Identifying and testing journal entries, in
particular any journal entries posted with
unusual account combinations.
There are inherent limitations in the audit
procedures described above. We are less
likely to become aware of instances of non-
compliance with laws and regulations that are
not closely related to events and transactions
reflected in the financial statements. Also, the
risk of not detecting a material misstatement
due to fraud is higher than the risk of not
detecting one resulting from error, as
fraud may involve deliberate concealment
by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing
complete populations of certain transactions
and balances, possibly using data auditing
techniques. However, it typically involves
selecting a limited number of items for testing,
rather than testing complete populations.
We will often seek to target particular
items for testing based on their size or
risk characteristics. In other cases, we will
use audit sampling to enable us to draw a
conclusion about the population from which
the sample is selected.
A further description of our responsibilities for
the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for
no other purpose. We do not, in giving these
opinions, accept or assume responsibility for
any other purpose or to any other person to
whom this report is shown or into whose hands
it may come save where expressly agreed by
our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
— we have not obtained all the information
and explanations we require for our audit; or
— adequate accounting records have not been
kept by the Company, or returns adequate
for our audit have not been received from
branches not visited by us; or
— certain disclosures of directors’
remuneration specified by law are not
made; or
— the Company financial statements and the
part of the Directors’ Remuneration Report
to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from
this responsibility.
Appointment
Following the recommendation of the Audit
and Risk Committee, we were appointed
by the members on 23 March 2015 to audit
the financial statements for the year ended
31 October 2015 and subsequent financial
periods. The period of total uninterrupted
engagement is nine years, covering the years
ended 31 October 2015 to 31 October 2023.
Other matter
In due course, as required by the Financial
Conduct Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-
prepared annual financial report filed on the
National Storage Mechanism of the Financial
Conduct Authority in accordance with the
ESEF Regulatory Technical Standard (‘ESEF
RTS’). This auditors’ report provides no
assurance over whether the annual financial
report will be prepared using the single
electronic format specified in the ESEF RTS.
Darryl Phillips
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
London
23 January 2024
Crest Nicholson 110 Annual Report and financial statements 2023
Note
| 2023 | 2022 | ||||||
| Pre- | 2023 | Pre- | 2022 | ||||
| exceptional | Exceptional | 2023 | exceptional | Exceptional | 2022 | ||
| items | items (note 4) | Total | items | items (note 4) | Total | ||
| £m | £m | £m | £m | £m | £m | ||
Revenue | 3 | ||||||
Cost of sales | ( | ( | ( | ( | ( | ( | |
Gross profit/(loss) | ( | ( | |||||
Net administrative expenses | 5 | ( | ( | ( | ( | ||
| Net impairment losses on financial | |||||||
assets | 17 | ( | ( | ( | ( | ||
Operating profit/(loss) | 5 | ( | ( | ||||
Finance income | 7 | ||||||
Finance expense | 7 | ( | ( | ( | ( | ( | ( |
Net finance expense | ( | ( | ( | ( | ( | ( | |
| Share of post-tax profits/(losses) | |||||||
| of joint ventures using the equity | |||||||
method | 14 | ( | |||||
Profit/(loss) before tax | ( | ( | |||||
Income tax (expense)/credit | 8 | ( | ( | ( | ( | ||
| Profit/(loss) for the year | |||||||
| attributable to equity | |||||||
shareholders | ( | ( | |||||
| Earnings per ordinary share | |||||||
Basic | 10 | ||||||
Diluted | 10 |
The notes on pages 115-155 form part of these consolidated financial statements.
Consolidated income statement
For the year ended 31 October 2023
Consolidated statement of comprehensive income
For the year ended 31 October 2023
Note
| 2023 | 2022 | ||
| £m | £m | ||
Profit for the year attributable to equity shareholders | |||
| Other comprehensive (expense)/income: | |||
| Items that will not be reclassified to the consolidated income statement: | |||
Actuarial losses of defined benefit schemes | 16 | ( | ( |
Change in deferred tax on actuarial losses of defined benefit schemes | 15 | ||
Other comprehensive expense for the year net of income tax | ( | ( | |
Total comprehensive income attributable to equity shareholders |
The notes on pages 115-155 form part of these consolidated financial statements.
Crest Nicholson 111 Annual Report and financial statements 2023
Financial statements
Note
| Share premium | Retained | ||||
| Share capital | account | earnings | Total equit y | ||
| £m | £m | £m | £m | ||
Balance at 1 November 2021 | |||||
Profit for the year attributable to equity shareholders | |||||
Actuarial losses of defined benefit schemes | 16 | ( | ( | ||
| Change in deferred tax on actuarial losses of defined benefit | |||||
schemes | 15 | ||||
Total comprehensive income for the year | |||||
| Transactions with shareholders: | |||||
Equity-settled share-based payments | 16 | ||||
Deferred tax on equity-settled share-based payments | 15 | ( | ( | ||
Purchase of own shares | 23 | ( | ( | ||
Dividends paid | 9 | ( | ( | ||
Balance at 31 October 2022 | |||||
Profit for the year attributable to equity shareholders | |||||
Actuarial losses of defined benefit schemes | 16 | ( | ( | ||
| Change in deferred tax on actuarial losses of defined benefit | |||||
schemes | 15 | ||||
Total comprehensive income for the year | |||||
| Transactions with shareholders: | |||||
Equity-settled share-based payments | 16 | ||||
Deferred tax on equity-settled share-based payments | 15 | ( | ( | ||
Purchase of own shares | 23 | ( | ( | ||
Transfers in respect of share options | |||||
Dividends paid | 9 | ( | ( | ||
Balance at 31 October 2023 |
The notes on pages 115-155 form part of these consolidated financial statements.
Consolidated statement of changes in equity
For the year ended 31 October 2023
Crest Nicholson 112 Annual Report and financial statements 2023
Consolidated statement of financial position
As at 31 October 2023
Assets Note
| 2023 | 2022 | ||
| £m | £m | ||
| Non-current assets | |||
Intangible assets | 11 | ||
Property, plant and equipment | 12 | ||
Right-of-use assets | 13 | ||
Investments in joint ventures | 14 | ||
Financial assets at fair value through profit and loss | |||
Deferred tax assets | 15 | ||
Retirement benefit surplus | 16 | ||
Trade and other receivables | 17 | ||
| Current assets | |||
Inventories | 18 | ||
Financial assets at fair value through profit and loss | |||
Trade and other receivables | 17 | ||
Current income tax receivable | |||
Cash and cash equivalents | 19 | ||
Total assets | |||
| Liabilities | |||
| Non-current liabilities | |||
Interest-bearing loans and borrowings | 20 | ( | ( |
Trade and other payables | 21 | ( | ( |
Lease liabilities | 13 | ( | ( |
Deferred tax liabilities | 15 | ( | ( |
Provisions | 22 | ( | ( |
( | ( | ||
| Current liabilities | |||
Interest-bearing loans and borrowings | 20 | ( | |
Trade and other payables | 21 | ( | ( |
Lease liabilities | 13 | ( | ( |
Provisions | 22 | ( | ( |
( | ( | ||
Total liabilities | ( | ( | |
Net assets | ( | ( | |
| Equity | |||
Share capital | 23 | ||
| Share premium account | 23 | ||
Retained earnings | |||
Total equity |
The notes on pages 115-155 form part of these consolidated financial statements.
Crest Nicholson 113 Annual Report and financial statements 2023
Financial statements
Consolidated cash flow statement
For the year ended 31 October 2023
Note
| 2023 | 2022 | ||
| £m | £m | ||
| Cash flows from operating activities | |||
Profit for the year attributable to equity shareholders | |||
| Adjustments for: | |||
Depreciation on property, plant and equipment | 12 | ||
Depreciation on right-of-use assets | 13 | ||
Retirement benefit obligation administrative expenses | 16 | ||
Net finance expense | 7 | ||
Share-based payment expense | 16 | ||
Share of post-tax profits of joint ventures using the equity method | 14 | ( | ( |
Impairment of inventories movement | 18 | ( | |
Net impairment of financial assets | 17 | ||
Income tax expense | 8 | ||
Operating profit before changes in working capital, provisions and contributions to retirement benefit obligations | |||
Decrease/(increase) in trade and other receivables | ( | ||
(Increase)/decrease in inventories | ( | ||
Decrease in trade and other payables and provisions | ( | ( | |
Contribution to retirement benefit obligations | 16 | ( | ( |
Cash (used by)/generated from operations | ( | ||
Finance expense paid | ( | ( | |
Income tax paid | ( | ( | |
Net cash (outflow)/inflow from operating activities | ( | ||
| Cash flows from investing activities | |||
Purchases of property, plant and equipment | 12 | ( | ( |
Disposal of financial assets at fair value through profit and loss | |||
Funding to joint ventures | ( | ( | |
Repayment of funding from joint ventures | |||
Dividends received from joint ventures | |||
Finance income received | |||
Net cash inflow from investing activities | |||
| Cash flows from financing activities | |||
Principal elements of lease payments | 13 | ( | ( |
Dividends paid | 9 | ( | ( |
Net purchase of own shares | ( | ( | |
Debt arrangement and facility fees | ( | ||
Net cash outflow from financing activities | ( | ( | |
Net (decrease)/increase in cash and cash equivalents | ( | ||
Cash and cash equivalents at the beginning of the year | |||
Cash and cash equivalents at the end of the year | 19 |
The notes on pages 115-155 form part of these consolidated financial statements.
Crest Nicholson 114 Annual Report and financial statements 2023
Notes to the consolidated financial statements
For the year ended 31 October 2023
Crest Nicholson 115 Annual Report and financial statements 2023
Financial statements
Notes to the consolidated financials statements continued
For the year ended 31 October 2023
Crest Nicholson 116 Annual Report and financial statements 2023
Crest Nicholson 117 Annual Report and financial statements 2023
Financial statements
Notes to the consolidated financials statements continued
For the year ended 31 October 2023
Crest Nicholson 118 Annual Report and financial statements 2023
Crest Nicholson 119 Annual Report and financial statements 2023
Financial statements
Notes to the consolidated financials statements continued
For the year ended 31 October 2023
Crest Nicholson 120 Annual Report and financial statements 2023
2 Segmental reporting
The ELT (comprising Peter Truscott (Chief
Executive), Duncan Cooper (Group Finance
Director until 13 December 2023), Bill Floydd
(Group Finance Director from 13 November
2023) David Marchant (Group Operations
Director), Kieran Daya (Managing Director,
Crest Nicholson Partnerships and Strategic
Land until 31 December 2023 and Chief
Operating Oce g Officer from 1 January 2024), Jane
Cookson (Group HR Director), Kevin Maguire
(General Counsel and Company Secretary
until 18 August 2023), Heather O’Sullivan
(General Council from 25 September 2023),
Penny Thomas (Group Company Secretary
from 1 January 2024), Alex Stark (Executive
Managing Director until 8 August 2023)
and David Brown (Executive Managing
Director until 15 December 2023)), which
is accountable to the Board, has been
identified as the chief operating decision
maker for the purposes of determining
the Group’s operating segments. The ELT
approves investment decisions, allocates
group resources and performs divisional
performance reviews. The Group operating
segments are considered to be its divisions,
each of which has its own management
board. All divisions are engaged in
residential-led, mixed-use developments
in the United Kingdom and therefore with
consideration of relevant economic indicators
such as the nature of the products sold
and customer base, and, having regard
to the aggregation criteria in IFRS 8, the
Group identifies that it has one reportable
operating segment.
Crest Nicholson 121 Annual Report and financial statements 2023
Financial statements
| 2023 | 2022 | |
| £m | £m | |
Open market housing including specification upgrades | 550.0 | 803.7 |
88.0 | 76.9 | |
Total housing | 638.0 | 880.6 |
Land and commercial sales | 19.5 | 32.0 |
Freehold reversions | – | 1.0 |
Total revenue | 657.5 | 913.6 |
| 2023 | 2022 | |
| £m | £m | |
| Timing of revenue recognition | ||
Revenue recognised at a point in time | 552.4 | 842.6 |
Revenue recognised over time | 105.1 | 71.0 |
Total revenue | 657.5 | 913.6 |
| 2023 | 2022 | |
| £m | £m | |
| Assets and liabilities related to contracts with customers | ||
Contract assets (note 17) | 6.9 | 25.1 |
Contract liabilities (note 21) | (6.0) | (19.3) |
Notes to the consolidated financials statements continued
For the year ended 31 October 2023
Crest Nicholson 122 Annual Report and financial statements 2023
| 2023 | 2022 | |
| £m | £m | |
| Cost of sales | ||
Combustible materials charge | (11.3) | (102.5) |
Combustible materials credit | 10.0 | – |
Net combustible materials charge | (1.3) | (102.5) |
Legal provision | (13.0) | – |
Total cost of sales charge | (14.3) | (102.5) |
| Net finance expense | ||
Combustible materials imputed interest | (4.6) | (1.0) |
| Share of post-tax profit/(loss) of joint ventures | ||
Combustible materials credit/(charge) of joint ventures | 0.6 | (1.5) |
Total exceptional charge | (18.3) | (105.0) |
Tax credit on exceptional charge | 4.8 | 22.4 |
Total exceptional charge after tax credit | (13.5) | (82.6) |
Crest Nicholson 123 Annual Report and financial statements 2023
Financial statements
| 2023 | 2022 | ||
| £m | £m | ||
Inventories expensed in the year | (520.2) | (705.3) | |
Inventories impairment movement in the year | 18 | (7.6) | 8.1 |
Employee costs | 6 | (60.7) | (58.4) |
Depreciation on property, plant and equipment | 12 | (0.5) | (0.4) |
Depreciation on right-of-use assets | 13 | (2.3) | (1.9) |
Joint venture project management fees recognised in administrative expenses | 27 | 1.9 | 2.0 |
Net administrative expenses | £m | £m | |
Administrative expenses | (55.0) | (51.1) | |
Other operating income | 40.1 | 48.9 | |
Other operating expenses | (40.9) | (47.4) | |
Net administrative expenses | (55.8) |
| 2023 | 2022 | |
| £000 | £000 | |
| Auditors’ remuneration | ||
Audit of these consolidated financial statements | 166 | 137 |
Audit of financial statements of subsidiaries pursuant to legislation | 819 | 783 |
Other non-audit services | 154 | 95 |