Building

better

futures

Annual Integrated Report 2022

Building

better

places

Cautionary statement

The Annual Integrated Report for the ﬁnancial year ended 31 October 2022 as

contained in this document (Annual Integrated 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 dier materially from those expressed or

implied by any such forward looking statements. Nothing inthis Annual Integrated

Report should beconstrued as a proﬁt forecast.

Approval

The Strategic Report for the ﬁnancial year ended 31 October 2022 as presented

onpages 1-65 was approved by the Board of Directors on 17 January 2023

andsigned on its behalf by:

Kevin Maguire

Company Secretary

More homes in more areas

We continue to operate across a broad spectrum of the market,

creating homes for private sale, aordable homes and private

rental properties. Our divisions are predominantly based in

theSouth of England, and during the year we have expanded

into Yorkshire and East Anglia.

Learn more online

www.crestnicholson.com/investors/strategy

New science-based sustainability targets

We have stepped up our ambition to reduce the Group’s carbon

footprint by setting out new science-based targets. The targets

are designed to achieve net zero by 2045 and have been

validated by the Science Based Targets initiative. Our new

targets are to reduce absolute scope 1 and 2 greenhouse gas

(GHG) emissions 60% by 2030 from a 2019 base year, reduce

scope 3 GHG emissions by 55% per sq. m completed ﬂoor area

within the same timeframe and reach net zero GHG emissions

across the value chain (scopes 1, 2 and 3) by 2045.

Read more on pages 26–29

Better careers

People are the key to our success. We have increased our

investment in vocational and leadership training programmes,

as well as in schemes promoting employee development,

engagement and recognition. During the year we welcomed

46 trainees across all disciplines within the Group.

Learn more online

www.crestnicholson.com/careers

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.

Front cover images

Top: Highlands Park, Henley-on-Thames

Bottom: Nichola Careless, Technical Manager

andWilliam Hope, Technical Trainee at

Westwood Park, Coventry

Wycke Place, Maldon

Highlands Park, Henley-on-Thames

Trainees on site at Manor View,

Milton Keynes

Our year in review

In this year’s report

Strategic Report

1 Our year in review

 We are Crest Nicholson

3 We have a clear purpose

4 What makes us Crest Nicholson

6 Chairman’s statement

8 Chief Executive’s statement

11 Our strategy in action

16 Market overview

20 Business model

22 Stakeholder relations

26 Our sustainability review

30 TCFD-related Financial Disclosures

39 Protect the environment

41 Make a positive impact

on communities

43 Operate our business responsibly

44 People

48 Safety, Health & Environment

50 Key performance indicators

52 Financial review

57 Non-ﬁnancial information statement

58 Principal risks and uncertainties

60 Our principal risks

65 Viability statement

Governance and

Directors’ Report

66 Corporate Governance Report

88 Nomination Committee Report

92 Audit and Risk Committee Report

100 Directors’ Remuneration Report

123 Directors’ Report

Financial Statements

128 Statement of Directors’

Responsibilities

129 Independent auditors’ report

138 Consolidated income statement

138 Consolidated statement

of comprehensive income

139 Consolidated statement

of changes in equity

140 Consolidated statement

of ﬁnancial position

141 Consolidated cash ﬂow statement

142 Notes to the consolidated

ﬁnancial statements

183 Company statement

of ﬁnancial position

184 Company statement

of changes in equity

185 Notes to the Company

ﬁnancial statements

188 Alternative performance

measures (unaudited)

190 Historical summary (unaudited)

191 Shareholder services

192 Group directory

We have made good progress in delivering the

ﬁrstpartof our growth strategy, and continued

todeliverstrong ﬁnancial and operational

performancesin the year.

Sales

£955.8m

FY21: £813.6m

Revenue

£ 913. 6m

FY21: £786.6m

Adjusted proﬁt before tax

£137.8m

FY21: £107.2m

Proﬁt before tax

£32.8m

FY21: £86.9m

Adjusted operating proﬁtmargin

15 .4%

FY21: 14.6%

Operating proﬁt margin

4.2%

FY21: 11.9%

Return on capital employed

22.4%

FY21: 17.2%

Net cash

£276.5m

FY21: £252.8m

Customer satisfaction

5 star

FY21: 5 star

Employees’ engagement score

83%

FY21: 75%

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 188–189.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

We are

Crest Nicholson

How we are building

better futures.

Our values

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.

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.

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.

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.

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.

Proud of our culture

We aspire to have an open and

welcoming culture, creating a positive

andcollaborative working environment,

where allcolleagues are empowered

todeliverour success.

Deﬁned by our values

Our values underpin how we implement

ourGroup strategy, deﬁning who we

areand how we operate.

Integrating sustainability

We recognise the importance placed

onourenvironmental, social and

governance (ESG) responsibilities

by ourstakeholders and we aim

to integrate sustainability into all

aspectsofourbusiness.

Read more in our Strategy in action

on pages 11–15

Led by our purpose

Building great places for our customers,

communities and the environment.

We invest in placemaking, delivering

attractive homes, amenities and open

green space to improve the quality of

lifefor customers andlife for customers and communities.

Lyewood, Maidstone

Morton Park, Milton Keynes

Read more in the Chief Executive’s Statement

on pages 8–10

Crest Nicholson

Annual Integrated Report 2022

We have a

clear purpose

Building great places

for our customers,

communitiesand

the environment.

Better customer service

Achieving a ﬁve-star customer satisfaction rating is one of

ourstrategic priorities. We are preparing for the introduction

of the New Homes Quality Code by investing in new technology

and recruiting additional roles to ensure we comply with its

requirements. We always want a ‘right ﬁrst time’ culture and

are focused on the smooth delivery of homes to customers

andproviding high quality after-sales service.

Better communities

Better skills and capabilities

We strive to create distinctive new communities for our

customers to live in and enjoy. We place a strong emphasis

on placemaking including careful consideration of the local

environment, wildlife and biodiversity. Through our activities

and operations we are committed to mitigating our impact

on the climate, reducing both our waste and our carbon

emissions. This approach ensures we create a long-term

positivelegacyfor communities.

In an industry with declining availability of skilled resources,

having our own pipeline of future talent is critical to our success.

We have established the Crest Academy which oversees

threetalent programmes. This investment will ensure we

can equip thenext generation with the skills and capabilities

we willneedto deliver our strategy and ensure our teams

understand the latest regulatory changes.

Better homes

We continuously seek to improve and innovate how our homes

are designed and built to ensure they meet our customers’

requirements and aspirations. The Crest Nicholson brand

issynonymous with providing a high quality speciﬁcation

andﬁnish. New Building Regulations are being introduced

toimprove the energy eciency of new homes and reduce

their impact on the climate and we are incorporating these

intoour designs.

Highlands Park, Henley-on-Thames

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

What makes us

Crest Nicholson

We have ﬁve established housebuilding divisions

and in the year opened a further two in Yorkshire and

EastAnglia. We also operate a dedicated Partnerships

and Strategic Land division which provides expertise

in working with our key partners and managing

theacquisition of strategic land.

Our divisions Divisional highlights

South West

Case study Highbrook View

Highbrook View, Stoke Giord, is a highly

sought-after village on the outskirts of

Bristol. The ﬁrst phase of 144 homes was

launched in September 2022. It will be

part of the new Harry Stoke Community

where we have ﬁve phases and will

deliver approximately 1,250 homes,

commercial and education facilities, and

local amenities. It is located just seven

miles from Bristol city centre, and is

wellconnected to the main motorways,

making travel into key cities and to

London more convenient.

South

Case study Curbridge Meadows

Curbridge Meadows is located in

Curbridge village, Hampshire andis

part of the wider Whiteley Meadows

development. It will provide two,three

and four bedroom homes with green

open space across half the development.

This scheme willbeneﬁt from associated

new facilities, including twonew primary

schools which arelocated on the

development, a secondary school and

two neighbourhood centres with space

forshops and community amenities.

Crest Nicholson

Annual Integrated Report 2022

Employees

797

Plots added to our short-term

land portfolio

3,094

Divisions

Partnerships and Strategic Land

The PSL division have established a

strong reputation to work in conjunction

with partners to deliver Crest Nicholson

homes across a range of tenure types.

They aim to maximise value for both parties

through scheme design and placemaking

principles and demonstrating sector-wide

knowledge across all housing, land and

planning matters.

Working with the public sector, PRS

andRegistered Providers, theteam have

successfully delivered multiple transactions

with valued partners for the Group’s

housebuilding divisions during the year.

Their Strategic Land team have secured

land deals on several promising sites in a

challenging market. The existing strategic

land portfolio continues to be promoted

witha number of sites progressing

through key planning stages in the year,

including new Local Plan allocations

and draft allocations in emerging plans.

The team hasalso played a leading role in

responding to regional and national planning

challenges such as emerging environmental

legislation and proposed changes to the

planning system.

Chiltern

Case study Highlands Park

Highlands Park is located on the

edge of Henley-on-Thames, close to

local amenities such as shops, cafes,

restaurants and schools. It is surrounded

by countryside and within an Area of

Outstanding Natural Beauty. The location

is suited for families and commuters,

being well connected to the main

motorways and train network to London.

The development has 191 homes with

abroad mix of homes from two bedroom

apartments to ﬁve bedroom houses.

Midlands

Case study Monksmoor Park

Monksmoor Park, Daventry, comprises

just over 1,000 thoughtfully designed

homes, a primary school and nursery,

community building, health facilities,

retail and oce space, as well as

anextensive network of cycle paths.

The site has two phases of the

development left to sell: Union Place,

whichhas a total of 114 homes with 26%

ofthese being section 106 aordable

homes and Central Point, asmaller

scheme consisting of 37 homes with

35%of these aordable.

East Anglia

Case study A new division

Our East Anglia division will

operate across Norfolk, Suolk and

Cambridgeshire. We have recruited

anexperienced leader who isfamiliar

with the region and will now establish

a team and start to acquire sites.

We remain conﬁdent that East Anglia

isahighly attractive new geography

forus to expand into given its population

growth and increasing accessibility

tomajor towns and cities.

Eastern

Case study Henley Gate

Henley Gate, Ipswich, forms part of

theIpswich Garden Village sustainable

urban extension that will deliver a total

of 3,500homes, alongside schools, a

localcentre and associated infrastructure.

The Henley Gate development, which

is north of therailway, comprises 1,100

homes and aprimary school along with

a large country park. The country park

will be a key attraction which will enable

ecological habitats to thrive along with

providing an open space for residents

and visitors to enjoy.

Yorkshire

Case study A new division

Our Yorkshire oce opened in Leeds

earlier this year. We have recruited

asmall, experienced leadership team

with local expertise to oversee our plans

in this region. Areas we are targeting

include East Riding, North, South and

West Yorkshire. We have acquired

a sitein Sprotborough, an attractive

villagenear several main towns with

access to good schools. We have also

approved the purchase of several further

sites andthese purchases should be

completed early in FY23.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Chairman’s

statement

I am pleased to present another year of strong

performance and strategic progress. Our robust

ﬁnancialposition underpins our ability to deliver

ourmedium-term growth strategy.

Performance overview

I am pleased to report that the Group

continues to deliver good progress

implementing its strategy and has delivered

a ﬁnancial performance in line with its

expectations. We have built more homes,

increased our adjusted operating margin

and maintained a robust balance sheet.

Despite the various challenges impacting

the housing market over the past year,

ourstrategy has supported us in navigating

through these conditions and delivering

these outcomes.

Our plans for geographical expansion

areprogressing well. In Yorkshire we are

in the process of acquiring several sites in

excellent locations and have established a

high-calibre leadership team with regional

expertise and knowledge. We have recently

recruited a senior business leader in

EastAnglia and we plan to make a similar

start in this region as well.

The Group can look forward with conﬁdence

and optimism about its longer-term growth

ambitions, while remaining cognisant of the

current economic environment. We have

made signiﬁcant progress in the past

three years and have both the operating

platform, the necessary ﬁnancial resources

and the resilience required to execute

these plans. On behalf of the Board I would

like to thank all of our colleagues for their

dedication andcommitment in delivering

thisyear’s results.

Prepared

for the future

I am always impressed by the

enthusiasm and commitment

ofeveryone that I meet across

theGroup.”

Iain Ferguson CBE

Chairman

Read more in our Chief

Executive’s statement

on pages 8–10

Crest Nicholson

Annual Integrated Report 2022

Building safety

In April 2022 the Group signed the

Government’s voluntary Building Safety

Pledge committing to remediate life-

critical ﬁre-safety issues on all buildings

over 11 metres developed by the Group

in the last30 years. We are pleased to

have reached an outcome that we hope

provides comfort and assurance to aected

residents and stakeholders. It also allows

the Group to move forward in remediating

the aectedbuildings directly or through

another party as soon as possible.

Sustainability and social value

As a Board we recognise our responsibility

inensuring that our business operations limit

or reduce their impact on the climate and

planet. Sustainability and social value is one

of the Group’s four foundations upon which

our strategy is anchored and we are always

looking for ways in which we can operate

more sustainably in everything thatwe do.

We continue to make strong progress

against our medium-term targets to reduce

greenhouse gas (GHG) emissions intensity

by 25%, waste intensity by 15% and increase

renewable electricity procurement to 100%.

Last year we stepped up our ambitions

toreduce the Group’s carbon footprint and

established new science-based targets.

These are designed to achieve net zero

by2045 and I am pleased to announce

these targets have been validated by

the Science Based Targets initiative,

bringing usa step closer in combating

climate change.

Board changes

In May 2022, the Board and Tom Nicholson,

Chief Operating Ocer, agreed that it was

the appropriate time for Tom to leave the

Group. The Board and I would like to thank

Tom for his hard work and dedication in

helping develop and oversee the changes

that nowposition Crest Nicholson todeliver

its future growth ambitions.

The Executive Leadership Team has been

augmented as we welcome the promotion

ofAlex Stark and David Brown to be

Executive Managing Directors. Alex and

David both bring signiﬁcant industry

expertise and will have responsibility for

both their existing divisions and oversight

of another division as we develop our

organisation to deliver our growth ambitions.

Engagement with our people

The Board is always keen to understand

andrespond to our employees’ views,

concerns, and challenges. Communication

and feedback are achieved through a

varietyof channels, including employee

surveys and the Employee Voice

programme. The latter is hosted by

LouiseHardy, Non-Executive Director

responsible for employee engagement.

This programme provides an open,

independent and inclusive forum for our

employees to interactwith aBoard member.

The Board has spent time during the year

reﬂecting on the feedback received.

During the year the Board has visited

severalof our developments enabling us to

meet our colleagues. I am always impressed

by the enthusiasm andcommitment of

everyone that I meet across the Group.

We are very conscious of the challenges

thatmany of our colleagues are facing

because of the cost-of-living crisis and

wehave considered ways of supporting

them throughout the year. In July 2022,

theGroup made a one-o payment as a

cost-of-living supplement to all employees

below the Executive Leadership Team.

We will continue tomonitor the economic

backdrop and consider any further measures

that are deemed appropriate. Further detail

about how the Remuneration Committee

hasconsidered Director and employee pay

can be foundon pages 100–122.

Capital allocation and dividend

The Group maintains its dividend policy

oftwo and a half times cover, and the Board

is recommending a ﬁnal dividend of11.5

pence per share (FY21: 9.5p), and subject

to shareholder approval, this will be paid

on5 April 2023, which will make the total

dividend 17.0 pence (FY21: 13.6 pence)

for FY22.

Summary and outlook

This has been another year of signiﬁcant

progress for Crest Nicholson. The strategy

we set out in 2019, coupled with the hard

work and eorts of our people across

the Group, is translating into improved

ﬁnancial performance. The Board remains

convinced that growing the Crest Nicholson

footprint inthe UK remains the best way

of generating value for shareholders.

The current economic uncertainty inevitably

challenges our original assumptions for

how quickly that growth can and should

bedelivered. Maintaining a robust ﬁnancial

position will always be our key priority in

times such as these and we will remain

disciplined and selective in relation to

futureland investment.

I remain conﬁdent in the skill and

commitment of our people and the Board

considers that we have highly experienced

leadership, central and divisional teams.

The long-term prospects for Crest Nicholson

remain attractive and exciting.

Iain Ferguson CBE

Chairman

Political and

economicenvironment

The long-term fundamentals of the

UK housing market remain attractive.

The shortage of available housing stock

and low levels of unemployment will both

underpin future demand. In recent years

mortgage availability has been good and

the cost of borrowing has also been at

historically low levels. It was against this

backdrop, supported by our excellent

ﬁnancial position, that we announced

our plans to expand Crest Nicholson into

newregions across the UK at our Capital

Markets Day in October 2021.

The economic situation in the UK has

undoubtedly deteriorated during 2022.

The war in Ukraine and the consequences

ofdecisions taken to deal with COVID-19

have caused higher levels of inﬂation across

all developed economies. We have also

hadto contend with adjusting to life outside

of the European Union and experienced

political leadership changes which have

added to the general economic and

politicaluncertainty for all businesses.

As a housebuilder, our sector’s performance

is heavily dependent on conﬁdence and

market sentiment. The Bank of England’s

actions to combat rising inﬂation, by

increasing interest rates and providing

forward guidance of more action to come

in2023, have started to have an impact

on the availability and cost of mortgage

borrowing. The general economic

uncertainty also encourages customers

to be more cautious and delay house

purchasing decisions if they believe prices

areabouttofall.

We will navigate and adapt our strategy in

response to trading conditions. Reassuringly,

the Group is equipped with the necessary

ﬁnancial resources and leadership

experience to successfully achieve this

and remains conﬁdent in the long-term

prospects of the UK housing market.

“ Maintaining a robust ﬁnancial position will

always be our main priority in times such

as these and we will remain disciplined and

selective in the acquisition of any new land.”

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Chief Executive’s

statement

I am delighted to report another year of improved

ﬁnancial performance and we continue to make good

progress with the implementation of our strategy,

despite a challenging economic backdrop.

FY22 performance review

This year has been characterised by signiﬁcant

uncertainty in the external environment.

At the start of the year our sector was starting

to recover from the operational disruption

created by COVID-19. The economic backdrop

pointed to rising inﬂation and increasing

interest rates, however the housing market

continued to demonstrate its resilience,

as it had done throughout the pandemic,

and we traded well during this time.

The tragic conﬂict in Ukraine acted as an

accelerant to these pressures, creating energy

supply concerns, adding further commodity

supply issues, and increasing global

geopolitical uncertainty. In housebuilding, cost

inﬂation started to grow with raw material price

increases and labour inﬂation driving up the

cost of construction. The housing market has

mitigated the impact of these increased costs

through comparable levels of house price

inﬂation. Trading conditions started to become

tougher over the summer, culminating in

signiﬁcant political and economic turbulence

in the UK in early autumn. A year that had

started so positively for all housebuilders

became increasingly challenging as we

closedour year at the end of October.

Despite this uncertainty I am delighted to

report another year of improved ﬁnancial

performance as we continue to make good

progress implementing our strategy. We

have delivered revenue growth, expanded

adjusted operating margins, increased

return on capital employed and generated

strong levels of cash throughout the

year. We closed the year with net cash of

£276.5m and completed a new £250m

Sustainability Linked Revolving Credit

Facility. In combination they underline

the strength of the Group’s balance sheet

which provides resilience in tougher market

conditions, funds our growth ambitions and

covers our legacy combustible materials

responsibilities. You can read more detail

on both our trading performance and eorts

inenhancing our ﬁnancial position in the

Finance Review on pages 52–56.

That we have managed to deliver such a

strong performance in the year, set against

this backdrop of uncertainty and external

pressures, reﬂects the hard work and eorts

of all Crest Nicholson employees. I would

like to personally thank each of them for

theircommitment, tenacity and resilience.

Over the past three years we have needed to

make some dicult decisions in our ambition

to restore Crest Nicholson as one of the UK’s

leading housebuilders. Our people have

dedicated themselves to this goal and can

rightly be proud of what we have achieved

this year.

Building

better

futures

The hard work

in the past three

years has put the

Group in a strong

ﬁnancial position,

which gives us

conﬁdence to

trade eectively

in allmarket

scenarios.”

Peter Truscott

Chief Executive

Crest Nicholson

Annual Integrated Report 2022

The UK’s antiquated planning system needs

fundamental reform if we are to build the

homes we need for our growing population.

Given this backdrop, and cognisant of our

strong ﬁnancial position, we have continued

tobe active in the land market in FY22 and

willremain disciplined and selective in doing

so in FY23.

Once sites have been identiﬁed and secured

the process for obtaining planning approvals

and satisfying any necessary conditions

has also become increasingly inecient.

Planning teams are often under-resourced

and trying to catch up after the pandemic

disruption. Fresh environmental challenges

emerged during the year including ground

nutrient levels and water neutrality. While we

are wholly committed to operating in harmony

with our natural habitat and to ensure we leave

a sustainable legacy on all our developments,

these challenges again impact our ability to

get on site and start building. Although these

challenges are signiﬁcant we have a strong

heritage and capability in procuring land

and utilising our placemaking experience

to navigate the approval process as swiftly

as possible.

In 2023 we would like to see the Government

tackle the constraints in the UK’s planning

environment.

Progress on strategy

We set out an update to our strategy at

our Capital Markets Day in October 2021.

Having completed the ﬁrst phase of this

strategy and delivered a strong ﬁnancial

and operational turnaround, the Board

outlined to shareholders why it believed

growing Crest Nicholson’s footprint in the

UK and expanding into new geographies

was the best way to create value over the

medium term.

We have made a strong start with these

ambitions in FY22. In Yorkshire we have

opened an oce, establishing a small team

which has been active in the land market,

acquiring its ﬁrst site and with terms agreed on

several others. We have been able to attract

high quality talent with expertise in the region

and have been pleased by the local reception

to the Crest Nicholson brand. In East Anglia

we have recruited an experienced leader who

has recently joined us and will implement a

similar approach in that region.

Given the uncertain economic backdrop and

challenges outlined above we have decided

to defer the planned opening of a third

new division in FY23. We will also remain

disciplined and selective in acquiring new

sites and incurring incremental overheads

across the whole Group and will look to

accelerate the growth plan in the new

divisions when market conditions stabilise.

Part of rebuilding operating margins in Crest

Nicholson in line with sector peers lies in

our ability to divest of those legacy schemes

held at weaker margins. On 6 May 2022 we

sold our 50% share in our joint venture with

Clarion Housing Group containing the London

Chest Hospital development in East London.

We recorded a £2.3m net impairment loss on

ﬁnancial assets because of this disposal but

will receive £16.0m in consideration and forego

signiﬁcant working capital utilisation in the

development of that scheme in future years.

Delivering excellent customer service

is a major focus for all Crest Nicholson

employees, reﬂected by our inclusion

ofattaining a ﬁve-star rating in the Home

Builders Federation (HBF) customer

satisfaction survey as one of our ﬁve

strategic priorities. In addition, our industry

is undergoing signiﬁcant change in this

area. The New Homes Quality Code (Code)

was introduced in October 2022, and we

have been preparing to align our business

operations and processes to comply with

the requirements of the Code. We welcome

its objectives which will support the delivery

of high standards from housebuilders and

see customers being more actively involved

during the construction process through

to completion.

During the year we have recruited a

dedicated Quality Assurance team to

support and train our site teams to deliver

the new requirements to take photographic

evidence throughout the quality assurance

process. We have also started to roll out

COINS, an enterprise resource planning

(ERP) platform speciﬁcally designed for

the construction industry and speciﬁcally

its customer service module, which will

provide better oversight of the snagging

andresolution process.

As outlined above, this year has seen

thehousebuilding sector impacted by

disruption to labour and supply chains

through a combination of adjusting to

life outside of the European Union, the

aftermath of COVID-19 and the conﬂict in

Ukraine. Against this backdrop we have

experienced operational challenges and

disruption in one of our divisions that has

delayed the handover of some properties

to customers. This has disproportionately

impacted our overall 2022 satisfaction score

which is now expected to be marginally

below the threshold required to retain

ﬁve-star when awarded in February 2023.

We are naturally disappointed with this

outcome as it falls short of the standard

wehave embedded into one of our strategic

priorities. However, we are conﬁdent that

the actions and investments we have made

during the year will return Crest Nicholson

toﬁve-star status next year.

Building Safety Pledge

In April 2022 we signed the Government’s

Building Safety Pledge (Pledge), which we

believe is in the best interests of the Group,

taking further steps to support those living

in aected buildings. The Pledge sets out

our commitment to address life-critical ﬁre

safety issues on all buildings of 11 metres

and above in England developed by the

Group in the 30 years prior to 5 April 2022.

In addition, the Group agreed that the

Government’s Building Safety Fund will not

be used to remediate those buildings and

that it will reimburse any amounts already

paid by the Building Safety Fund. There is

now greater clarity around the Government’s

requirements of us and the wider sector

concerning historic building safety issues,

and the costs related to remediate these.

Political and economic environment

The UK is facing the same global headwinds

on inﬂation and energy supply as other

developed nations. The impact of COVID-19

necessitated signiﬁcant ﬁnancial intervention

from the Government to protect the economy

and jobs. These actions are undoubtedly

contributing to some of the current

economic fragility.

However, the political uncertainty experienced

over the late summer of 2022 was undeniably

self-inﬂicted and avoidable. The short tenure

of the Prime Minister and Chancellor of the

Exchequer, following the rejection of their

Mini Budget in September, created additional

volatility. Financial markets became instantly

concerned by tax cuts that were not clearly

funded. In addition, the overall aordability

of the UK’s projected national debt led to a

rapid drop in the value of the British pound

and speculation on the requirement for a

succession of steep increases in interest

ratesinto 2023.

Mortgage rates responded in kind with

lenders increasing their rates across all

products and in many instances withdrawing

products for those buyers with the lowest

levels of equity. Media speculation at the time

inevitably focused on the pressure this would

exert on the housing market, pointing to falling

volumes and prices as a major correction

was underway. Rising mortgage costs were

accompanying a general cost of living crisis

as increasing energy bills and food prices

were being absorbed against a call for wage

inﬂation restraint in the public sector to help

curb overall levels of inﬂation.

The appointment of another Prime Minister

and Chancellor in October, complemented

by a new Budget in November calmed the

ﬁnancial markets. Focusing on delivering

eciencies in public spending and increasing

taxes across a variety of income streams has

already started to lower predictions of peak

future interest rates. Evidence that inﬂation

is starting to recede is also supporting

this narrative.

No one can deﬁnitively predict how the

housing market will perform in 2023. The UK

consumer will undoubtedly be in possession

of lower levels of disposable income, however

mortgage availability will likely still remain

good, albeit more expensively priced than in

2022. This is a key dierentiator to the last

housing market downturn in 2008, when

stress in the banks was the principal cause

of the weakness. Ultimately the signiﬁcant

commitment and decision that comes with

buying a home is heavily linked down to

sentiment and conﬁdence. The UK housing

stock remains structurally challenged with

demand outstripping supply. We are conﬁdent

in our ability to operate and trade in whatever

economic conditions we face next year.

The political volatility in the UK has also

hindered the necessary change and progress

we need in how we operate. The land

market is highly competitive with multiple

bidders for new schemes. The strong sales

market of the past two years has seen outlet

numbers fall across all major developers

and there is not enough new land being

released to replenish this capacity and help

support the Government’s previously stated

aspiration to build 300,000 homes a year.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Chief Executive’s

statement continued

In FY22 we recorded an exceptional

before tax charge of £105.0m in respect of

signing the Pledge, which reﬂects our best

estimate of the extent and future cost of

work required. The Group, along with the

rest of the industry, continues to work with

Government to transfer the principles of

the Pledge into a longer-form agreement.

We will continue to update stakeholders

onthe progress ofthese discussions.

Our internal team responsible for managing

the remediation programme continues to

work at pace and we expect this work to be

completed in approximately three years.

Sustainability and social value

We recognise our responsibility to

mitigate, where possible, the impact that

our business operations have on the climate

and environment. We are continually striving

to improve the energy eciency and

sustainability of our homes and are adapting

our home designs in response to Building

Regulations and the changes contained

withinthe Future Homes Standard.

During the year we made good progress

in reducing scope 1 and 2 greenhouse

gas GHG emissions and have exceeded

our target to reduce emissions intensity

by 25% by2025 compared to a 2019 base

year. We understand that scope 3 emissions

account for most of our carbon footprint and

having calculated these emissions for the

ﬁrst time in FY21, we are also taking steps

toaddress this area of our footprint.

Our strategy is well-embedded and

delivering operational improvements

andstronger ﬁnancial performance.

Our goal is to deliver sustainable growth

for all our stakeholders. Our strategic

priorities are underpinned by our

four foundations.

Placemaking

& Quality

Multi

Channel

Approach

Land

Portfolio

Five-Star

Customer

Service

Operational

Eciency

Our strategic priorities

andour foundations

We signed up to the UN-backed Race

toZero in FY21 and have since established

new science-based targets. Our targets

include near-term scope 1, 2 and 3 GHG

emissions targets and a commitment

toachieve net zero emissions across

ourvalue chain by 2045. I am pleased to

conﬁrm that our targets have been approved

by the Science Based Targets initiative.

The Sustainability Committee, which I

chair, has oversight of matters relating

to sustainability throughout the Group

and isresponsible for overseeing

thedevelopment and delivery of

strategic aims.

Outlook

The outlook for the housing market is

clearlyuncertain. There are many political

andeconomic factors, some global in

nature,which we cannot hope to inﬂuence

orchange. Our focus in times like this

mustbe on those things we can control.

The hard work of the past three years has

put the Group in a strong ﬁnancial position.

Our balance sheet is robust and gives us

conﬁdence to trade eectively in all market

scenarios. We also want to remain active in

the land market, recognising the competition

for new sites, and ensuring we emerge

from any downturn in market conditions in

the strongest possible condition. We have

an experienced leadership team who

have extensive experience of operating

intougher market conditions.

We enter FY23 with a strong forward order

book, a portfolio of excellent land assets

andan operating platform with multiple

channels to market.

We are convinced that the fundamentals

of the housing market in the long term

remain attractive. The lack of land which

can be immediately developed, and the

skill and experience required to navigate

our planning system, will eventually require

reforms if we are to signiﬁcantly boost our

nation’s housing supply. Our strategy to

grow Crest Nicholson into new geographies

remains undiminished. We will remain

disciplined and selective in the way we

allocate capital and will look to accelerate

our growth plans when calmer market

conditions return.

Peter Truscott

Chief Executive

Placemaking & Quality

Read more on pages 52–56

Our Strategic Priorities Our Foundations

Crest Nicholson

Annual Integrated Report 2022

Our strategy

inaction

We are committed to improving the energy

eciency and sustainability of our homes.

We are adapting our homes in response

tothe Future Homes Standard ensuring

thatwe continue to reduce the impact

thatthe construction and usage of our

homes has on the climate.

See page 26 for our

Sustainability review

Progress in the year

We want to build developments that people

wish to live in and call home. We do this by

creating attractive and vibrant communities

with a focus on sustainability. An example

of this is our development Fernhurst in

Camberley, Surrey. Within the development

wehave provided a wildﬂower meadow

with mown footpaths, an informal wetland

basin area and it will also containequipped

play areas. The site has been designed

to attract a range of wildlife such as bats,

butterﬂies and distinctive birdssurrounded

byleafy woodlands.

The site is adjacent to Hawley Park Farm

Country Park which provides 15 acres of

open meadow with tree and hedgerow

planting. The space provides opportunities

for dog walking and informal recreation

including a play area, picnic area and natural

play trail. The site has been created as a

Suitable Alternative Natural Greenspace

(SANG) which helps to reduce recreational

pressure on the nearby Thames Basin

heathland habitats.

Building

better

communities

Our land portfolio will continue to provide opportunities

for the Group to demonstrate itsmaster planning and

placemaking expertise. We aim to create aspirational

developments that we know our customers are proud to

call home and deliver high quality, well-speciﬁed homes.

Placemaking & Quality

Future priorities for FY23

Continue to focus our investments

ondesirable locations that meet

ourcriteria for placemaking

Committed to mitigating and

managingclimate change risks

and increasing biodiversity on

our developments

To create a positive legacy

forour customers.

Fernhurst, Surrey

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Financial

Statements

Governance and

Directors’ Report

Our strategic land portfolio generally oers

longer-term opportunities to create value,

often at superior margins to short-term land

and enables us to utilise our strengths in

promotion and placemaking. These sites

are predominantly controlled under option,

representing good capital eciency.

Progress in the year

We remain disciplined and selective on the

procurement of land and new acquisitions

must meet our elevated hurdle rates to

reﬂect the current economic uncertainty.

During the year we have been able to add

high quality sites to our land portfolio across

the Group. This included the purchase of 143

plots inKinver, Staordshire – a high quality

location in ourMidlands division. Our team’s

expertise in sourcing land opportunities and

managing relationships with landowners

was pivotal tosecuring this scheme.

While the land market remains highly

competitive, the Group’s standard house

type range and ecient operating platform

have supported our ability to procure

landon compelling economic terms.

Occasionally the Group believes it can

bestrealise value for stakeholders by

disposing of land interests. In May 2022

theGroup disposed of its 50% share in

thejoint venture containing the London

Chest Hospital site in East London to

its jointventure partner receiving

£16.0m cash.

We have a well-located land portfolio which provides us with

ﬂexibility in how we choose to develop it. Our short-term land

portfolio represents approximately ﬁve years’ worth of supply

which we consider to be appropriate for our needs. Most of

these sites can be delivered by utilising our standard housetype

range and some are well suited to development for partners

who we work closely with to realise valuefor both parties.

Land Portfolio

Our strategy in action

continued

Building

better

opportunities

Future priorities for FY23

We will be disciplinedand selective

inour acquisition of new land

We will retain our higher hurdle rates

forland approvals in FY23 and ensure

that the Group’s standard house

typerange remains competitive

We have sucient short-term land

forFY23. Our land buying focus is

nowfor FY24 and beyond.

Kinver, Staordshire

Crest Nicholson

Annual Integrated Report 2022

Build costs

During the year global inﬂationary pressures

and supply chain constraints, as a result

of the war in Ukraine and the aftermath

ofCOVID-19 disruption, both contributed

to asteep rise in building material costs.

In the labour market, a shortage of skilled

workers also led to high wage inﬂation

which added to the cost to construct new

homes. While inﬂation has moderated in

both of these areas, for those materials that

have a highenergy cost to produce such as

concrete and steel, pricing has remained

dynamic. Our operational eciency

programme has helped to mitigate the

impact of these cost increases in FY22.

Central to every part of our strategy is a desire to do things

eciently and right ﬁrst time. Using our standard house types

andspeciﬁcations we can build with greater consistency which

inturn leads to higher quality. These house types are ecient

to plot and use development space eectively. As the Group

expands into new regions, wewill maintain strong oversight

onincremental overheads.

Operational Eciency

Progress in the year

Our standard house types accounted for the

majority of completions in FY22. Our house

types have the beneﬁt of contemporary

thinking with respect to the requirements

of the Future Homes Standard andenergy

eciency. They also have ﬂexibility when

replanning sites. Plotting eciency is an

ongoing process to maintain ﬂexibility in our

product oerings and to optimise the value

of the developments. Replans and replotting

will continue to bring positive beneﬁts in

coverage while also enhancing the returns

from our schemes.

During the year we began rolling out a

newERP system. Construction Industry

Solutions (COINS) is the most commonly

used software system in the construction

industry and provides users with a fully

integrated experience across commercial,

technical and ﬁnancial activities. The

introduction of this system will provide

greater control and oversight of our build

programmes andgenerate a richer level

ofinsight downto plot-level data.

Building

better

operations

Future priorities for FY23

Maintain a disciplined approach

tocentral overheads

Continue to focus on plotting

eciencyto ensure maximum

valuefrom our sites

Continue to regularly tender

works toachievecompetitive

pricing inatougher market.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Financial

Statements

Governance and

Directors’ Report

We are committed to delivering high

qualityhomes and excellent customer

service to our customers. During the

yearwehave made further investment

in training, we have recruited a

Quality Assurance team to support

further our siteteams and introduced

COINSforcustomer service, which

will provide better oversight on snag

resolution process.

Progress in the year

In October 2022 the New Homes

QualityBoard (NHQB) was established

for the purposes of developing a new

framework to oversee reforms in the

build quality of new homes and the

customer service provided by developers.

The NHQBintroduced the New Homes

Quality Code (Code) and the New Homes

Ombudsman Service to ensure best practice

in the housebuilding sector. We welcome

the objectives and purpose of the Code,

which covers the period frominitial enquiry

through to completion, and then two years

post-occupation. We are making good

progress in preparing for the Code and

howwe will deliver the high standards

ofquality and service the Code requires.

Giving great customer service is at the heart of everything

we do. We have a ‘rightﬁrst time’ culture and are focused

on the smooth delivery of homes to customers and

providing a high quality after-sales service.

Five-Star CustomerService

Our strategy in action

continued

Building

better

experiences

Future priorities for FY23

Additional training and controls

acrossthe Group to ensure

compliancewith theCode

New Customer Relations Manager

roles to drive consistency and

sharebest practice

Introduce improved processes

to trackand respond to snags

and complaints.

Pictured above: Mr Coyles and

MrPratt who used Deposit Unlock

tobuy their home at Monksmoor

Park, Daventry and credited the

process as “speedy and smooth”.

Crest Nicholson

Annual Integrated Report 2022

By working closely with partners to identify

which sites and product types align with

their business models we can forward sell

signiﬁcant volumes at a relatively small

discount to private open market prices and

optimise margins. These transactions often

beneﬁt from earlier cash receipts which de-

risk build programme commitments and can

deliver ahigher return on capital employed.

Our strategy envisages that approximately

20% of total Group revenue each year

will come from alternative channels to

theprivate market.

Progress in the year

PSL continues to develop strong strategic

relationships with institutional investors

and local authorities and has successfully

negotiated and delivered signiﬁcant

transactions in FY22.

During the year the Group announced its

biggest PRS deal, worth £120m, with funds

managed by leading global investment

management ﬁrm, Oaktree Capital

Management, L.P. and CompassRock

International. The transaction involves

the sale of 403 homes across three key

developments in Southern England,

oering high quality private rental units

tolocal residents.

The investment encompasses homes located

at Brightwells Yard, Farnham, TheTower

atCentenary Quay, Southampton, and

WaltonCourt Gardens,Walton-on-Thames.

The Partnerships and Strategic Land (PSL) division is

responsible for both sourcing land and developing

partnership arrangements. Their Strategic Land team

are experienced in managing and promoting strategic

land to bring these sites through to our short-term land

portfolio. The other responsibility of this division is to

develop strategic relationships with the public sector,

Private Rented Sector(PRS) and Registered Providers.

Multi Channel Approach

Building

better

partnerships

Future priorities for FY23

Continue to invest in our PSL

platform,focusing on mixed

tenuredelivery, specialist land

procurement and key relationships

PRS investors’ appetite remains

strongand we will continue to

focusonbuildinga sales pipeline

inthis market

Maintain strong relationships with

strategic partners, improve contract

terms and optimise discounts to

openmarket sales prices.

Walton Court Gardens, Surrey

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Financial

Statements

Governance and

Directors’ Report

Market overview

Despite the current economic and political uncertainty,

the long-term fundamentals of the UK housing market

remain strong.

UK economy

Overview

The UK economy continues to be impacted

by a variety of factors and theoutlook

remains uncertain.

At the start of 2022 COVID-19 restrictions

remained a concern and this has further

aected global supply chains and

increased labour supply challenges.

Against this backdrop the UK started to

see signiﬁcant inﬂation in the economy.

In February 2022 Russia invaded Ukraine

which created further geopolitical and

economic uncertainty, given Russia’s

contribution to the world’s energy

resources and Ukraine’s provision of

rawmaterials and foodstus. In May

2022 the Bank of England increased

the base interest rate by 25bps to 1%.

Over the summer mounting political

Our response

— Continue to maintain our robust

ﬁnancial position

— Focus on margin performance

aheadofvolume growth

— Adjust the pace of planned growth

inournew and existing divisions.

Key risks

— Continued volatility in the economic

and political backdrop will have

negative impact on growth

— Potential increase in the rate

ofunemployment has implications

oncustomers’ conﬁdence and

abilitytobuy homes

— Negative sentiment towards investment.

Link to principal risks

Market conditions

Access to site labour and materials

Build cost management

Our principal risks pages 58–64

pressure resulted in the departure of the

Prime Minister. The newly appointed Prime

Minister and Chancellor of the Exchequer

announced a Mini Budget in September

2022 which proposed signiﬁcant unfunded

taxcuts across a range of areas which

caused thepound to rapidly fall in value,

reaching a37-year low against the US dollar.

Forward forecasts for interest rates

startedto climb even higher as the

BankofEngland rearmed its objective

to keeping inﬂation under control and

raisedthe base interest rate further.

Consumer conﬁdence started todecline,

weakening the economic backdrop even

further. The economic uncertainty was

so acute that it resulted in the Chancellor

beingreplaced, before the Prime Minister

herself chose to resign.

The appointment of another new Prime

Minister and Chancellor, coupled with

the delivery of a more prudent economic

plan has provided some stability and

conﬁdence. GDP growth is still expected

to be negative for the latter part of 2022

and the UK is forecast to be in recession

in 2023. The depth and duration of that

economic downturn remains unclear

andwill be subject to the inﬂuences of

thegeopolitical factors outlined above.

Nine Acres, Tiptree

Crest Nicholson

Annual Integrated Report 2022

Housing market fundamentals

Overview

The housing market has demonstrated

its relative resilience to recent economic

shocks, such as COVID-19, however its

performance remains heavily sentiment-

driven and mortgage costs have historically

remained low for a long time.

The biggest underpin to this robust

performance is the imbalance of housing

supply to meet buyer demand. This situation

has developed over generations as the

UK has not built enough homes to keep

pace with population growth and changing

household sizes. The Government

recognises the importance of increasing

the number of homes being built and

has communicated an annual target

of300,000 new homes per year.

Our response

— Strong land portfolio in Southern

Englandwith limited supply

— Expansion into Yorkshire and

EastAngliawhere we see long-term

strongdemand and future growth

— Remain selective and disciplined

intheacquisition of new sites.

Key risks

— Rising interest rates will have

animpact on mortgage pricing

andconsumer conﬁdence

— The long-term structural

imbalance of supply and demand

remains unaddressed

— Undersupply of housing continues

tounderpin house price inﬂation and

aordability challenges for buyers.

In addition, it has created the Department

of Levelling Up, Housing and Communities

(DLUHC) with the speciﬁc objective of

ensuring that investment, regeneration

andhousing are considered across the

wholeof the UK.

The number of new homes being

constructed in the UK is closer to 200,000

per year and this is expected to reduce in

2023. To reach its target, the Government

will have to stimulate the conditions for

regeneration and economic investment,

including housebuilding.

Government legislation – ﬁre and building safety

Overview

In January 2022 the Secretary of State

for DLUHC announced the Government’s

intention to widen and lengthen the

deﬁnition of legal obligation on developers

to fund the remediation of buildings

aected by ﬁre safety issues.

As of 9 August 2022, 49 developers,

including Crest Nicholson, have signed

apledge committing to remediate

Our response

— Signed the Government’s Building

SafetyPledge in April 2022

— Recorded an additional £105.0m

combustible material related charge.

Closing combustible materials provision

is£140.8m at31 October 2022

— The Group is working as swiftly

aspossible with all stakeholders

tocomplete these works.

Key risks

— Costs for ﬁre remediation may

bedicult toestimate due to the

complex nature of the process

— Build cost inﬂation increases the total

amount required for the remediation

— Scope of building safety issues

increase,leading to additional cost.

Link to principal risks

Safety, Health & Environment

Laws, policies and regulations

Combustible materials

Our principal risks pages 58–64

life-critical ﬁre-safety works in buildings over

11 metres that they developed or refurbished

over the last 30years in England. Developers

making thiscommitment have also agreed

to reimburse any funding granted to

building owners from Government

remediation programmes.

Each developer will be expected shortly

tosign a legally binding contract reﬂecting

these pledges and inform leaseholders

in aected buildings how they will

be meeting their commitments.

The housebuilding sector is working

with the Home Builders Federation (HBF)

and the DLUHC to agree the necessary

legal documentation.

The pandemic has also triggered achange

in housing demand as people re-evaluated

their working patterns and housing needs.

In particular the growth in demand for

single family homes has been strongest

where there is provision for home working

options and excellent transport links.

With energy supply uncertainty, customers

are also carefully examining the energy

eciency performance of any new home,

and new build properties perform strongly

in this respect.

Link to principal risks

Market conditions

Our principal risks pages 58–64

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Link to principal risks

Market conditions

Solvency and liquidity

Land availability and planning

Our principal risks pages 58–64

Climate change

Overview

The Climate Change Act 2008

commitstheUK Government to

reducinggreenhouse gas emissions

byatleast100% of 1990 levels (netzero)

by2050. It is setting an ambitious

agendato decarbonise the

UK economy.

Several upcoming climate change

regulations and disclosures with

whichwehave to comply include:

Our response

— Continue to improve awareness

andknowledge of climate change

acrossthe Group

— Conduct further embodied carbon

analysis to reduce upstream scope

3 emissions, and to trial and monitor

technologies to support delivery

oftheFuture Homes Standard

— Established a biodiversity framework

to help deliver biodiversity net gains

onour developments.

Aordability and lending environment

Overview

Housing aordability is becoming

morechallenging across the UK housing

market. The UK house price to earnings

ratios reached a peak in Q3 2022 at

7times, above the 2009 peak at 6.3 times,

which preceded the collapse in pricing

associated with the Global Financial

Crisis (GFC). All economic downturns are

dierent and there are several factors that

suggest the next onemay not be as severe.

Firstly, lending banks are more strongly

regulated, stress-tested and capitalised

since the GFC. Secondly, employment

levels in the UK remain strong and thirdly

Key risks

— Economic volatility and rising

unemployment may force people

tosellhomes and reduce prices

— Prospective buyers may be unable to

ﬁnance a house move given the other

impacts on their household ﬁnances

— Banks become more risk averse

andwithdraw aordable ﬁnancing

oers toprospective buyers.

the Government has demonstrated through

its actions during times like COVID-19,

thatit is committed tomaintaining a strong

housing market as an underpin to general

economic health.

However, rising interest rates have already

led to some higher mortgage costs.

Recent pricing has been as high as 5.5%

(Nationwide two-year ﬁxed rate) with further

interest rate impact expected. The increase

in mortgage rates sees a prospective ﬁrst-

time buyer’s monthly mortgage payment

rise from approximately 34% of take-home

pay to approximately 45% (based on a

5.5% mortgage rate)*. Mortgage approvals

have also started to fall, down 26% year-

on-year in FY22, reﬂecting the increased

economic uncertainty**.

* Source: Nationwide Housing Index.

** Source: Bank of England.

Our response

— Actively promoting Deposit Unlock as

analternative to Help to Buy to help

ourcustomers with the aordability

ofanew home

— Adjust the pace of our build programmes

and land acquisitions toreﬂect tougher

market conditions

— A strong balance sheet that will enable

usto prioritise our returns overvolume

during any downturn.

Key risks

— Emerging regulations to reduce

emissions associated with

our homes

— Carbon tax and other pricing

mechanisms could increase the

costoffuel, energy and materials

— An inability to transition to lower

emissions technology.

The additional burden of increasing

mortgage repayments on household

ﬁnances comes at a time of rising

energybills, food prices and modest

wageinﬂation. The combination

of thesefactors will weigh on

housing aordability.

The Government has sought to provide

some assistance to home buyers,

recentlyincreasing the threshold to

pay stamp duty to £425,000 for ﬁrst-

time buyers, and£250,000 otherwise.

The Help-to-Buy scheme will end

on 31 March 2023. Participation in

thescheme continues to reduce with

buyers now seeking alternative methods

ofﬁnance support such asDeposit

UnlockandFirst Homes.

The Future Homes Standard (FHS):

Updatesto Part L of the Building

Regulationswill require a 31% reduction in

carbon emissions over current regulations

starting from June2022. From 2025 the

FHS will require at least a 75% reduction

in carbon emissions compared to current

standards, together with the prohibition

offossil fuel heating, including gas boilers.

Biodiversity net gain: The legislation

will require all developments to deliver

a biodiversity net gain of 10% which

means developments will need to

create a 10% measurable improvement

in the biodiversity of the site developed

relative to the site if development had

not occurred.

Task Force for Climate-related Financial

Disclosure (TCFD): It is a mandatory

requirement for companies to disclose

climate-related ﬁnancial information

withinthe annual report. (See pages 30–38

formore information.)

Link to principal risks

Laws, policies and regulations

Climate change

Our principal risks pages 58–64

Market overview continued

Crest Nicholson

Annual Integrated Report 2022

Land and planning

Overview

The land market remains highly

competitive, driven by a lack of supply

and housebuilders’ need to replenish their

pipelines of new sites following a strong

market in recent years. Opportunities are

generally more plentiful on larger sites

and schemes, but given the economic

uncertainty, many developers are now

communicating caution in their approach

to purchasing new land which may be

acquired at the peak of this market cycle.

Acquiring sites is only the ﬁrst challenge

thatdevelopers currently face in

building new homes. The planning

system is currently highly inecient.

Resourcing issues, a lack of political

Key risks

— More complexity and change created

bynew legislation and proposed

reforms of planning

— Insucient land in the market for

futureexpected output and for growth

— Competition on pricing and payment

terms for land and associated

house prices.

Link to principal risks

Laws, policies and regulations

Land availability and planning

Our principal risks pages 58–64

impetus and a backlog of applications

received during COVID-19 are leading to

delays in obtaining consents and slowing

down the speed at which builders can get

on site. This backdrop has been present

forsome time but has deteriorated further

inthe past year.

In addition, several environmental agenda

items have also emerged in the past year,

contributing to planning delays. Nutrient issues

and water neutrality challenges have been

highlighted in several parts of the country

by Natural England. The Government has

acknowledged that these concerns require

clear policy making and guidelines to

ensurethe planning system can proceed

withgranting approvals.

Our response

— Approximately ﬁve years’ worth

ofshort-term land – the right level

forthesize of our business

— Standard house type range and

placemaking capabilities have

supportedability to procure land

oncompelling economic terms

— A strategic land portfolio which will

continue to provide a supply of high

quality sites at superior margins.

The Government has repeatedly

communicated its intention to reform

the UK’s planning system. Central to

thismessage is a desire to ‘level up’

theUK, by encouraging investment

andnew home building in areas

awayfrom the South East.

Morton Park, Milton Keynes

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Business model

Our business model is centred on our purpose to

buildgreat places for our customers, communities

andthe environment. Guided by our strategy,

wecarefully select resources and partners to

create value for all stakeholders bybuilding

qualityhomesindesirable locations.

through our activitiesCreating value

Focused

divisional

businesses

— Regional housebuilding operations

with local expertise and relationships,

enabling eective and ecient delivery

ofnew homes

— A dedicated Partnerships and Strategic Land

division developing multiple channels to

market and promoting strategic land.

Design,

planning and

placemaking

— House type range with interior andexterior

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 ofhomes and tenures.

Land

— Operational eciency programme and

reputation for placemaking supports

landacquisition at appropriate margins

— Strategic land capability allows us

topromote sites through to approval

andearnsuperior 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 Functional Forums embedding and

sharing best practice including safety,

quality and energy eciency.

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 Partnerships and Strategic Land

division bring forward a range of ownership

tenures including aordable, shared

ownership and private rented sector.

Quality and

customer

service

— 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

andafter care.

People

— Experienced, dedicated

anddiverse workforce

— Robust Safety, Health & Environment

processes to keep everyone safe.

Natural and

manufactured

resources

— High quality building materials

— Commitment to reducing waste

and carbonemissions throughout

ourvalue chain.

Partnerships

— Carefully selected business partners

and projects

— Close relationships with regulatory

andindustry bodies to help shape

thefuture of housing

— Relationships with landowners

and engagement throughout the

development process.

Customers

— Commitment to delivering

ﬁve-star customer service

— Focus on customers’ needs to

ensureﬁrstclass service is provided

atevery stage of the buying process.

Design and

innovation

— Attractive and ﬂexible design of

our house type range to improve

qualityandoperational eciency

— Investment in innovative sales

andmarketing tools

— Modern technology to support

safety,quality and service.

Financial

resources

— Supportive shareholders

— Diverse capital structure and

aprudentapproach to risk.

What we doOur resources and relationships

Value for society

We are committed to creating

a positive legacy and long-term

value for society by building quality

homes in desirable locations.

Read more in our Sustainability review

on pages 26–43

Crest Nicholson

Annual Integrated Report 2022

Our investment case

We have an ambition to deliver earnings

growth through geographical expansion

while oering a competitive dividend.

Strong fundamentals for

UK housing market

— Market demand underpinned by growing population and limited

housing supply

— Complex planning system favours experienced housebuilders

withbroad range of capabilities and knowledge of local market

— The lending environment remains supportive with competitive

supplyof mortgages.

Attractive land portfolio

— High quality and desirable land portfolio, primarily concentrated

inSouthern England, with new sites being added innew regions

ofthe UK

— Extensive strategic land portfolio is predominantly held under

optionand represents excellent capital eciency

— Strong ﬁnancial position enables us to remain active in acquiring

landin competitive environments.

Brand synonymous with quality

and placemaking

— Established brand name with strong heritage associated

with quality and customer service

— Strong reputation for placemaking and for creating attractive,

sustainable communities

— Opportunity to oer more customers the chance to own

aCrestNicholson home across the UK.

Diversiﬁed sources of income

— Our Multi Channel Approach provides resilience by delivering

incomefrom a variety of sources and capital

— Private Rented Sector (PRS) is a well-capitalised, growing asset

classproviding dependable yields

— Dedicated Partnerships and Strategic Land division maintaining

strongrelationships with Registered Providers and PRS partners.

Clear responsibilities to society and the planet

— Committed to net zero emissions by 2045 and established interim

science-based targets covering scope 1, 2 and 3 emissions

— Reducing our waste and minimising our impact on natural resources

— Increasing procurement of renewable electricity to 100% by 2025.

Robust balance sheet with margin recovery

planon track

— Strong balance sheet with year end net cash position of £276.5m

anda renewed £250m revolving credit facility

— Disciplined and selective approach to land acquisition and

capital allocation

— Sustainable dividend cover on two andahalf times cover basis.

for our stakeholders

Investors

— Compelling investment proposition

settingouthow we realise value from

ourhigh quality portfolio of assets.

Customers

— Five-star customer service experience

withquality products in desirable locations.

Our people

— Investing in people to develop the

skillsthatwe need and enhancing our

reputation as an employer of choice.

Suppliers

— Being a long-term and trusted partner

tosuppliers 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 shareour

expertise to support eective regulation.

Read about how we are creating

stakeholder value on pages 22–25

The value we create

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Stakeholder

relations

To achieve our strategy, we need to understand

ourstakeholders. This will help us create long-term

value for all our stakeholders.

Section 172(1) Statement

Considering all our stakeholders in key

business decisions enables us to make

balanced decisions which deliver value

overthe long term.

Our Board of Directorspromote the

success of the Company for the beneﬁt of

our members as awhole, in accordance

with the Companies Act 2006 (Act).

The Board is responsible for ensuring that

it fulﬁls its obligations to those impacted

by ourbusiness, in its stakeholder

consideration and engagement.

By direct engagement, and via the

Executive Leadership Team, our Board is

fully appraised of the matters of importance

to our stakeholders. The Board, Executive

Leadership Team and senior management

actively engage in communication

andinvolvement initiatives.

The following pages comprise our Section

172(1) statement, setting out howthe Board

has, in performing its duties over the course

of the year, had 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.

Further details on the Board and its

decision-making process in relation

to stakeholders is included within the

Governance report on pages 76–79

Stakeholder engagement

The following pages set out the

engagementthat has taken place with

thosestakeholders considered as being

keyto the Group. The Board has identiﬁed

each of them as a key stakeholder due

to their inﬂuence on the success of our

business model, strategy and because

they represent the key resources and

relationships that support the generation

andpreservation ofvalue in the Group.

Stakeholder engagement and decision making

How we consider stakeholders

External assurance

from brokers and

advisors

Annual strategy

and budget review

Board

committees with

key focus areas

A Safety, Health and

Environment Committee

and Sustainability

Committee providing

updates to the Board

Regular updates

from senior

management

on their areas

of expertise

Risk reviews

considered at the

Board and throughout

the organisation

Board oversight of

the Group’s purpose,

values and culture

and alignment with

our strategy

Board

decision

making

Crest Nicholson

Annual Integrated Report 2022

Investors

Both individual and institutional investors

who invest their capital in Crest Nicholson.

What matters to our investors

Our investors expect an eective relationship with senior

management and the Board. They expect a clear and appropriate

Group strategy which delivers long-term sustainable returns

and is appropriately adapted to the prevailing macro-economic

environment. The Group has arrangements in place which enable it to

communicate eectivelywith shareholders in respect of matters

such as business strategy, governance and remuneration.

How we have engaged in FY22

Board engagement

— The Chief Executive, Group Finance Director and Head of

Investor Relations meet regularly with investors and analysts

to convey an understanding of the market and the Group’s

operations and strategic priorities. These meetings take place

throughout the year, but particularly after the annual and

interim results announcements. During FY22 they attended

93 meetings through virtual platform or in person. In addition

they have attended two industry conferences duringthe year

— The Chairman and other Non-Executive Directors also have

the opportunity to attend meetings with major shareholders.

Our Chairman led a shareholder governance engagement

programme and our Chair of the Remuneration Committee

led a shareholder engagement consultation on the new

Remuneration Policy that will be subject to shareholder

approval at the 2023 AGM

— The Board receives regular updates in relation to themarket,

housebuilding sector and investor activities, including

feedback from shareholder roadshows

— All Directors attend the AGM and are available to answer

shareholder questions.

Group engagement

— Meetings with shareholders to provide insight on our

responseto the impacts of climate change, progress against

oursustainability targets and our Remuneration Policy

thatwillbe subject to shareholder vote at the 2023 AGM

— Responses to voting agencies, including IVIS, ISS,

Glass Lewis and PIRC.

Key outcomes

— Shareholders are kept informed of the Group’s performance

— Enhanced understanding of ESG issues which are

anincreasinginvestor focus

— A constituent member of the FTSE4Good and achieved

a B rating in the CDP climate change disclosures

— Engagement with prospective investors to develop

their understanding of our strategy.

Link to

KPIs

— Return on capital employed

— Earnings before interest and tax margin

— Unit completions

— Cash generation

— Land creditors as a % of net assets

— Greenhouse gas emissions intensity

— Waste intensity.

Customers

The people who purchase our homes. These can

beindividual private purchasers or larger institutions

who we work in partnership with.

What matters to our customers

Our customers expect quality homes in beautiful places

that aresafe, delivered on time, and which oer good value

for money. Excellent customer service and after care are

akeypart of how we understand our customers’ needs

andhowwe respond.

How we have engaged in FY22

Board engagement

— During FY22 the UK construction environment has

experienced disruptionto materials availability which, coupled

with the longer-term challenge of skilled labour availability,

has sometimes led to delays in completing and handing over

homes to our customers. The Board has closely monitored

thissituation and mitigating actions taken during the year

— At each Board meeting the National Housebuilding Council

(NHBC) customer satisfaction survey scores are considered.

The Board also receives feedback from the Executive

Managing Director, Partnerships and Strategic Land on

relationships withour partners

— The Board receives regular feedback on any Group

dialogue with the Department for Levelling Up, Housing

andCommunities (DLUHC) and in April 2022 the Board

agreed to sign the Building Safety Pledge (Pledge), taking

further stepsto support those living in aected buildings

— The Board considers initiatives undertaken by the Group

todeliver high levels of customer service, enhance

placemaking and create sustainable developments.

Group engagement

— Participation in the Home Builders Federation (HBF)

customersatisfaction survey and aim to consistently

achieveaﬁve-star performance

— Site teams responsible for after care with direct responsibility

for quality

— Partnerships and Strategic Land division focused on promoting

placemaking and design both directly and with trusted partners

— Working at pace to implement the New Homes Quality Code

— Closely monitoring build schedules to enable customers

tobeupdated on progress of the delivery of their new home.

Key outcomes

— Responded to supply chain and labour shortages

by adjusting timescales as required

— Signed the Pledge and continue toworkwithaected parties

— Listened to changing customer needs, adapting where

necessary our proposed site plans and making them

increasingly energy ecient.

Link to

KPIs

— Unit completions

— Customer satisfaction

— PRS/Aordable unit completions.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Stakeholder

relations continued

Our people

Individuals who are directly employed by us.

What matters to our people

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 supported by professional development and

career opportunities. We have responded to employees who

increasingly require ﬂexible and agile working environments.

Reward and beneﬁts need to be fair and competitive to respond

to both increased costs of living and a market where there are

shortages of skilled resource.

How we have engaged in FY22

Board engagement

— The Board receives updates on employee matters

ateachBoard meeting and regularly discusses employee

turnover, engagement, succession planning and development

— Our Chief Executive has attended dierent employee forums

toprovide employees with strategic andtrading updates

— Our Non-Executive Director responsible for employee engagement

has attended a number of events with our employees.

Further details on this activity are outlined on pages 78–79

— Our Chair of the Remuneration Committee and Non-Executive

Director responsible for employee engagement held several

meetings with employees across our divisions to consult

on the revised Remuneration Policy which will be subject

toshareholder approval at the 2023 AGM

— Employees are encouraged to participate in the Group’s

Sharesave scheme

— The Board held two site visits during the year, with further

details outlined on page 83.

Group engagement

— While voluntary employee turnover has declined, the

Executive Leadership Team regularly considers employee

turnover data and insights, and actions to reduce this

— Focused regular engagement activities including pulse surveys,

team-building activities and the Group-wide charity challenge hike

— Continued visits and focus from the Executive Leadership

Team throughout the business

— Partnering with a third-party provider, to develop

opportunities for entry-level and high-potential employees

— Health and wellbeing training and ability for employees

toenhance their mental health ﬁtness

— Continue to operate Sharesave schemes to employees,

tosave andpurchase shares in the Company.

Key outcomes

— Reﬂective of the rising living costs, a one-o payment of

£1,000 was made to all employees below the Executive

Leadership Team

— We partnered with a third-party provider to conduct our

employee engagement surveys, with engagement rated at 83%

— 49% participation rate across all Sharesave schemes

— Over 100 employees participated in the Group-wide charity

hike raising over £42,000 for Cancer Research UK.

Link to

KPIs

— Voluntary employee turnover

— Annual Injury Incidence Rate (AIIR).

Suppliers

Our suppliers of raw materials, plant and equipment

and the wide range of tradespersons whowe

subcontract our construction activities to.

What matters to our suppliers

Our suppliers expect projects to be delivered safely,

on timeandin line with their and our ﬁnancial targets.

Mutually beneﬁcial working relationships that share

risk andreward alongside operational eciency are

important for eective relationships. Suppliers expect us

to maintainarobustﬁnancial position and to pay them

toagreed timescales.

How we have engaged in FY22

Board engagement

— The Board regularly discusses the Group’s responsibility

to its suppliers and subcontractors and its impact on the

localhousebuilding and construction industry

— Regular updates are provided to the Board on the Group’s

supply chain, including payment practices, theprevention

ofmodern slavery and recent industry disruption

— The Chief Executive and Group Operations Director

maintainrelationships with Directors of the Group’s key suppliers

with a focus on Safety, Health & Environment (SHE) matters.

Group engagement

— Feedback on supplier performance shared at divisional

Board meetings

— Account review meetings held with key suppliers

onaregular basis

— Regular communications on our Supply Chain

Code ofConduct including anti-slavery and human

tracking policies

— Distributed an engagement survey to our suppliers,

coveringareas such as safety, sustainability, supply

chainandmanufacturing, diversity and inclusion, training,

product andmaterials, quality and service levels

— Member of the Supply Chain Sustainability School

asapartner, and encourage our supply chain to engage

with them

— Held meetings to discuss climate change and the transition

to net zero with suppliers deemed to contribute signiﬁcantly

towards our scope 3 emissions

— Conﬁrmed with our subcontractors our aim to become

a LivingWage accredited employer, requesting them

tocomplete relevant questionnaires

— Trialled JCB new all-electric telehandler forklift.

Key outcomes

— Greater focus on sourcing from Group-approved suppliers

— Reinforcing the focus of anti-slavery in our supply chain

— 18% of our Group suppliers are actively engaging with

theSupply Chain Sustainability School

— 36 days, being the average time taken to pay suppliers

(FY21: 37).

Link to

KPIs

— AIIR

— Unit completions

— Greenhouse gas emissions intensity

— Waste intensity.

Crest Nicholson

Annual Integrated Report 2022

Communities and environment

The communities and environment local

to our developments.

What matters to the communities and

environment local to our developments

Our neighbours want engaged two-way communication with

us. We seek to provide 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 environment, reduce

emissions and waste and help support sustainable lifestyles.

How we have engaged in FY22

Board engagement

— The Board reviewed the progress against the sustainability

strategy and the Group’s proposed science-based targets

— The Board, supported by our Sustainability Committee,

considers sustainability and environmental impacts in

relationto the development of sites.

Group engagement

— The Group actively seeks the views of local communities in

developing a tailored planning and community engagement

strategy for each development

— More houses built using our standard house type range,

whichemphasises build and design quality

— Engagement with communities through public meetings,

consultations and publicly available documentation,

seekingto meet local needs

— Working with our trusted partners to provide aordable

homesto individuals who are supporting local communities

— Providing green space and the provision of sports and

educational facilities, play areas, allotments, public

art, community buildings, transport improvements and

environmental protection and enhancement measures.

Key outcomes

— Delivering attractive developments that are valued

byourcustomers and communities

— The Science Based Targets initiative approved our

near-term and net zero targets

— 47% reduction in scope 1 and 2 emissions compared to FY19

— Development of a new charitable giving strategy

tosupportlocal charities and organisations

— Receipt of the Silver Award for the Armed Forces

CovenantEmployer Recognition Scheme.

Link to

KPIs

— Unit completions

— Greenhouse gas emissions intensity

— Waste intensity

— PRS/Aordable unit completions.

Government and other bodies

The Government, regulatory and industry bodies

shape the legislative environment in which

weoperate and local planning departments.

What matters to the Government and other bodies

The Government is focused on the delivery of high quality,

attractive homes and communities which are designed to be

energy ecient. Therefore, it is critical that ourdevelopments

support biodiversity and climate change priorities.

How we have engaged in FY22

Board engagement

— The Board monitors and participates in regulatory and

industry bodies that shape the legislative environment

andlocal planning departments

— During the year regular active dialogue and debate was

heldby the Board on industry developments, including

theFuture Homes Standard, Consumer Code for

NewHomes,market trends, stamp duty changes,

disruption to the supply chain and the labour market.

Group engagement

— Divisional attendance at HBF and NHBC events

— Divisional local planning meetings and engagement

withHomes England and Housing Associations

— Participation in the Future Homes Hub and working

toimplement the New Homes Quality Code

— Regular engagement with local authorities, the

EnvironmentAgency and local water authorities

— Responding to the consultation on biodiversity net gain.

Key outcomes

— Engagement with the DLUHC and dialogue prior

to becoming signatories to the Pledge

— Engagement with Government enables us

to understand their priorities for housing

— We are continually improving our understanding

of what ourpartners expect from us

— Awards received from the NHBC to our people

— Progress with our partners across a multitude

of our strategicland projects.

Link to

KPIs

— Unit completions

— Greenhouse gas emissions intensity

— Waste intensity

— PRS/Aordable unit completions.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our sustainability

review

As one of the leading housebuilders in the UK,

werecognise that we have a responsibility and

anabilitytomake a positive impact in addressing

someofthe long-term challenges society faces.





RCF

In October 2022 the Group announced

the completion of a £250m Sustainability

Linked Revolving Credit Facility (RCF).

Under the terms of the facility, the

Group is incentivised to deliver annual

performance improvement in four key

areas that align with our sustainability

priorities. The targets include:

— Reduction in absolute scope 1 & 2

GHG 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.

The Group will ensure that its performance

against all these metrics will be reported

in future Annual Integrated Reports.

Our commitment to responsible operations

starts at the top with Board oversight and

ownership of the sustainability strategy

and objectives.

Our Sustainability Committee has delegated

authority from the Board and Executive

Committee to integrate sustainable practices

into the business. The Committee met

fourtimes in FY22 and is chaired by our

Chief Executive. Page 31 has further detail

onourgovernance structure.

To support our strategy, we link

sustainability-related targets to our

remuneration packages (see pages 100–122

for further information). In FY22 we also

ﬁnalised a new Sustainability Linked RCF.

Governance

Sustainability continues to be of fundamental

importance to our Group and stakeholders.

The global challenges we face are

signiﬁcant and societal expectations to

address the issues of climate change and

biodiversity loss are increasing. We aim to

integrate responsible practices throughout

all aspects of our business, allowing us to

contribute positively to society and create

long-term value for our stakeholders.

Our strategy is split into three priority areas:

protect the environment, make a positive

impact on communities and operate our

business responsibly.

We continue to take action to reduce our

greenhouse gas (GHG) emissions and this

year achieved our scope 1 and 2 intensity

reduction target ahead of our FY25 target

date. Having signed up to the UN-backed

Race to Zero in FY21, we developed new

science-based targets, which include

a commitment to reach net zero across

our value chain by 2045. We were proud

to seeour progress recognised by the

Financial Times in their European Climate

Leaders list in 2022.

We are also committed to delivering positive

social value for our employees, customers,

communities, partners and people

throughout our supply chain. By creating

great homes and developments, respecting

human rights and providing a safe, diverse

and inclusive workplace we can build a

better future for all our stakeholders.

Learn more online

www.crestnicholson.com/sustainability

Our sustainability strategy is linked to our

purpose (see page 2 for further information)

and is integral to our strategic priorities and

is one of our strategic foundations.

The strategy’s three priority areas guide our

commitment to drive positive action across

our business and value chain. They also help

shape our sustainability objectives and the

targets we select to measure success.

The strategy is informed by continuous

engagement with our stakeholders

(seepages 22–25 for further information)

as well as external frameworks such as

the UN Sustainable Development Goals

(SDGs) andNatural, Social and Human

Capital Protocols.

The following pages provide further

detail on our sustainability strategy

andperformance during the year.

Sustainability strategy

Crest Nicholson

Annual Integrated Report 2022

Key highlights

Natural

resources

and waste

Biodiversity

Protect the environment

47%

Target 60% reduction by 2030

47% reduction in scope

1and 2 emissions compared

to FY19

70%

Target 100% by 2025

70% of electricity procured

from renewable taris

Climate

action

Key highlights

Make a positive

impact on communities

88%

FY21: 88%

88% of developments

within 1km of a public

transport link

522

FY21: 483

522 aordable

homes delivered

Key highlights

Operate our business

responsibly

10%

FY21: 7%

10% of our workforce

aretrainees

FY21: 13

18 trained mental health

ﬁrstaiders across our

divisions

Responsible

practice

People

and

capability

Health

and safety

Thriving

communities

Social

value

High quality

homes

and service

External validation

We participate in several sustainability benchmarks and indices:

In FY22 we

received a B score

in the CDP climate

change disclosure

Listed as a

constituent of the

FTSE4Good Index

In FY22 we received

an AA rating (on a

scale of AAA-CCC)

in the MSCI ESG

Ratings assessment

Supporting the UN Sustainable Development Goals

The UN Sustainable Development Goals

(SDGs) are a collection of 17 global

goalsdesigned to be a blueprint for

achieving abetter and more sustainable

future forall. We have identiﬁed eight

of these goals where we can make

apositive dierence:

— Supporting the health and

wellbeing ofourpeople, customers

and communities.

— Promoting an inclusive and

diverse workplace and providing

equal opportunities.

— Living wage for direct employees

— Supporting mental health

and wellbeing

— Investing in training and development

for our workforce

— Providing work for local suppliers

andsubcontractors.

— Collaborating with the supply chain to

review and trial innovative technologies

and materials

— Implementing infrastructure to support

sustainable developments.

— Commitment to placemaking

and quality

— Provision of social infrastructure

— Multi channel approach provides

rangeof tenures including aordable

housing and shared ownership.

— Supply chain engagement and

partners of the Supply Chain

Sustainability School

— Committed to improving

resource eciency.

— Science-based GHG emissions

reduction targets

— Procuring renewable electricity

— Climate adaptation on developments

— Supporting customers to reduce

theircarbon footprint.

— Supporting biodiversity on site

— Procuring sustainable timber.

We have used the SDG icons throughout the following pages to demonstrate where our strategy aligns with the goals.

MSCI disclaimer: www.crestnicholson.com/pdf/media/

reports/sustainability/2022/135-reports-media-item.pdf

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our sustainability review

continued

Protect the

environment

1 Approved by the SBTi in December 2022.

2 The target boundary includes biogenic land-related

emissions and removals from bioenergy feedstocks.

SDG alignment:

Link to strategicpriorities:

Placemaking & Quality

Operational Eciency

Link to foundations:

1 2

FY22 highlights

— Science-based targets set

to 2030 and net zero by 2045

— Reduced absolute scope 1 and 2

emissions by 47% compared to

2019 base year (43% reduction

inemissions intensity)

— Developed a new toolkit to

supportbiodiversity net gain

— Rolled out the Group’s new

Waste Policy.

We strive to reduce our impact on the natural

environment by reducing our greenhouse gas emissions,

using our resources eciently and protecting and

enhancing biodiversity in and around our developments.

Priorities for FY23

— Conduct embodied carbon

assessments on a selection

of our standard house types

— Continue to engage with our

supply chain on key sustainability

issues and introduce minimum

requirements

— Awareness campaign to embed

resource-ecient processes

acrossour sites

— Increase the procurement of

renewable electricity taris

— Develop guidance and

embed biodiversity approach

across divisions.

FY19

FY22

FY21

FY20

8,458

4,449

5,356

6,004

FY19

FY22

FY21

FY20***

2.57

2.42

2.53

Scope 1 and 2 emissions tCO

Scope 3 emissions intensity tCO

e/sq.m

*Upstream emissions.

**Regulated and unregulated energy.

***No calculation in FY20.

1 Scope 1 69%

2 Scope 2 31%

1 Supply chain* 32%

2 Use of sold product** 66%

3 Other scope 3 1%

FY22 Scope 1 and 2

emissions breakdown

FY22 Scope 3

emissions breakdown

Scope 1 and 2 GHG emissions performance

Scope 3 GHG emissions performance

Scope 1 and 2 emissions

Our scope 1 and 2 emissions arise predominantly from fuel used in plant and equipment

on site, electricity and gas for our oces and sites and our Group-operated vehicle ﬂeet.

In FY22 our absolute scope 1 and 2 emissions were 4,449 tCO

e, a 47% reduction compared

to the FY19 equivalent. On an intensity basis, this represents a reduction of43% compared

toFY19 (FY22: 1.82 tCO

e/100 sq. m, FY19: 3.20 tCO

e/100 sq. m).

Scope 3 emissions

Scope 3 emissions account for 99% of our total carbon footprint and predominantly comprise

emissions relating to our supply chain (upstream) and the use of our homes (downstream).

Our scope 3 emissions intensity in FY22 was 2.42 tCO

e/sq. m, a decrease of 4% compared

to the FY21 equivalent and a reduction of 6% against our 2019 base year.

Climate action

We are committed to minimising our

impact on climate change and helping

our customers to reduce their carbon

footprint. We also understand the eects

climate change may have on our business

and supply chain. Our disclosure against

the recommendations of the Task Force

on Climate-related Financial Disclosures

(TCFD) sets out how we are managing

climate-related risk (see pages 30–38

forfurther information).

During the year we made good progress

in reducing scope 1 and 2 GHG emissions

and have exceeded our target to reduce

emissions intensity by 25% by 2025,

compared to a 2019 base year. Scope 3

emissions account for most of our carbon

footprint and we are taking steps to address

this area of our footprint. In FY22 we

developed new science-based targets that

have been approved by the Science Based

Targets initiative (SBTi). Our new targets

are to reduce absolute scope 1 and 2 GHG

emissions by 60% by 2030

and scope 3

GHG emissions by 55% per sq. m completed

ﬂoor area by 2030, both from a 2019 base

year. We are also committed to achieving

net zero emissions across our value

chainby 2045.

The action we are taking to reduce

emissions is set out within this section.

Further information on our climate-

related metrics and compliance with the

Streamlined Energy and Carbon Reporting

(SECR) requirements is on pages 37–38.

FY30 target (3,383)

FY30 target (1.16)

Crest Nicholson

Annual Integrated Report 2022

Action taken to reduce

scope 1 and2 emissions

Site fuel

Site fuel consumption increased by 41%

inFY22, partly as a result of business growth.

Overall scope 1 GHG emissions associated

with site fuel are 13% lower and our use

of hydrotreated vegetable oil (HVO) as a

substitute for white diesel is a signiﬁcant

factor in driving this reduction. In FY22

HVOaccounted for 49% of our sitediesel,

anincrease from 17% in FY21.

Ecient plant and equipment

We have successfully introduced a

numberof new technologies and initiatives

to reduce emissions from plant and

equipment. We prioritise early connection

to the grid to avoid the use of generators.

Where generators are required, they are

correctly sized and HVO compatible.

98% of our telehandler ﬂeet now have

the most ecient Tier 5 engines

and

wecontinue to utilise telemetry reports

toidentify potential fuel savings.

We continue to consider new and

alternativetechnologies across our sites

toreduce fuel consumption. In FY22

we trialled technologies such as hybrid

generators and an electric telehandler.

Business travel

To minimise business travel emissions

we continue to provide incentives to our

employees to choose low emission vehicles

and provide a good selection of electric-

only and hybrid vehicles at dierent price

points on our Company Car Scheme.

As at31 October 2022 40% of our Group

ﬂeetwas hybrid or electric.

Our Agile Working Policy also ensures

employees have the ﬂexibility to choose

where they can work which supports a

reduction in unnecessary business mileage.

Renewable electricity

We continue to target 100% renewable

electricity usage across the Group by FY25.

In FY22 we procured 70% of our electricity

from renewable electricity taris backed

byRenewable Energy Guarantees of

Origin certiﬁcates (FY21: 62%).

All our homes are handed over beneﬁting

from renewable electricity taris.

Action taken to reduce

scope 3 emissions

Our materials and supply chain

Achieving net zero emissions throughout

our value chain by 2045 will be a signiﬁcant

challenge. Upstream emissions accounted

for 32% of our scope 3 emissions in FY22.

Substantial emission reductions will require

eective collaboration and coordinated

action across our supply chain and the

wider industry.

During the year we have engaged

with key suppliers to understand their

decarbonisation objectives and how

theycan contribute to our net zero target.

We are also members of the Future Homes

Hub’s Embodied and Whole Life Carbon

Workgroup, which is developing guidance,

tools and an implementation plan to

supportan industry-wide reduction in

wholelife carbon.

Our standard house types are being

constructed in traditional and timber

frameformats. We expect greater use

ofosite manufacture to be utilised in

futureto reduce the embodied carbon

associated with our homes and to address

thelong-term challenge of skilled labour

in the industry. We continue to review

the design of our homes and evaluate

Environmental Product Declarations

when assessing products and materials.

Decarbonising our homes

The Future Homes Standard (FHS) will play

acrucial role in reducing the emissions

of our homes in use. The regulation will

require a 75% reduction in carbon emissions

while traditional gas heating systems will

be prohibited from 2025 and replaced

with electric alternatives. Electric heating

solutions, such as air source heat pumps

(ASHPs), will mean that homes are eectively

zero carbon ready as the UK has committed

to decarbonising the electricity grid by 2035

While the environmental beneﬁts are clear,

it is essential to consider the running cost

implications for homeowners. We will pilot

electric heating solutions, including installing

ASHPs on certain developments in FY23.

We will engage and gather feedback from

our customers and suppliers to help reﬁne

the designs and technologies used as we

strive to ensure our homes are comfortable,

easy to use and aordable to run.

Value chain emissions

Emissions associated with raw

materials and wider supply chain.

PREDOMINANTLY

COMPRISES OF:

Fuel used in plant and equipment on

site, electricity and gas for our oces

and sites and our Group-operated

vehicle ﬂeet.

Emissions associated

with the use of our

sold homes.

UPSTREAM

SCOPE 3 EMISSIONS

OPERATIONAL SCOPE 1

AND 2 EMISSIONS

“ The homebuilding industry is

rapidly reducing the in-use carbon

emissions of new homes and there

is now increasing focus on reducing

emissions throughout the home’s

lifecycle, including embodied

carbon. Success depends on full

participation from the homebuilding

sector, supply chain and other

partners and we are grateful for

Crest Nicholson’s contribution

to the Embodied and Whole

LifeCarbon Workgroup.”

Ed Lockhart

CEO, Future Homes Hub

3 Tier 5 engines in plant are the ﬁnal stage of a gradual engine eciency improvement plan introduced

across the UK, EU, and EEA states. This has improved the eciency of these machines by reducing fuel use,

GHG emissions and particulates from the exhaust of machinery. At the time of publication, 100% of our

telehandlersareTier 5.

4 Plans unveiled to decarbonise UK power system by 2035 – GOV.UK (www.gov.uk).

DOWNSTREAM

SCOPE 3 EMISSIONS

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

We are focused on reducing our emissions while

adapting our homes and developments to the impacts

of climate change.

This section details our disclosures against

the recommendations of the Task Force

on Climate-related Financial Disclosures

(TCFD), building on the voluntary disclosure

in our FY21 Annual Integrated Report.

In accordance with Listing Rule 9.8.6R,

we set out our consistency with the 11 TCFD

recommendations in the table below.

The table also sets out the page numbers

where further information can be found.

For strategy disclosure (b and c) we carried

out climate scenario analysis for the ﬁrst

time in FY22. We plan to evolve our climate

scenario analysis in FY23 to further support

our risk and opportunity assessment and

quantiﬁcation of the potential impacts.

For metrics disclosure (a) we have noted the

links to our risks and opportunities identiﬁed

on page 37. We will continue to assess

further metrics for inclusion in our climate-

related disclosures in FY23.

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

andopportunities.

a) Board oversight

b) Management’s role

Strategy

Disclose the actual

andpotential impacts

of climate-related

risksand opportunities

on the organisation’s

businesses, strategy,

and ﬁnancial planning

where such information

ismaterial.

a) Risks and opportunities

32–35

b) Impact on organisation

32–35

c) Resilience of strategy considering

climate scenario analysis

32–35

Risk management

Disclose how the

organisation identiﬁes,

assesses and manages

climate-related risks.

a) Risk identiﬁcation and

assessment process

b) Risk management processes

c) Integration into overall

risk management

Metrics and targets

Disclose the metrics

andtargets used to

assess and manage

relevant climate-related

risks and opportunities

where such information

is material.

a) Climate-related metrics

37–38

b) Scope 1, 2, 3 GHG emissions

37–38

c) Climate-related targets

37–38

Our sustainability

reviewcontinued

In assessing consistency, we considered

on a voluntary basis the document titled

‘Implementing the Recommendations of

the Task Force on Climate-related Financial

Disclosures’ published in October 2021

bythe TCFD.

We will continue to adapt our response

to climate change as the scientiﬁc and

economic understanding of the impacts

grow and the methodologies and tools to

assess and manage risk evolve. The box to

the right details the progress we have made

during the year to improve our management

of climate risk and sets out the action we

will take in FY23 to enhance our approach.

Further information on the TCFD is

availableon the Financial Stability

Board’s website fsb-tcfd.org

FY22 progress

Brackets indicate the TCFD pillar

relevant to the action. G = Governance,

S = Strategy, R = Risk management

and M = Metrics and targets.

— Developed science-based targets that

have been approved by the SBTi (M)

— Established Climate Risk Working

Group to review climate-related

risksand opportunities (G, S, R)

— Completed ﬁrst stage of climate

scenario analysis (S, R)

— Agreed new Sustainability

Linked Revolving Credit Facility

(RCF), including carbon emission

reductiontarget (G)

— Included carbon emission reduction

target in Executive Director’s Long

Term Incentive Plan (LTIP) (G)

— Integrated climate-related risk

andopportunity assessment

intodivisional processes (R).

Task Force on

Climate-related

Financial Disclosures

FY23 areas of focus

— Implement opportunities to

improve awareness of climate

change across the business(G)

— Evolve our climate scenario analysis

and quantiﬁcation of potential

risksand opportunities (S, R)

— Continued engagement

withoursupply chain to:

— Continuously improve our

understanding of climate-

related risks and opportunities

for key suppliers and materials

— Share knowledge and help

upskillthe industry (S, R)

— Conduct further embodied

carbonanalysis on our homes

to reduce our upstream scope 3

emissions (S, R)

— Trial technologies to support

delivery of the Future Homes

Standard (S, R).

Consistency with TCFD recommendations:

Not consistent Partially consistent Consistent

Crest Nicholson

Annual Integrated Report 2022

Governance around climate-related

risks and opportunities

Board oversight

The Board has overall responsibility for

riskmanagement, including climate-related

risks and opportunities, reviewing this twice

a year and updating the Group’s principal

risks. Climate change is one of the Group’s

principal risks and is governed in line with

our Risk Management Framework detailed

on page 58.

The Sustainability Committee has delegated

responsibility from the Board and Executive

Committee to oversee the development

and delivery of strategic aims and initiatives

to improve sustainability performance.

Chaired by our Chief Executive, it met

four times during FY22 andprovides

regular updates to the Board and

Executive Committee.

During the year the Board agreed the science-

based GHG emission reduction targets, which

were subsequently approved by the SBTi.

Further detail on our science-based targets

is on page 28. The Board also approved the

new RCF which includes climate-related

targets. Further detail on the RCF targets

isonpages26 and 76.

We have linked GHG emissions

performanceto the Executive Directors’

LTIP. Further detail on thesetargets

isonpage121.

The Nomination Committee remains mindful

of the importance of broadening diversity

and experience within the Board. As part

of its succession planning processes the

Nomination Committee considers a broad

range of skills and experiences the Board

will need and climate change is considered

as part of this process. Detail of the Board’s

skills and experience can be found on

pages71 and 91.

Management’s role

Our Group Operations Director has

executive responsibility for sustainability

and climate-related risk and sits on both

the Executive Committee and Sustainability

Committee. The Group Operations Director

manages the Group disciplines that support

the delivery of climate-related outputs

and ensures that climate-related risks and

opportunities are assessed and managed,

and business opportunities are realised.

A Group Operations report is provided

monthly to the Board and Executive

Committee, which includes an update

on performance against our climate-

related targets and outlines any

upcomingregulatory changes.

The Group Operations function has in-depth

knowledge of climate-related matters

including current and emerging policy.

Members of the team sit on external working

groups, including the Future Homes Hub

and Supply Chain Sustainability School,

todevelop knowledge and engage with

thewider industry.

Our divisions are responsible for considering

how climate-related risks and opportunities

may impact their developments. The

divisions report climate-related risks and

opportunities within their divisional risk

registers, which are reviewed and updated

twice a year, as part of the Group’s risk

management framework.

Divisions also consider climate-related

matters at a project level such as ﬂood

riskassessments when reviewing

site selection.

The diagram below provides an overview

ofour governance framework and how

climate-related issues are considered

throughout the Group.

Board and

management

oversight

Management

oversight

The Board

Oversight of the Group’s sustainability strategy and its performance.

Overall responsibility for risk management, including climate-related risks and opportunities.

Audit and Risk Committee

— Met four times in FY22

— Monitors risk management

processes, including climate-

related risks.

Remuneration Committee

— Met ﬁve times in FY22

— Responsible for including

climate-related targets

within executive

remuneration package.

Executive Committee

Oversees the principal and divisional risks. The Executive Committee, with support from functional

representatives, considers the Group’s principal risks and oversees the divisional risk process.

Sustainability Committee

— Met four times in FY22

— Oversees the development

and delivery of strategic aims

and initiatives to improve

sustainability performance.

SHE Committee

— Met ﬁve times in FY22

— 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. Review and update

the divisional risk register

twicea year.

Climate Risk Working Group

Responsible for assessing

climate-related risks and

opportunities. Team composition

includes representatives from

the Finance, Procurement,

Sustainability, Technical and

Internal Audit teams.

Climate Risk Working Group

Responsible for assessing

climate-related risks and

opportunities. Team 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

management on site.

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.

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.

Nomination Committee

— Met three times in FY22

— Oversees the selection and

appointment of new Directors

to the Board and reviews the

balance, skills, diversity and

eectiveness of the Board.

Governance framework and climate touch points

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Strategy

In FY21 we signed up to the UN-backed

Race to Zero and in FY22 we developed

science-based targets that have been

approved by the SBTi. Pages28–29 provide

further information on the steps we are

taking to reduce emissions, including using

low carbon fuels across our developments,

increasing renewable electricity usage,

and evolving our homes tobe more energy

ecient and lower in carbon.

While we are taking action to reduce 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 at both a UK and

international level. Climate-related risks are

classiﬁed into transition and physical risks.

Transition risks: transitioning 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: 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).

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

totakeeect and have an impact on the business. It also aligns with the time period

forour2030 science-based targets.

Long term 10 years plus This period is challenging to predict. While it is clear the climate has already changed,

andthis is going to continue, the physical risks relating to climate change are likely

tohavea more 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 dierent or more severe

thanthose experienced today.

Our sustainability reviewcontinued

Task Force on Climate-related Financial Disclosures

The risk management section on page 36

details our processes for identifying

climate-related risks and opportunities.

The table on pages 34–35 describes

the primary climate-related risks and

opportunities we have identiﬁed and

setsout our management response

toeach one.

Time horizons

In accordance with the TCFD

recommendations, we assess 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.

Scenario analysis

Scenario analysis supports the Group’s

understanding of potential climate change

impacts on our business. Climate scenarios

are hypothetical future states and are not

intended to be forecasts. They are designed

tobe plausible, improving our understanding

of possible climate outcomes and their

potential impact on ourbusiness. This in

turninforms our strategy and business

planning toincrease our resilienceto

climate change.

We engaged with external consultants

(Verco Advisory Services) to identify three

climate scenarios to test the resilience

oftheGroup against a range ofclimate-

related risks and opportunities.

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 scenarios provide a combination

offuture climate states with a wide

range oftransition and physical impacts.

An overview of each scenario together

withhow they impact our business is

detailed in the table on the next page.

Moving forward, we will continue to reﬁne

our approach to scenario analysis to

include more quantitative data, particularly

forphysical risks. This will further support

the Group to test the resilience of our

business model. We will also continue to

engage with our supply chain and wider

industry on climate risk.

Crest Nicholson

Annual Integrated Report 2022

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 eective

global response to climate

change. Rapid progress in the

2020s limits warming to around

1.5°C by 2050. The worst physical

impacts of climate change are

avoided but there are milder

winters and hotter, drier summers.

Higher temperatures increase

the likelihood of overheating

in buildings and storm events

increase in intensity.

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. Supply constraints

on technologies to reduce and

remove carbon lead to signiﬁcant

increases in carbon prices.

The global response to climate

change is poorly coordinated and

ineective, resulting in warming

of over 4°C by 2100. Physical risks

are high. More frequent droughts

and heatwaves in the UK increase

water supply stress and lead to

a signiﬁcant risk of overheating.

Flood risk increases and

storm intensity and frequency

become routinely disruptive.

Transition risks materialise later in

response to the physical impacts.

Estimated warming compared to pre-industrial era:

2040–2060 1.6°C 1.7°C 2.4°C

2081–2100 1.4°C 1.8°C 4.4°C

Transition impact Low/moderate High Low

Physical impact Low Low/moderate High

Business impact Products and services: Climate-related risks and opportunities inﬂuence the development of our products.

Scenarios 1 and 2 will likely see greater regulatory requirements to reduce emissions associated with the

construction and use of our homes. We have already observed this with the introduction of the Future

Homes Standard. Fewer regulatory requirements likely under scenario 3 in the short to medium term.

Supply chain: Our supply chain accounts for around a third of our carbon footprint. The transition to net

zero is likely to see an increase in carbon taxes and other pricing mechanisms. Scenarios 1 and 2 will likely

witness greater carbon prices resulting in higher material costs. A disorderly transition may see a steeper

and higher rise in carbon prices. While all three scenarios will encounter physical impacts within the supply

chain, scenario 3 will see the most severe impacts. The supply chain will be more susceptible to acute events

such as storms closing manufacturing plants or disrupting transport. Chronic changes may mean suppliers

are forced to relocate due to rising sea levels, reductions in productivity due to adverse working conditions

and some materials such as timber may be prone to disease or wildﬁres.

Operations: Energy and fuel costs are likely to increase under scenarios 1 and 2. Carbon prices are likely

to rise and a greater demand for lower carbon energy and fuel may result in price increases. Scenario 3 will

likely see greater disruption on our sites due to an increased risk of severe events including heatwaves and

more frequent and severe storms. Flood risk will increase and may reduce the land available to develop.

Access to capital: Under scenarios 1 and 2 in particular, it could become more challenging to access

aordable capital without demonstrating how we are eectively managing climate risk.

Customers and markets: There could be greater demand for lower carbon products under scenarios 1 and

2, and we are responding to this by reducing the emissions associated with our homes. With the addition of

new technologies, high levels of customer engagement will be required to successfully transition to new low

carbon homes. Customers are more likely to be aected by the physical impacts of climate change under

scenario 3. For example, overheating is more likely, impacting comfort and requiring modiﬁcations to homes.

1 Shared Socioeconomic Pathways (SSPs) describe possible socioeconomic futures in the absence of climate policy intervention, providing a basis for possible emission scenarios.

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.

Business resilience

We have considered the potential for

the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.

While physical risks such as ﬂooding,

overheating and disruption to site and

supply chain activities are expected to

increase over time, they are more likely

tohave a greater impact in the longer term.

There is also signiﬁcant uncertainty as to

theextent and impact these risks will have

on the business and we will continue to

assess the risk.

We believe that transition risks represent

the largest threat in the medium term,

mostnotably the potential for an increasing

price of carbon. Carbon taxes are likely to

increase under scenarios 1 and 2 and we are

engaging with our suppliers to gain further

insight in this area. We acknowledge that we

are exposed to some climate-related risks in

the short term, most notably transition risks

including emerging regulation, however the

impact is not considered material based

on the mitigations the Group has in place.

The anticipated costs relating 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 FY22 Annual Report and Accounts.

Please see further information in our

accounting policies on pages 142–148.

We will continue to evolve our assessment

and quantiﬁcation of climate-related risks

and opportunities over time, including

undertaking more quantitative modelling

ofrisks in the next year.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our sustainability reviewcontinued

Task Force on Climate-related Financial Disclosures

Risks Opportunities

Risk category Transition Transition Transition Physical Physical Physical Opportunity Opportunity

Risk type Policy and legal Policy and legal Technology Chronic Chronic Chronic and acute Products and services Markets

Driver Carbon pricing

mechanisms

Emerging regulations Transitioning to lower

emissions technology

Rising

mean temperatures

Changing precipitation

patterns

More frequent and

severe weather

Greater demand for

sustainable homes

Green ﬁnancing and

partnership opportunities

Description Carbon taxes or other

pricing mechanisms

provide a policy tool to

limit carbon emissions.

As governments

intervene to limit climate

change, increasing

carbon prices could

impact the cost of our

direct fuel and energy

and those associated

with our supply chain.

Emerging regulations

to reduce emissions

could impact our

home speciﬁcation,

such as the Future

Homes Standard.

Further regulations

could come into

force, for example

reporting and reducing

embodied carbon.

Reporting requirements

are also likely to

increase.

Lower carbon

technologies will

increasingly be used

within our homes, which

may be unfamiliar to

ourcustomers. There is

a risk that increasing

demand could lead to

constraints on supply

and a lack ofskilled

labour to install

and maintain.

Higher temperatures

could increase the

risk of overheating

within our homes.

Greater mitigation

requirements

mayimpact the

speciﬁcation of

our homes.

Changing precipitation

patternsleading to more

frequent droughts and

ﬂooding.This could impact

planning requirements

and leadto greater ﬂood

mitigation and water

eciency requirements.

Severe weather events

causing disruption to our

sites, supplier facilities and

transportation. This could

disrupt material availability

andbuild programmes.

Recent analysis highlights a

growing demand for energy

ecient and lower carbon

homes. Together with the

availability of green home

mortgages, this may lead

toagreater demand for

lowercarbon homes.

Greater ability to attract green

ﬁnance, such as sustainability

linked loans as investors

and lenders increasingly

consider climate-related risks,

opportunities and progress

in reducing emissions when

reviewing portfolios.

Financial driver Increased cost

of sales.

Increased cost of sales

to deliver against

new regulations.

Increased cost of sales. Increased cost

of sales to model

overheating risk

and implement

solutions to mitigate.

Increased cost ofsales to

deliver mitigation requirements.

Increased cost of sales. Increased revenue

through demand for lower

emissions products.

Increased access to ﬁnance

atlower cost.

Time horizon Medium to long term Medium term Medium term Medium to long term Medium to long term Medium to long term Short to long term Short to long term

Likelihood Likely Likely About as likely as not About as likely as not About as likely as not About as likely as not About as likely as not Likely

Scenario with

highest impact

Scenario 2 Scenario 1 Scenario 1 Scenario 3 Scenario 3 Scenario 3 Scenario 1 Scenario 1

Management response We are committed

to reducing our GHG

emissions across all

scopes in line with

our 2030 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.

Potential regulatory

changes and

consultations are

reviewed closely by

the Group Operations

team. We engage with

Government and are

members of the Home

Builders’ Federation

(HBF) and Future Homes

Hub to support our

understanding and

delivery of potential

future policy. We also

partner with planning

authorities and expert

consultants to achieve

consensual cost-

eective outcomes.

Anticipated costs

relating to the FHS are

included in new project

acquisition appraisals.

We engage with our

supply chain to review

low carbon technologies

for our homes and will

be testing low carbon

heating solutions in

FY23 and FY24 prior to

the implementation of

the FHS. We also have

an internal workstream

focused onthe customer

aspect of delivering

the FHS.

All homes are subject

to an overheating

risk assessment at

the design stage.

The assessment

identiﬁes the level of

risk and the potential

mitigation measures.

Undertaking the

assessment early

in the development

process allows cost

eective solutions

tobe implemented.

Flood risk assessments are

completed on all developments

during the land acquisition

process ensuring the Group

understands what action is

necessary to mitigate ﬂood

risk on any given project.

To mitigate the risk of water

stress and impacts from

planning, our homes are

designed to use less than

105litres per person per day,

less than Building Regulations

require. Our Land teams

work closely with our Group

Technical team to assess

planning requirements and

ensure projects are deliverable.

Our SHE team monitor

forecasts for severe weather

and issue advisory notes

across the Group to reduce

the risks involved in these

events. In the past year these

have included strong wind

and high temperature events.

We engage regularly with

our supply chain partners

to mitigate risks relating to

material availability and to

assess their management

of climate risk and wider

sustainability performance.

We are progressively reducing

the emissions associated with

the operational use of our

homes while increasing energy

eciency. Green mortgages

that oer lower interest rates

are available for energy

ecient homes.

We maintain open and

transparent communication with

investors, informing them about

our strategy and performance.

In FY22 we successfully agreed

a £250m Sustainability Linked

RCF, which links sustainability

commitments withour

ﬁnance strategy.

Crest Nicholson

Annual Integrated Report 2022

Risks Opportunities

Risk category Transition Transition Transition Physical Physical Physical Opportunity Opportunity

Risk type Policy and legal Policy and legal Technology Chronic Chronic Chronic and acute Products and services Markets

Driver Carbon pricing

mechanisms

Emerging regulations Transitioning to lower

emissions technology

Rising

mean temperatures

Changing precipitation

patterns

More frequent and

severe weather

Greater demand for

sustainable homes

Green ﬁnancing and

partnership opportunities

Description Carbon taxes or other

pricing mechanisms

provide a policy tool to

limit carbon emissions.

As governments

intervene to limit climate

change, increasing

carbon prices could

impact the cost of our

direct fuel and energy

and those associated

with our supply chain.

Emerging regulations

to reduce emissions

could impact our

home speciﬁcation,

such as the Future

Homes Standard.

Further regulations

could come into

force, for example

reporting and reducing

embodied carbon.

Reporting requirements

are also likely to

increase.

Lower carbon

technologies will

increasingly be used

within our homes, which

may be unfamiliar to

ourcustomers. There is

a risk that increasing

demand could lead to

constraints on supply

and a lack ofskilled

labour to install

and maintain.

Higher temperatures

could increase the

risk of overheating

within our homes.

Greater mitigation

requirements

mayimpact the

speciﬁcation of

our homes.

Changing precipitation

patternsleading to more

frequent droughts and

ﬂooding.This could impact

planning requirements

and leadto greater ﬂood

mitigation and water

eciency requirements.

Severe weather events

causing disruption to our

sites, supplier facilities and

transportation. This could

disrupt material availability

andbuild programmes.

Recent analysis highlights a

growing demand for energy

ecient and lower carbon

homes. Together with the

availability of green home

mortgages, this may lead

toagreater demand for

lowercarbon homes.

Greater ability to attract green

ﬁnance, such as sustainability

linked loans as investors

and lenders increasingly

consider climate-related risks,

opportunities and progress

in reducing emissions when

reviewing portfolios.

Financial driver Increased cost

of sales.

Increased cost of sales

to deliver against

new regulations.

Increased cost of sales. Increased cost

of sales to model

overheating risk

and implement

solutions to mitigate.

Increased cost ofsales to

deliver mitigation requirements.

Increased cost of sales. Increased revenue

through demand for lower

emissions products.

Increased access to ﬁnance

atlower cost.

Time horizon Medium to long term Medium term Medium term Medium to long term Medium to long term Medium to long term Short to long term Short to long term

Likelihood Likely Likely About as likely as not About as likely as not About as likely as not About as likely as not About as likely as not Likely

Scenario with

highest impact

Scenario 2 Scenario 1 Scenario 1 Scenario 3 Scenario 3 Scenario 3 Scenario 1 Scenario 1

Management response We are committed

to reducing our GHG

emissions across all

scopes in line with

our 2030 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.

Potential regulatory

changes and

consultations are

reviewed closely by

the Group Operations

team. We engage with

Government and are

members of the Home

Builders’ Federation

(HBF) and Future Homes

Hub to support our

understanding and

delivery of potential

future policy. We also

partner with planning

authorities and expert

consultants to achieve

consensual cost-

eective outcomes.

Anticipated costs

relating to the FHS are

included in new project

acquisition appraisals.

We engage with our

supply chain to review

low carbon technologies

for our homes and will

be testing low carbon

heating solutions in

FY23 and FY24 prior to

the implementation of

the FHS. We also have

an internal workstream

focused onthe customer

aspect of delivering

the FHS.

All homes are subject

to an overheating

risk assessment at

the design stage.

The assessment

identiﬁes the level of

risk and the potential

mitigation measures.

Undertaking the

assessment early

in the development

process allows cost

eective solutions

tobe implemented.

Flood risk assessments are

completed on all developments

during the land acquisition

process ensuring the Group

understands what action is

necessary to mitigate ﬂood

risk on any given project.

To mitigate the risk of water

stress and impacts from

planning, our homes are

designed to use less than

105litres per person per day,

less than Building Regulations

require. Our Land teams

work closely with our Group

Technical team to assess

planning requirements and

ensure projects are deliverable.

Our SHE team monitor

forecasts for severe weather

and issue advisory notes

across the Group to reduce

the risks involved in these

events. In the past year these

have included strong wind

and high temperature events.

We engage regularly with

our supply chain partners

to mitigate risks relating to

material availability and to

assess their management

of climate risk and wider

sustainability performance.

We are progressively reducing

the emissions associated with

the operational use of our

homes while increasing energy

eciency. Green mortgages

that oer lower interest rates

are available for energy

ecient homes.

We maintain open and

transparent communication with

investors, informing them about

our strategy and performance.

In FY22 we successfully agreed

a £250m Sustainability Linked

RCF, which links sustainability

commitments withour

ﬁnance strategy.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Risk management

Climate change is identiﬁed as one of the

Group’s principal risks. The risks relating

to climate change are identiﬁed, assessed,

managed and monitored in line with our

Group-wide Risk Management Framework.

Our Board, Executive Committee and

divisional boards formally assess risk

twicea year.

The principal risks are considered by

management in connection with the

viabilityassessment of the business,

informing the viability statement on

page65. Further detail on our principal

risksis provided on pages 58–64.

In FY22 we established a Climate Risk

Working Group (Working Group) to review

our existing list of climate-related risks

and opportunities in greater detail and

support our disclosure against the TCFD

recommendations. The Working Group

includes colleagues from disciplines across

the business, including Finance, Production,

Procurement, Technical, Sustainability

andInternal Audit.

The Working Group developed an extensive

list of risks and opportunities based on a

peer review, internal expertise and external

consultant support. The likelihood, potential

impact to the Group and the timeframe for

each risk was reviewed.

The assessment included a review of

current and emerging regulation, trends in

consumer preferences, reports on physical

climate change impacts and current and

potential future carbon pricing mechanisms.

Following this exercise, a short list of risks

and opportunities was developed (see table

on pages 34–35) and information gathered

to quantify potential ﬁnancial impacts.

Climate scenario analysis was conducted

to gain an understanding of potential

future impacts and test business resilience.

We will continue to evolve our assessment

and quantiﬁcation of climate-related risks

and opportunities.

At a project level, risks and opportunities

are identiﬁed and assessed throughout

the project lifecycle and feature regularly

in project review and build cost meetings.

Risks such as ﬂooding, overheating and

local authority requirements are reviewed

with our consultants, and mitigation

measures are implemented.

FY22 Group climate risk review

Our sustainability reviewcontinued

Task Force on Climate-related Financial Disclosures

Identiﬁed climate-

related risks and

opportunities based on

internal stakeholders’

working experience

and knowledge, peer

review and external

consultant support.

More information about our climate

change risk can be found in the

Principal risks section on page 63

Assessed climate-

related risks and

opportunities based

on likelihood and

impact. Carried out

quantiﬁcation exercise

to understand potential

ﬁnancial impacts.

Developed

climate scenarios.

Reviewed short-listed

risks and opportunities

against the scenarios.

Evaluated the potential

impacts on our strategy

and ﬁnancial position.

Reviewed management

methods to mitigate risk.

Step 2

Assessed materiality

ofclimate-related risks

Step 3

Identiﬁed and deﬁned

climate scenarios

Step 4

Evaluated business

impacts

Step 1

Identiﬁed climate-related

risks

Outcome

Developed a long list of

climate-related risks and

opportunities, broken

down by:

— Transition risk

— Physical risk

— Opportunities.

Outcome

Developed a prioritised

shortlist of climate-related

risks and opportunities.

Developed understanding

of potential ﬁnancial

implications and where

datagaps are missing.

Outcome

Developed understanding

of how climate scenarios

can impact our strategy

andﬁnancial planning.

Outcome

Improved understanding

of how we are managing

climate-related risks and

opportunities and identiﬁed

areas for improvement.

Crest Nicholson

Annual Integrated Report 2022

Metrics and targets

We monitor and disclose a range of metricsand targets to help us assess and manage our climate-related risks and opportunities.

The metrics have been chosen because they address our climate-related risks and opportunities identiﬁed on pages 34–35.

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

(FY19base year)

47% 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

(FY19base year)

6% reduction in scope 3 GHG emissions per sq. m completed

ﬂoorarea compared to FY19.

Achieve net zero

acrossthe value chain

by 2045

Reduction in GHG emissions as detailed above.

Continued supply chain engagement and investigating

furthercarbon reduction opportunities.

Energy

Procure 100% renewable

electricity by 2025

70% of scope 2 electricity is procured from renewable taris. — 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)

10% reduction in waste intensity compared to FY19. — Carbon pricing mechanisms

— Greater demand for

sustainable homes

— Green ﬁnancing and

partnership opportunities.

Divert at least 95%

ofwaste from landﬁll

Diverted 96% of waste from landﬁll.

Water

Homes designed to use

105 litres per person

perday (lpppd)

Standard house type speciﬁcation is 105 lpppd. — Changing precipitation patterns

— Greater demand for

sustainable homes.

1 Target linked to RCF and Executive Director’s LTIP.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Greenhouse gas 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 UK 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

oces 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 oce data is obtained

from the relevant management company

responsible for the oce 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

business 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 2022.

Streamlined Energy and Carbon

Reporting (SECR) disclosure

Our SECR disclosure includes greenhouse

gas emissions data in line with our

methodology above. Our annual energy

consumption data covers scope 1 and 2

components and includes our site and

oce electricity, gas, diesel and LPG used

on our sites and business travel with our

Group-operated ﬂeet. All ﬁgures relate to

emissions and energy consumed in the UK.

Information onenergy eciency measures

carried out during the year is provided

onpages 28–29.

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 2021 to 31 October 2022, 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.

Metrics and targets

Greenhouse gas emissions and energy consumption statement

GHG scope 1 and 2 emissions data

FY22

Location based

FY22

Market based

FY21

Location based

FY21

Market based

Scope 1 (tCO

e) 3,070 3,070 3,638 3,638

Scope 2 (tCO

e) 1,379 234 1,718 263

Total scope 1 and 2 (tCO

e) 4,449 3,304 5,356 3,901

Scope 1 and 2 intensity (tCO

e/100 sq. m) 1.82 1.35 2.52 1.84

GHG scope 3 emissions data

FY22

Location based

FY21

Location based

Scope 3 (tCO

e) 593,055 536,846

Purchased goods and services

and capital goods 185,898 169,707

Use of sold products 393,328 361,127

Other scope 3

13,829 6,012

Scope 3 intensity (tCO

e/sq. m) 2.42 2.53

Energy consumption data FY22 FY21

Scope 1 and 2 Group-wide energy use (kWh) 26,162,348 25,331,829

Scope 1 and 2 energy use intensity

(kWh/100 sq. m) 10,683 11,927

Our sustainability reviewcontinued

Task Force on Climate-related Financial Disclosures

1 Other scope 3 emissions are relatively small and 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.

Crest Nicholson

Annual Integrated Report 2022

Protect the

environment

Natural resources andwaste

Reducing natural resource consumption,

waste and the risk of pollution incidents

is a key area of our sustainability strategy

and central to our operational eciency

strategic priority.

Reducing and recycling

construction waste

In FY22 our construction waste intensity

reduced to 8.72 tonnes/100 sq. m

compared to FY21 (9.25 tonnes/100 sq. m).

This represents a reduction of 10% against

our 2019 base year and 6% against the

prior year.

We increased the proportion of standard

house types delivered in FY22, which we

expect to reduce material consumption

and waste over time. The standard

house type designs were carefully

considered, with dimensions aligned with

typical material sizes and fewer steps and

staggers toreduce ocuts and improve

thermal eciency. As our site teams and

subcontractors become increasingly

familiar with our designs, we expect to

deliver considerable eciency, quality

andenvironmental beneﬁts.

We continue to reuse and recycle timber

through our pallet return scheme and

partnership with Community Wood

Recycling (CWR). CWR are a social

enterprise that collects timber for reuse

andrecycling while also providing training

and job opportunities for disadvantaged

people. During FY22 our work with CWR

created seven jobs andeight training places.

We implemented a new Waste Policy

across the Group in FY22. The policy aims

to drive consistent waste management

practices across our sites, including waste

segregation and eective use of supplier

take-back schemes. We completed a waste

audit that detailed how eectively the

policy has been implemented. The audit

identiﬁed several actions for FY23, including

improvements to waste reporting, greater

engagement between our site teams and

waste providers, and a drive to increase

thetake-up of our supplier return schemes.

FY22 has been a challenging year for

material procurement due to the geopolitical

and macro-economic environment.

To safeguard material availability, we have

stored greater volumes of material on site,

which increases the risk of damage and

therefore waste. FY23 will be a key year for

us to intensify our waste reduction eorts

against this challenging backdrop.

8.72

Waste intensity (tonnes/100 sq. m)

(FY21: 9.25)

96%

Waste diverted from landﬁll

(FY21: 96%)

>15,000

Pallets returned through our pallet

return scheme

Case study

We care passionately about our habitat and plan

our developments to minimise our impact on the

environment and natural resources.

Closing the loop with

Returnable Packaging

Services (RPS)

FY22 saw the highest number of

pallets returned sincethelaunch

ofour pallet return scheme. In FY22

15,052 pallets were collected by our

repatriation partner RPS, representing

a 30% increase compared to the

prioryear(FY21: 11,581 pallets).

“RPS Pallets are extremely proud

to partner with CrestNicholson to

manage their pallet return scheme.

Applying circular economy principles,

we returned 7,276pallets for

reuse in the supply chain while the

remaining 7,776pallets were recycled.

We lookforward to strengthening

ourpartnership inthe future.”

Tom Hudson

Commercial Director, RPS

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our sustainability reviewcontinued

Protect the environment

Aim Detail Key objectives

1. Protect and

enhance biodiversity

Protect and enhance biodiversity to support

healthy ecosystems and priority species.

— Achieve a 10% BNG on new developments

submitted for planning from November 2023

— Protect and provide habitats for priority species.

2. Integrate

nature-based

climate solutions

Mitigate and adapt to the eects of climate change

by integrating nature-based solutions to support

carbon sequestration and reduce heat, drought

andﬂood risk.

— Utilise nature-based climate solutions where

possible. For example, sustainable drainage

systems and climate-resilient planting.

3. Connect people

and nature

Connect our communities with the natural world

to promote awareness and understanding of

biodiversity while maximising the wellbeing

beneﬁtsthat nature provides.

— Consider accessibility to nature in

development designs

— Improve engagement with customers and the

localcommunity on biodiversity in the area

— Collaborate with wildlife organisations to

supportaction that beneﬁts nature

— Increase environmental awareness among

our employees.

We continue to segregate waste on site

to reduce the amount sent to landﬁll.

In FY22 our landﬁll diversion rate was

96% (FY21: 96%), exceeding our target of

95%. Diverting waste from landﬁll prevents

pollution, reduces GHG emissions, keeps

the materials in use topreserve natural

resources and supports jobs in the reuse

and recycling sector.

Water eciency

Several areas of the UK are already at

highrisk from water supply stress. With the

population growing and climate change

increasing the likelihood of droughts,

water eciency in the home is becoming

increasingly important. While household

water use will vary depending on household

habits, our homes are designed to use a

maximum of 105 litres per person per day,

which is 16% lower than Building Regulations

require. To reduce water consumption

andimprove resilience to water scarcity,

weinstall aerated taps andshowers,

dual ﬂush toilet cisterns andwater-

ecient appliances.

Biodiversity

Biodiversity, which describes the variety

ofliving species on our planet, is declining

at an unprecedented rate. Since 1970

populations of UK priority species have

declined by 60%.

We are committed to achieving a

biodiversity net gain (BNG) of at least

10% ondevelopments submitted for

planning from November 2023, in line

with the timeline and threshold set

intheEnvironment Act 2021.

We engage with ecologists across

all developments at an early stage

to consider eective protection and

enhancement measures. In FY23

we willrollout a biodiversity toolkit

for ourLandteams tosupport their

assessmentofthebiodiversity value

ofnew projects.

By considering at the outset how our

developments can enhance biodiversity,

theneed to provide new homes and

improvesocial infrastructure can be

balanced with environmental concerns,

ensuring both people and nature

can thrive.

Our biodiversity aims are shown in the table below:

Case study

Monksmoor Park

Monksmoor Park is a thriving

community surrounded by sensitive

ecological habitats. Our Midlands

division worked in partnership with

landscape architects and ecologists

to expand and integrate Daventry

Country Park into the development

through a series of lakes, native

tree and shrubbery planting and

the addition ofopen spaces and

play areas.

Highlights include the creation of

anotter island within the country park

extension, allowing a safe space for

local wildlife to ﬂourish. The link to

theDaventry Reservoir Country Park

to the south of the development, and

the Grand Union Canal to the north,

has allowed the wider community to

enjoy the space. Furthermore, bee

and bug hotels have been installed

throughout the development to

attractand support wildlife.

A series of allotments were provided

in FY22, giving residents the

opportunity to grow fruit and

vegetables. Walkways and cycleways,

including awalking route through the

25 acres ofopengreen space and

mature trees, have been established

to provide attractive amenity space

and connect the community with

thesurrounding landscapes.

Crest Nicholson

Annual Integrated Report 2022

Make a positive

impact on

communities

SDG alignment:

Link to strategic priorities:

Placemaking & Quality

Five-Star Customer Service

Multi Channel Approach

Link to foundations:

FY22 highlights:

— 522 aordable homes delivered

— 88% of developments within 1km

ofapublic transport link

— Over £42,000 raised for Cancer

Research UK in charity event

— Signiﬁcant increase in customer

andquality roles.

We are committed to providing attractive and high

quality new homes and investing in initiatives and

infrastructure that bring lasting beneﬁts to communities.

Thriving communities

and social value

Creating thriving communities and

delivering social value is at the heart of

our Group’s purpose. The homes and

developments we build today will shape our

landscape and communities for generations

to come. Through a considered approach

to placemaking, collaborative planning

and stakeholder engagement, we strive to

deliver high quality homes with good access

to local amenities. We also aim to promote

the relationship our customers have with

nature by providing accessible green space

wherever possible.

Placemaking goes hand in hand with

delivering social value to the local community.

Infrastructure such as public transport links,

community centres, education facilities

and play areas contribute to social value

across our developments. In addition,

socio-economic beneﬁts are delivered

through employment opportunities for local

contractors, apprentices and trainees. We also

support employment in our supply chain

through material and labour procurement.

Charitable giving and supporting

the local community

In FY22 we donated £76,470 to charities,

including Variety, the Children’s Charity,

and Cancer Research UK. The Group also

oers a payroll giving scheme allowing

employees to make tax-free donations to

their chosen charities directly from their

salary. We continue to support local charities

and organisations through donations

andsponsorship, helping to deliver a

positive impact in the communities in

which we operate. The Group will conﬁrm

a new charity partner in early FY23.

See our ‘People’ section on pages 44–47

formoreinformation on charitable giving.

Priorities for FY23

— Implement and embed the

NewHomes Quality Code

— Embed new Quality

Assurance processes

— Implement new photographic

evidence process for Part L

of the Building Regulations

— Establish new customer

service processes.

Case study

Supporting health and wellbeing

at More Park School

The Group sponsored the installation of

outdoor exercise equipment at More Park

Catholic Primary School in West Malling

forthe students to use and enjoy.

The new additions included cardio

and resistance apparatus accessible

to children aged ﬁve to 12 years old.

The equipment will be used in PE lessons

to support the students’ understanding

of health and ﬁtness and will also be

available to use at break and lunch

times. The equipment is designed in a

horseshoe conﬁguration so that a whole

class can use the space for anoutdoor

ﬁtness lesson. The equipment will also

be used in activities for children with

a variety of needs, meaning all students

across the school can make themost

of the new installations.

“ This donation has allowed us to not only

purchase new apparatus, but choose

equipment that will both excite and

inspire children for many years to come

on their sports and health journey.”

Paul Greenwood

PE Lead at More Park School

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

High quality homes

and customer service

We are committed to delivering high quality

homes and excellent customer service to

our customers. Achieving a ﬁve-star rating

for customer satisfaction from the HBF has

been one of our ﬁve strategic priorities since

the Group updated its overall strategy in

early 2020. We have made a strong start

in this ambition and have proudly been

awarded ﬁve-star status for the past two

years. This has been delivered by ensuring:

— We build and handover a high quality

product that is well designed and ﬁnished

— We provide professional and responsive

customer service and promptly address

any concerns or complaints our

customers have

— We provide our customers with

anaccurate forecast of when we will

handover their home so they can manage

their purchase process eciently.

During FY22, the housebuilding sector was

impacted by disruption to labour and supply

chains through a combination of adjusting

to life outside of the European Union, the

aftermath of COVID-19 and the conﬂict in

Ukraine. Against this backdrop the Group

has experienced operational challenges

and disruption in one of its divisions that

has delayed the handover of some of its

properties. This has disproportionately

impacted our overall 2022 satisfaction score

which is now expected to be marginally

below the threshold required to retain

ﬁve-star when awarded in February 2023.

Given the importance of providing ﬁve-

star customer service, and in advance of

further industry-level changes that will

soon be introduced to protect customers

buying a new home, the Group is already

implementing an action plan to improve

itsperformance next year. The box to

theright details the actions.

Our sustainability reviewcontinued

Make a positive impact on communities

Case study

Moving into Hygge Park

When Saeed Mazinani and Ameneh

Bahrami decided to start a family, they

knew they would need a bigger home to

accommodate their soon-to-be growing

household. Not only was a larger home

a priority but having a sustainable and

energy-ecient property was equally as

important. Following recommendations

from friends who had bought with

Crest Nicholson, the ﬁrst-time buyers

decided to purchase a three bedroom

‘Hatﬁeld’ at Crest Nicholson’s Hygge

Park development.

“ We previously lived in a small two

bedroom ﬂat in Bath for four and a

halfyears, so we knew having more

space was essential for when our little

one came along. We now have plenty

of indoor living space downstairs as

well as an extra bedroom upstairs,

sothe ﬂoorplan gives us all the

space and ﬂexibility we need as

agrowing family.

Having an energy ecient and

eco-friendly home was really

importantto me, and something

wewere speciﬁcally looking out

forduring ourhouse hunt.

We noticed some notable dierences

with our energy bills in our new build

in a short space of time. In our ﬂat, we

were paying around £110 a month, which

has nearlyhalved in ournew home

toaround £67. Things like the double-

glazed windows and the design of the

house have madea real dierence

in retaining heat. Because of these

enhancements, we can really see our

house being our homefor the long run.”

Saeed Mazinani and Ameneh Bahrami

Customers at Hygge Park, Keynsham

Customer service management

We have started to recruit a team

ofCustomer Relations Managers

that willprovide additional focus and

expertise to support customers prior

tomoving in and during the early

weeksof occupation.

Quality assurance

We have recruited a Quality Assurance

team to support and train our site teams

to deliver improved quality. Our homes

are individually built by tradespeople

and this team will provide an extra layer

of assurance that we consistently deliver

high quality. In 2023 this team will also

support the introduction of the new

PartLBuilding Regulations requirement

totake photographic evidence

throughout the quality assurance

process. Photographic evidence will be

required to demonstrate that new homes

are builtto high thermal standards and

give the additional peace of mind that

customers will be receiving a highly

energy ecient new home.

New Homes Quality Code

The New Homes Quality Code is a

newcode of practice for home builders

designed to achieve high levels of

quality and strengthen protections

forcustomers. We have enhanced our

processes to meet the requirements

of this new Code and we are strongly

committed to its principles and the

elevated levels of consumer protection

it provides. We will formally implement

our new processes and be bound by

theCode inFebruary 2023.

We are conﬁdent that these actions

and additional resources will enhance

the experience for a customer buying

aCrestNicholson home.

Crest Nicholson

Annual Integrated Report 2022

Operate our

business

responsibly

Responsible practice

We are committed to operating our

businessin a responsible manner,

creating a supportive and inclusive

workplace for our people, and engaging

withour supply chain to deliver positive

outcomes for our stakeholders.

Sustainable supply chain

Our supply chain partners play a pivotal

rolein supporting our business to eectively

manage our strategy and sustainability

performance. Our Sustainable Procurement

Policy sets out our commitment to

responsible procurement and is available

onour website.

Supply chain collaboration is critical in

tackling major environmental and social

issues. In FY22 we met several material

suppliers that have a high carbon footprint,

including brick, block and plasterboard

manufacturers to understand their eorts

to reduce emissions. Our supply chain

is responsible for around a third of our

carbon footprint and actions they take

todecarbonise will be critical to achieving

ournet zero target.

Supplier meetings covered a range of other

sustainability topics including modern

slavery, social value and risk management.

In addition, we issued a questionnaire to all

Group suppliers that focused on material

sustainability issues. The responses will

improve our understanding of supplier

actions taken to mitigate risk and how our

supply chain can support us to deliver

asustainable future.

We continue to partner with the Supply

Chain Sustainability School (School).

The School is a collaborative learning

environment designed to upskill those

working within, or aspiring to work

within, the built environment sector.

Membership is free for our supply chain

andprovides access to thousands of

learning resources and CPD-accredited

content including webinars, e-learning

modules and guidance documents.

In FY22 we promoted the School to

oursupply chain partners to encourage

learning and improve knowledge. We also

established a new target to increase the

number of our suppliers with Group Supply

Agreements (GSA) actively engaging with

the School. In FY22 18% of our suppliers with

a GSA were at bronze, silver or gold status

within the School (target: 90% by FY26).

Sustainable timber

Our Sustainable Timber Policy commits

ustoprocure sustainable certiﬁed timber

– either FSC (Forest Stewardship Council)

orPEFC (Programme for the Endorsement

ofForest Certiﬁcation) certiﬁed. Our last

reported timber audit conﬁrmed 100% of our

timber procured from suppliers was FSC or

PEFC certiﬁed. Purchasing FSC and PEFC

accredited timber promotes sustainable

forest management and helps reduce the

risk ofillegal deforestation.

Human rights and modern slavery

The Group takes a zero-tolerance approach

to any form of modern slavery, including

forced labour and child labour. Our Supply

Chain Code of Conduct 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 Supply Chain

Codeof Conduct.

All direct employees are paid at or above

the voluntary Real Living Wage

and we

aim to achieve Living Wage Foundation

accreditation in FY23. Our Human Rights

Policy is available on our website. We support

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

(ILO) Fundamental Conventions.

In FY22 we updated our modern slavery

escalation process and delivered training

to relevant teams. Our modern slavery

e-learning module is compulsory on

induction for relevant new employees

and isrenewed annually. In FY22 97% of

targeted colleagues completed the training

module. We also communicate updates

on modern slavery to our employees via

our intranet. Our Anti-slavery and human

tracking statement is updated annually

and published on our website.

We have a whistleblowing helpline

managed by a third party that allows our

colleagues, subcontractors, suppliers and

the local community to report concerns.

Our whistleblowing policy Speaking Up

provides further information and isavailable

on our website. During FY22 there were

zero substantiated grievances relating

tohuman rights and zero reported cases

ofmodern slavery.

SDG alignment:

Link to strategic priorities:

Operational Eciency

Link to foundations:

1 2 3

FY22 highlights:

— Increased engagement with our

supply chain on sustainability-

related issues

— Achieved The 5% Club Silver

Awardforour commitment to

recruiting trainees, apprentices

and graduates

— 10% of our employees were

traineesin FY22

— Employee engagement

increasedto83%

— SHE compliance increased

to 88%.

1 Apprentices are subject to a dierent pay scale

in line with regulatory requirements.

Our people and supply chain partners are

key to the successful delivery of our strategy

and overall performance.

Priorities for FY23

— Achieve the Living Wage

Foundation accreditation

— Increase the number of our

suppliers actively engaging

with the Supply Chain

Sustainability School

— Strengthen diversity and

inclusion initiatives

— Enhanced focus on material

management and site

maintenance.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

People

Our people are at the core of our business.

Wecontinueto focus on promoting diversity and

inclusion. Werecognise the importance of our

people’swellbeing and nurturing and developing

peopleto fulﬁl their ambitions and potential.

Attracting and developing talent

People are one of our strategic foundations.

The quality of our people and the decisions

they make are fundamental to the successful

implementation of our strategy.

We aspire to be an employer of choice

that attracts, develops and retains high

quality talent and expertise. We collaborate

and work inclusively, focusing on shared

goals, welcoming new ideas and fostering

acultureof continuous improvement.

We want to ensure we have the availability of

talent in every part of our organisation and at all

levels. Our workforce should beappropriately

diverse, embracing a full range of views,

experiences and backgrounds and beneﬁting

from the enhanced performance that we know

this brings. We have reﬂected this aspiration

inour approach to recruitment and are seeing

an increasingly diverse range ofcandidates

for all vacancies.

During the year we have focused on

enhancing our talent pool by expanding

ourTrainee Programme.

Following several open days across our

division we have recruited 46 trainees for

roles across the Group, exceeding our initial

target of 25. Candidates represented a

range of backgrounds and age groups and

were able to demonstrate their individual

skills and capabilities, while learning to

work as part of a team. This initiative has

also been open to existing employees

seeking a career change. We have 76

trainees in total, which includes our new

intake, those moving into their second year

and existing employees transitioning onto

theTrainee Programme.

In September we held our annual traineeevent.

Attendees who took part acrosstwo days,

gained valuable insight into key areas of

ourbusiness via a series of educational

talksand practical sessions.

Finally this year we applied for and received

Silver Award for The 5% Club. The 5%

Club is a movement of employers we have

joined who are committed to have 5% of

their workforce in earn and learn positions.

We want to promote ourselves as an

employer who aims to address the lack of

opportunities for people to start a career or

develop themselves in their current career.

Trainees

9.6%

Workforce who

are trainees

Trainees recruited

in the year

Total number

of trainees

Our Trainee Programme

Georgina joined Crest Nicholson in 2021 as a

TraineeLand Buyer, as part of our Trainee Programme.

The programme has enabled her to rotate around

dierent departments within her division to learn

about how her role ﬁts intothe bigger picture.

Georgina is also part of our Future Talent Programme,

which focuses on personal and professional

development for trainees and allows trainees

fromallareas of the business anddivisions

tocometogether to learn and network.

“ I have completed rotations in the Technical,

Commercial, Build, Sales, and Finance teams.

I reallyenjoyed getting the chance to work with

dierent teams in the Company to learn about

whateach department does and how they each

contribute to the overall housebuilding process.

In my current role, I assist with the initial review of a

site, looking into factors such as planning status,

siteconstraints, design requirements and sales

values. I have also accompanied the team on

sitevisits, and more recently have got involved

withproject management of current sites.

I have thoroughly enjoyed my ﬁrst year at

CrestNicholson working within the Land team,

and Iamlooking forward to building my career

andthefuture opportunities that the Company

hasto oer.”

Case study

Crest Nicholson

Annual Integrated Report 2022

Investing in our people

Following our launch of our Talent

Programmes in FY21, we have continued

toinvest inthese programmes:

— Future Talent

— Emerging Talent

— Future Leaders.

We nominated 116 people for our Talent

Programmes and 38 employees have been

promoted in their job role during the year:

— 13 Future Talent

— 18 Emerging Talent

— 7 Future Leaders.

The programmes have provided us with

valuable insight and feedback from the

current participants and those developing

thecourse content. This will allow us to

reﬁne and enhance the oering to future

attendees as we continue to evolve our

approach to developing our talent.

Talented people are often aware of their

own value and are understandably targets

of interest from competitors. We want to

ensure that our best people feel valued

and recognised and that we articulate a

clear case for why their development and

career progression is best served with

CrestNicholson. We do this in a variety

of ways:

— We aim to create a culture at work they

wish to be part of and can be proud of

— We oer our employees competitive

reward packages for the contribution

they make

— We have a comprehensive personal

development review and planning

process where employees receive

feedback and set their future objectives

and development activities

— We run a Group-wide talent review

andsuccession planning process

whichaims to match our talent to the

right role for now and in the future,

ensuring each individual identiﬁed

hasapersonalised development plan.

Wellbeing

Our people are at their best when they

feel happy and settled at work. As a major

employer we have a responsibility for the

wellbeing of our workforce and we invest

in activities that support their mental

andphysical health.

We have 18 trained mental health ﬁrst aiders

across our divisions. The mental health

ﬁrst aiders are now equipped toidentify,

understand and help support aperson at

work who may need it. They will support

employees when mental health issues arise.

This is particularly important in our industry

where employees do not always feel able

tobe open about their mental health.

During this year we have launched Fika,

amental ﬁtness platform. Fika supports

our employees by training them to deal

with the big and small challenges weall

experience every day and help them

buildpersonal resilience.

Exercise plays a signiﬁcant part in physical

and mental wellbeing. Our GymFlex

scheme provides us with an opportunity

to engage with employees and encourage

them to be active and healthy. In January

2022 we promoted #WellnessWednesday.

Whether they arealready very active or

just startingout, #WellnessWednesday is

aﬂexible programme that our employees

can get involved in, regardless of time,

placeandchoice of exercise.

We provide beneﬁts, services and support

toall our employees and these are promoted

through a variety of sources with several

providers being open 24/7. This enables

ouremployees to access these services

when they most needit.

We will continue to deliver further

enhancements to our wellbeing strategy

in FY23.

Talent development

at Crest Nicholson

Emerging Talent

Focus: Creating and developing

inspiring leadersat all levels

Future Leaders

Focus: Identifying and developing

individuals with aspirations to

perform senior leadership roles

Future Talent

Focus: Equipping trainees

with new skills and identifying

future leaders

Throughout FY22 the following

development programmes

were launched so that

our talent can realise its

full potential.

“ From the moment I started with

CrestNicholson as a Trainee Site

ManagerI have never looked back.

I haveworked with some fantastic

colleagues and completed some

invaluable training schemes,

from gainingmy MCIOB status to

beingenrolledand completing the

Emerging Talent Programme. It is

greatto be part ofa Company who

take pride indeveloping employees,

along withhaving the faith in them

to promotefromwithin, and I am

gratefultobe part of that process.”

Sam Chilvers

Build Manager, Eastern

Case study

Emerging Talent

Programme

Sam describes the Emerging Talent

Programme as being hugely valuable,

having helped develop his skills,

enabling him to be ready forthe

next step in his career and leading

him to secure a recent promotion.

Meeting up with colleagues from

acrossthe business while on training

days hasalso been veryuseful for

enhancing his network and seeing how

his role aects the wider Company.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

People continued

Employee engagement

Employee voice forums took place in the

yearwith Louise Hardy (Non-Executive

Director for employee engagement) chairing

these meetings. Representatives from

each division can give theirhonest and

open feedback to Louise. Louise ensures

as appropriate, that this feedback

isdiscussedand actioned at the Board.

For further information please see

pages78–79.

During the year we conducted a shorter

form (pulse) survey comprising eight

questions and a longer form (full) survey

of 60 questions. The pulse survey gave us

asnapshot of employee engagement prior

to the full survey, with anengagement score

of 70%. The full surveythat was completed

in September 2022 showed an overall

engagement score of83%, an 8%increase

from our FY21 scoreof 75%.

Our next objective is to work with

ourpeople to ensure action plans are

embedded as a result of insights derived

from the surveys. We will also be issuing

further surveys to follow up on speciﬁc

areasof focus.

At half year and full year our Executive

Leadership Team visits all divisions to discuss

our results, targets, future plans and strategy.

Employeessubmit questions in advance,

anonymously if they wish, with all questions

being answered by the Chief Executive on

the day.

The roadshows are a great opportunity for

the Executive Leadership Team to meet with

employees across the divisions and to thank

them all for their hard work throughout the

year. These roadshows are made accessible

to everyone whether atthe oce or by

virtual attendance at the meeting.

We have utilised a variety of employee

communication channels in FY22.

These include regular Exchange

(internalmagazine) updates, ad hoc

Shoutouts (recognition) as well as

usingSnapComms for instant updates.

We have also upgraded our intranet

toensure employees can easily keep

trackof these news items.

Employee turnover has been signiﬁcantly

elevated in the past two years with our

industry being particularly aected.

Strong construction output coupled with

along-term reduction in skilled people,

as wellas adapting to life outside of the

European Union, has meant qualiﬁed

peopleare in signiﬁcant demand and in

short supply. This has driven high levels

oflabour turnoverand wage inﬂation.

We have beenmitigating this impact by:

— Recruiting in advance

ofvacancies arising

— Focusing on retaining and

attractingthebest people

— Launching the Induction Hub

onour intranet

— Running a comprehensive talent

development programme that

links to our succession planning

— Making103 internal promotions

andassociated salary reviews

throughoutthe year

— Giving employees a one-o

payment of£1,000 in response

to the increasing cost of living.

Trained mental

health ﬁrst aiders

Across the Group

Pulse Survey

70%

Engagement score

Full Survey

83%

Engagement score

with 72% participation

Employee turnover

27%

Voluntary employee turnover

(excluding those who left

during probation)

Crest Nicholson

Charity Challenge

In September 2022 over 100

CrestNicholson colleagues, including

theExecutive Leadership Team,

took partinthe Crest Nicholson

Charity Challenge.

The challenge consisted of

three separate walking routes:

— The Classic – 13.0km,

taking around three hours

— The Advanced – 26.6km,

taking around six hours

— The Expert – 35.5km,

taking around eight hours.

We set a fundraising target of

£12,000 and surpassed this by

raising over £42,000. All money

raised wenttoCancerResearch UK.

Case study

>1 00

Crest Nicholson colleagues

£42K

Raised for Cancer

Research UK

Crest Nicholson

Annual Integrated Report 2022

Diversity and inclusion

We encourage diversity and promote equality

and respect throughout the organisation.

This supports our goal tobeaninclusive

employer, where employees are empowered

regardless of theirbackground, identity,

age,gender, ethnicity or disability.

We continue to review and develop our

policies that support diversity, inclusion

andequality within the business to ensure

there are no barriers to recruitment,

performance and career development.

We also continue to celebrate our

calendarofinitiatives to acknowledge

notable datesandreligious festivals

toraiseawareness and respect for all

faithsand important causes.

Further to the launch of our Company

visionand values in 2020, we announced

ournew People Vision in March 2022,

whichhas been developed through the

Diversity andInclusion Forum (D&I Forum).

Our values underpin how we implement

ourGroup strategy, deﬁning who we

areandhow we do business. Our values

setout the principles we expect everyone

inthe Group to follow. Together, these values

strongly inform our culture and outline the

type of organisation we aspire tobe.

We aim to create an inclusive

environmentwhere all colleagues are

valued, included and empowered to

succeed. We launched new anity groups

which will playa vital role in helpingus

to achieve thisgoal. Employees were

encouraged to volunteer their participation

within these groups, which will then

develops ideas to feed into the D&I Forum.

These groups will then assess how to

bestimplement those ideas and initiatives

thatthe D&I Forum wants to take forward.

Equal opportunities

We aim to create an atmosphere that provides

equal opportunities for all. Selection for

employment and promotion is based on merit,

following an objective assessment of ability

and experience. We are also committed to

ensuring that ourworkplaces are free from

discrimination and that everyone is treated

fairly and withdignity and respect.

Employment policy

Our equality and diversity policy ensures

all employees and job applicants are

accorded equal opportunities for recruitment,

remuneration, access to beneﬁts and

training and promotion. We are committed

to ensuring that our workplaces are free

from discrimination. We select and promote

employees based on their aptitudes and

abilities, not their gender, sexual orientation,

marital status, race, nationality, ethnic or

national origin, age or disability. Where an

employee has, or develops, long-term health

issues or a disability, the Group works

with them to adapt their role, skills and

development opportunities to remain suitable

and appropriate for their circumstances

sothat they can continue, and progress,

intheir employment with the Group.

“ We have a strong focus insupporting

a diverse and inclusive culture so that

we areseen as an employer ofchoice.

Our inclusive working environment

enables us to attract talented people

to pursue a career within Crest

Nicholson. We operate on a ﬂexible

and adaptive basis so that people ﬁnd

the right personal balance for them,

that also beneﬁts the business.

Our leadership sponsors the Group’s

initiatives in succession planning,

talent development and diversity

and inclusion.”

Jane Cookson

Group HR Director

Our values

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.

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.

Mean hourly pay gap

between men and women FY22

£1 80p

20%

FY21: 27%

Median hourly pay gap

between men and women FY22

£1 87p

13%

FY21: 22%

Age breakdown

October 2022

Ethnicity breakdown

October 2022

1 White British 635 79.7%

2 White Other 47 5.9%

3 Undisclosed 41 5.1%

4 Non-White

British

54 6.8%

5 Non-White

Other

20 2.5%

1 20 years

or less

8 1.0%

2 21 to 30 years 191 24.0%

3 31 to 40 years 210 26.3%

4 41 to 50 years 176 22.1%

5 51 to 60 years 161 20.2%

6 Over 60 years 51 6.4%

Our people

Gender split

October 2022

All employees

1 Male 489 61%

2 Female 308 39%

Board

1 Male 4 57%

2 Female 3 43%

Executive

Leadership

Team

1 Male 5 83%

2 Female 1 17%

Executive

Leadership Team

and direct reports

1 Male 27 66%

2 Female 14 34%

1 Based on the standard deﬁnition of leadership

(seniormanagement) by FTSE Women Leaders.

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.

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.

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.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Financial

Statements

Governance and

Directors’ Report

Safety, Health

& Environment

It is important that employees and others

aectedby the work that we do remain

healthy and go home safely to their family

and friends every day. We can only achieve

this by establishing a relentless focus

for those working on site, and those who

support our operations away from it, on

identifying those risks attached to how we

work and taking responsibility to mitigate

these through proactive decision making

and compliance.

Compliance and leadership

Following the introduction of a new

compliance and audit programme with

supporting software in 2020, our performance

continues to improve. Compliance has

increased to 87.9% in FY22 (FY21: 86.9%).

Measuring compliance this way gives us

a forward indicator of performance and

enables us to focus our attention where

we can make the biggest dierence

beforeaccidents or incidents occur.

We strive to continually improve the way

wework and while the Construction Design

and Management (CDM) Regulations are

well established, we undertook a review

of our procedures in FY22. As a result of

this, we have added more opportunities

forearly consideration of safety issues in

ourprocesses and provided additional

training to key disciplines.

In February 2022 we introduced new

standards and protocols for environmental

protection and waste management.

We augmented this with an audit in the

summer to review how well they had been

adopted and to assess the eectiveness

oftheir impact. We will continue to apply

these learnings throughout FY23.

The safety, health and welfare of everyone

whocomesinto contact with our operations

is our number one priority.

FY22 highlights

— Internal SHE compliance audit

programme now fully embedded,

drivingimproved performance

— Introduced new incident and

claiminvestigation processes

— Enhanced reporting tools, generating

insights from new audit programmes

and incident investigation processes

— Environmental and waste processes

reviewed and updated

— Additional pre-construction

design and management protocols

introduced, supported by

appropriate training.

SHE audit compliance

8 7. 9 %

FY21: 86.9%

Annual Injury Incidence

Rate (AIIR)

468

FY21: 385

SHE training days

366

FY21: 278

Senior management

safety tours

144

FY21: 152

SHE compliance

inspections

685

FY21: 810

Wycke Place, Maldon

Crest Nicholson

Annual Integrated Report 2022

Our Annual Injury Incidence Rate (AIIR)

hasincreased in FY22 and is higher than

we would like it to be. During the year there

were 17 injury incidents that we reported

to the Health and Safety Executive (HSE).

We critically review every incident, whether

RIDDOR reportable or not, to consider how

it could have been avoided. In April 2022

we introduced a revised process for the

management, investigation and reporting

ofincidents which is now providing greater

insights on the causes of incidents.

Using the more structured and

comprehensive data set from our new

compliance audit and incident investigation

processes, we have improved a number

ofour on-site processes that will help

makethe working environments safer

forallnext year.

Examples of these improvements are:

— Following a ﬁre in a nearly complete

plot, we introduced new ﬁre prevention

protocols to control the turning on of the

electrical supply by unauthorised trades

— A contributory cause to incidents can

be the quality of subcontractors’ risk

assessments and method statements.

In May 2022 we rolled outnew processes

for the checking of this documentation

and aprocess to escalate this review

forhigher risk activities

— We have reviewed and adapted our

processes for risk assessing sites

withpotential radon exposure.

FY23 focus areas

As well as further embedding the new

procedures and initiatives from FY22,

we will introduce new procedures

and campaigns to drive performance

improvements in these areas:

— Following examples of implemented

strikes ofburied cables during FY22,

newprocedures will be implemented

to enhance the pre-planning of this

activity and to require a supervisor

to be present throughout the dig.

Additional precautions are being

introduced to ensure that any

hand tools and road pins used

inthegroundare insulated

— Maintaining a clean and tidy working

environment helps minimise the

risk of slips, trips and falls. It also

sets the right culture and mindset

for all those working on that site as

well-organised sites are generally

safer ones. Data from our insight

reports indicates this is one of the

areas in which we can improve.

In FY23 we will place an enhanced

focus on goodhousekeeping and

site maintenance to reduce the

incidence of reportable and

non-reportable events.

Governance

The Board considers SHE performance

critical to our eective operations.

Executive oversight is delegated to the

SHECommittee, which is chaired by the

Group Operations Director and attended

bythe Chief Executive, General Counsel

andCompany Secretary, Group HR

Directorand Group Head of SHE.

The SHE Committee provides general

leadership and oversight including:

— Monitoring performance against

theGroup’s SHE strategy

— Setting associated policies,

proceduresand initiatives

— Overseeing the management

of the Group’s SHE risks.

The Committee is advised on operational

issues by the Group’s SHE function as

wellas the Build Functional Forum – a

regular meeting focused on the Group’s

build processes including health and safety,

which is chaired by a Divisional Managing

Director and attended by all divisional

BuildDirectors and relevant heads of

Group functions.

During the year the SHE Committee met

sixtimes and approved the following:

— Phased alteration of COVID protocols

— New incident reporting processes

— Recommendations from

incident investigations

— Proposals for Environmental & Waste

Management Audit

— New policies for avoiding service strikes.

To complement our own governance

structures, we continued to work

closely with colleagues from the wider

housebuilding industry to support industry

initiatives aimed at elevating health and

safety standards across all developments.

Our new environmental and waste

management protocols are a great step

forward. There issuch a strong link between

safe working practices and protecting the

environment andthis has provided us with

aclear focus onthis issue.”

Chris Epps

Group Head of SHE

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Key performance

indicators

We use 12 key performance indicators to monitor

our progress against our strategic objectives.

These are the key metrics that we use to measure

theperformance and health of the business.

Financial

22.4%

Return on capital

employed (ROCE)

15.4%

Earnings before

interest and tax

(EBIT) margin

2,734

Unit completions

22.5%

Land creditors as

a% of net assets

£276.5m

Net cash

25.0%

Land portfolio

gross margin

KPI used in the

annual bonus scheme

KPI used in the

Long-Term Incentive Plan

Deﬁnition

Sales of homes recognised in the year

including 100% of those held in joint

venturesand on an equivalent unit basis.

FY20 sales of homes recognised in the

yearincluding our proportion of those

heldin joint ventures and not on an

equivalent unit basis.

Why we measure

Reﬂects overall business activity

andoutputand enables the Group to

forecast future capacity requirements.

Deﬁnition

EBIT margin (operating proﬁt margin)

reﬂectsthe adjusted proﬁt before interest,

joint ventures and tax achieved by the

Group, divided by revenue.

Why we measure

Assesses the ﬁnancial eciency

of our business operations before

any one-o cost.

Deﬁnition

Adjusted operating proﬁt before

joint ventures divided by average

capital employed.

Why we measure

Illustrates how eective the Group’s

capitalallocation is in delivering returns.

Deﬁnition

Land creditors divided by net assets.

Why we measure

Ensures that the Group is maintaining

arobust ﬁnancial position when entering

into future land commitments.

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.

Deﬁnition

The expected gross margin after sales

andmarketing costs of land we hold

inourshort-term land portfolio.

Why we measure

Indicates the earnings potential of

currentand future land development

andthesale ofassociated homes.

FY22

FY20

FY21

22.4%

7.6%

17.2%

FY22

FY20

FY21

22.5%

24.9%

24.7%

FY22

FY20

FY21

15.4%

8.4%

14.6%

FY22

FY20

FY21

£276.5m

£142.2m

£252.8m

FY22

FY20

FY21

2,734

2,247

2,407

FY22

FY20

FY21

25.0%

16.0%

23.4%

1 3 5 9 1 3 5 1 9 1 3 5

1 3 5

3 1 3 5

1 3 5 2

1 2 3 4 5

7 8 9 10 11

The numbers below relate to our

principalrisks

8 7

Strategic foundations and priorities

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

People

Sustainability & Social Value

Safety, Health & Environment (SHE)

Financial Targets

See pages 60–64 for

our principal risks

Crest Nicholson

Annual Integrated Report 2022

Our KPIs were revised during the year to

improve alignment between the measures

we use to run the Group on a daily basis

with the interests of all stakeholders and

ourremuneration targets.

We strive to deliver sustainable growth

in volumes while delivering shareholder

returns within a framework of a robust

balance sheet. It is essential that ﬁnancial

performance does not compromise

the build quality, customer satisfaction

orsafetyofthose working on our sites.

To align the focus of the Board and

Executive Leadership Team with the

interests of stakeholders, some KPIs

are reﬂected in our senior management

incentive schemes. Further information

onremuneration can be found on

pages100–122.

1 ROCE, EBIT margin, net cash and land creditors as a percentage of net assets are alternative performance measures. See pages 188–189 for further details.

Non-ﬁnancial targets

1.82

Greenhouse gas

(GHG) emissions

intensity

8.72

Waste intensity

Deﬁnition

The percentage of leavers during the year

by reason of resignation or retirement as

aproportion 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

anddevelopment of skills within our teams.

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

totrack our progress on reducing our

impacton the environment. There is

alsoabusiness beneﬁt from the reduced

cost ofmaterials purchased and waste

generated in the construction process.

Deﬁnition

The GHG emissions intensity reﬂects our

scope 1 and 2 emissions (tCO

e) per 100

sq.m of completed ﬂoor area. It includes

business travel via company cars, fuel and

energy used on sites and in oces.

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 business

beneﬁt from increased operational eciency

and reduced cost of fuel used.

Deﬁnition

The annual Home Builders Federation’s

customersatisfaction rating based on

theNational House Building Council

surveywhich newhome buyers receive.

Why we measure

Providing an excellent customer

experienceis one of the Group’s

ﬁvestrategic priorities.

Deﬁnition

AIIR represents the number of

accidentsinthe year normalised

per100,000people working on site.

Why we measure

The safety, health and welfare

ofeveryonewho is part of our

operationsisournumber

one priority.

Deﬁnition

Proportion of unit sales of homes

recognisedin the year to the Private

Rented Sector (PRS) or aordable.

Why we measure

Selling homes through a range of

partnerships and tenures is one of

theGroup’s ﬁve strategic priorities.

27%

Voluntary employee

turnover

5 star

Customer

satisfaction

468

Annual Injury Incidence

Rate (AIIR)

35.1%

PRS/Aordable unit

completions

FY22

FY20

FY21

1.82

3.08

2.52

FY22

FY20

FY21

FY22

FY20

FY21

8.72

8.19

9.25

FY22

FY20

FY21

468

369

385

FY22

FY20

FY21

27%

26%

35%

FY22

FY20

FY21

35.1%

49.1%

37.1%

79 10

9 7 3 67

1 4

1 3 5 8 1 5 9

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Financial review

Revenue

£913.6m

(FY21: £786.6m)

Net cash

£276.5m

(FY21: £252.8m)

A strong

financial

performance

in the year

The Group has made further good

progress implementing its strategy

which is reﬂected in our enhanced

ﬁnancial performance for the year.

Increases in revenue, operating

margin and return on capital employed

demonstrate the underlying health

of our operations. The balance sheet

remains robust and will provide

resilience in tougher market conditions

and fuel our growth ambitions when

more stable conditions return.”

Duncan Cooper

Group Finance Director

Read more about our KPIs

on pages 50–51

Adopting a standard housetype range and moving

away from more complex schemes has simpliﬁed

ouroperating model and delivered the eciencies

weneeded to rebuild margins.

Crest Nicholson

Annual Integrated Report 2022

Financial highlights

— Revenue up to £913.6m,

reﬂectingstrong trading in

uncertain macro environment

— Adjusted proﬁt before tax

at£137.8m,in line with

our expectations

— Proﬁt before tax at £32.8m,

afterrecording exceptional

items of£105.0m

— Adjusted operating proﬁt margin

upto 15.4%, on track back to

industryaverage level

— Net cash at £276.5m, and ran

on average net cash basis

throughout FY22

— Return on capital employed

increasedto 22.4%

— £250m Sustainability Linked

Revolving Credit Facility

completedin year

— Final proposed dividend

of 11.5 pence per share.

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. The exceptional items have a

material impact on reported performance

and arise from recent, unforeseen events.

As such, the Directors consider these

adjusted performance metrics reﬂect a

more accurate view of the core operations

and business performance. All alternative

performance measures aredetailed on

pages 188–189.

FY22 trading performance

The trading year started strongly with

good levels of demand for new homes.

Construction activity and operating

conditions were beginning to normalise

after the supply chain disruption caused

by COVID-19. Although labour inﬂation and

rising prices of raw materials were starting

to drive increasing levels of build cost

inﬂation, housebuilders were managing

to successfully oset this through house

prices. As FY22 started to unfold the

global geopolitical environment became

increasingly uncertain. The conﬂict

in Ukraine led to further supply chain

disruption and created signiﬁcant energy

supply insecurity, both of which contributed

to an acceleration in build cost inﬂation.

Later in the summer domestic political

uncertainty added further economic

headwinds, resulting in a backdrop of rising

interest rates across the course of the

year, an increase in the cost of mortgage

borrowing and speculation that this would

result in much tougher trading conditions for

housebuilders in FY23. Despite this external

volatility the Group has traded strongly in

the year, delivering an improvement across

all key ﬁnancial metrics.

Sales, including joint ventures, grew 17.5%

on prior year at £955.8m (FY21: £813.6m).

This comprised £913.6m of statutory

revenue (FY21: £786.6m) and £42.2m

ofthe Group’s share of revenue through

joint ventures (FY21: £27.0m), reﬂecting a

strong trading performance and a growing

contribution from existing joint venture

schemes reaching maturity.

The Group delivered 2,734 (FY21: 2,407)

home completions during the year, up

13.6% on prior year. 2,212 of these were

open market completions (including bulk

deals) (FY21: 1,924), up 15.0% on prior year,

with the balance derived from aordable

completions at 522 (FY21: 483), up 8.1%

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.

The Group started to report on this basis at

HY21 to align to the methodology commonly

adopted by other UK housebuilders.

Open market (including bulk) average

selling prices increased to £388,000

(FY21: £359,000) during the year. Since the

Group announced an updated strategy in

January 2020 it has focused on rolling out

its standard house type range across new

developments. These houses are typically

more ecient to build and are oered to

customers at lower price points than the

Group’s legacy house types. In addition,

the Group has experienced a shift in the

regional composition of its sales as it has

moved away from selling in London and

delivers a greater proportion of sales

from other, lower priced geographies.

These factors continue to support a

reduction in average selling prices which

hasbeen more than oset by house price

inﬂation in the year.

Adjusted gross proﬁt was £194.3m

(FY21: £166.7m), up 16.6% on prior year,

principally reﬂecting the stronger sales

performance. Adjusted gross margin

was slightly up on prior year at 21.3%

(FY21: 21.2%). Gross proﬁt margin

progression was expected to be ﬂat this

year as the prior year comparative included

the contribution from the Longcross Film

Studio sale. This was reﬂected in lower land

and commercial sale revenue at £32.0m

(FY21: £49.2m). In addition, the Group

continued to recognise several zero margin

schemes including units at Brightwell’s Yard,

Farnham and the completion of OldVinyl

Factory, Hayes and Sherborne Wharf,

Birmingham. Approximately one-thirdof

the Group’s remaining NRV provision

is expected to be used in FY23 and

predominantly relates to the scheme at

Brightwell’s Yard, Farnham. Gross proﬁt

was £91.8m (FY21: £145.9m), down

37.1% on prior year due to the impact

ofexceptional items.

Adjusted proﬁt before tax

£ 1 3 7. 8 m

(F Y21: £107.2m)

Return on capital employed

22.4%

(FY21: 17.2%)

“ The Group has outlined a margin

recoveryplanto bring margins in line

withindustry peers by FY24.”

Duncan Cooper

Group Finance Director

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Financial review continued

The Group has delivered another year of

strong progress implementing its strategy,

realising tangible progress in its ﬁnancial

performance. While the market outlook

for FY23 has undeniably become more

challenging. The Group is now realising

the beneﬁts of exiting those previously

identiﬁed low margin legacy schemes.

Opening new divisions in Yorkshire and

EastAnglia will provide volume growth

inthe future to accompany the Group’s

ongoing margin recovery.

Adjusted operating proﬁt (or Earnings

Before Interest and Tax – EBIT) increased

in the year to £140.9m (FY21: £114.6m) with

EBIT rate increasing from 14.6% to 15.4%.

Excluding the eect of the London Chest

Hospital sale, EBIT rate would have been

15.7% for FY22, reﬂecting strong progress

towards the 18-20% range currently being

delivered by other housebuilding peers.

The Group has outlined a margin recovery

plan to bring margins in line with industry

peers by FY24. Finally, adjusted proﬁt

before tax (APBT) for the year was £137.8m

(FY21: £107.2m), up 28.5% on prior year and

proﬁt before tax after exceptional items

for the year was £32.8m (FY21: £86.9m),

reﬂecting the impact of the stronger year-

on-year operating proﬁt contribution oset

by the exceptional charge outlined below.

Operating proﬁt was £38.4m (FY21: £93.8m),

down 59.1% on prior year due to the impact

of exceptional items.

Administrative expenses for the year

were £51.1m (FY21: £51.1m). The prior year

comparative is inﬂated through the one-o

voluntary repayment of the Government’s

Job Retention Scheme for COVID-19

of £2.5m, which was received in FY20.

The Group has continued to maintain a

strong discipline on overheads, but the

underlying increase reﬂects the backdrop

ofrising wage inﬂation and the competition

for talent within the construction sector

during the past year. Given the tougher

economic outlook, we expect to operate

with far fewer vacancies for roles in

FY23. In addition, we are investing in

the establishment of two new divisions,

recruiting new roles focused on quality

and customer service and are seeing other

regulatory changes which will require

more resources. These factors will all

contribute to an increase in the Group’s

headcount in FY23 and accordingly

we expect administrative expenses to

increasebyover10% compared to FY22.

On 6 May 2022, the Group disposed of

its50% share in the joint venture containing

the London Chest Hospital to its joint

venture partner for a total consideration

of £16.0m. £8.0m of this was received

in FY22 with the balance due in FY23.

Accordingly, the Group recorded a £2.3m

net impairment loss on ﬁnancial assets for

the year (FY21: £1.0m). This site had been

thesubject of planning objections and

delays and is a complex build programme

with signiﬁcant levels of peak capital

investment. By disposing of it for a small

lossthe Group has been able to forego

the future recognition of a margin dilutive

scheme and realise a strong cash inﬂow

toinvest into schemes that are consistent

with its current strategy.

“ While the market outlook for FY23 has

undeniably become more challenging

theGroup is now realising the beneﬁts

ofexiting those previously identiﬁed

lowmargin legacyschemes.”

Duncan Cooper

Group Finance Director

Crest Nicholson

Annual Integrated Report 2022

FY22 total dividend

17.0p

(FY21: 13.6p)

Adjusted operating margin

15.4%

(FY21: 14.6%)

Adjusted basic EPS

42.5p

(FY21: 34.0p)

Exceptional items

Since the Grenfell Tower tragedy in 2017, the

Government and construction sector have

been carefully trying to identify any other

buildings which may be exposed to potential

ﬁre safety risks. At the outset of this review

process, the Group sought to identify

which buildings needed remediating and if

necessary, where temporary risk mitigation

solutions were required until this work could

be completed. The Group’s stated position

was that it would work as swiftly as possible

to remediate those buildings where it had a

legal or constructive obligation to do so.

The ﬁrst exceptional charge taken in this

respect was in FY19 for £18.4m and by the

end of FY21 the Group had cumulatively

recorded £47.8m of net exceptional charges

and had an unutilised balance sheet

provision of £42.6m. In January 2022,

theSecretary of State for the Department

for Levelling Up, Housing and Communities

(DLUHC) announced the Government’s

intention to change the regulatory and

legislative framework for ﬁre remediation.

Finance expense and taxation

Adjusted net ﬁnance expense of £7.1m

(FY21: £9.1m) is £2.0m lower year on year,

and the Group Revolving Credit Facility

(RCF) remained undrawn for the duration

of the year. Net ﬁnance expense was £8.1m

(FY21: £8.6m). Income tax charge in the

year of £6.4m (FY21: £16.0m) represented

an eective tax rate of 19.5% (FY21: 18.4%).

This increase is due to the impact of

changesin UK tax rates and the introduction

of the Residential Property Developer

Tax (RPDT). Further detail can be found

innote 8.

£250m Revolving Credit Facility

The Group’s previous £250m RCF was due

to expire in June 2024. During the year

we completed a new Sustainability Linked

Revolving Credit Facility on 13 October

2022. This £250m facility provides the

Group with strong levelsof liquidity and

headroom tocomplement the year end

net cash position and 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.

The Group will provide an annual progress

update against these targets in future

issuesof its Annual Integrated Report.

Dividend

The Board proposes to pay a ﬁnal

dividendof 11.5 pence per share for the

ﬁnancial year ended 31 October 2022 which,

subject to shareholder approval, is expected

to be paid on 5 April 2023 to shareholders

on the Register of Members on 17 March

2023. This is in addition to the 5.5 pence

per share interim dividend that was paid

inOctober 2022.

These changes culminated in a request

tohousebuilders to sign the Government’s

Building Safety Pledge which the Group

did on 19 April 2022. As a consequence

of signing the Building Safety Pledge

the Group informed the capital markets

on 5 April 2022 that it considered a

further exceptional charge of £80–120m

represented its best estimate of the

rangeofthese incremental costs.

At FY22 the Group recorded an exceptional

charge of £105.0m (FY21: £20.3m) in respect

of its further obligations upon signing the

Pledge. Tax credit on exceptional items

is £22.4m (FY21: £3.9m). Further detail

oftheseitems can be found in note 4.

In January 2023, the Group received a

£10.0m cash settlement from a third party

relating to buildings included within the

combustible materials provision. As this

was not contracted in the current ﬁnancial

year, it has not been recognised in the

FY22 consolidated ﬁnancial statements.

The receipt will be reﬂected in the FY23

consolidated ﬁnancial statements as an

exceptional credit.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Financial review continued

A strong ﬁnancial position

The Group had net cash of £276.5m at

31 October 2022 (FY21: £252.8m) and was

ungeared (FY21: ungeared). Net cash and

land creditors were £77.8m (FY21: £29.9m).

Average net cash during the period was

£102.0m (FY21: £78.4m).

The Group has made signiﬁcant progress

over the past two years in strengthening

thebalance sheet through improved

workingcapital management and the

disposal ofnon-core assets. In combination

with the renewed RCF this gives the Group

ample liquidity to remain resilient in tougher

trading conditions, fund its combustible

materials obligations and enables it to

fundits growth ambitions.

Inventories at 31 October 2022 were

£990.1m (FY21: £1,037.5m), down 4.8%

year-on-year. Included within this

balance is an NRV provision of £12.6m

(FY21: £20.7m) which principally relates to

the Group’s scheme at Brightwell’s Yard,

Farnham. Completed units at 31 October

2022 were£30.1m (FY21: £57.7m).

Approximately one-sixth (FY21: one-sixth)

of the stock of completed units were

showhomes. Further detail on inventory

canbe found innote 19.

Net cash inﬂow from operating activities

was £51.7m (FY21: £126.5m) and return

on capital employed (ROCE) increased

strongly for the second successive year

to 22.4% (FY21: 17.2%), reﬂecting the

increase in earnings and further progress

on strengthening the balance sheet.

Net assets at 31 October 2022 were

£883.1m(FY21: £901.6m), a decrease

of2.1%on prior year.

Land portfolio

The land market remains highly competitive.

Strong sales rates across all major developers

over the past two years, coupled with lack

of availability of fresh land supply and

delays in approving land in the planning

process, has seen the number of industry

outlets fall. The uncertain market outlook

is discouraging some developers from

completing planned acquisitions. Given this

structural lack of supply, our strong ﬁnancial

position, and the opportunity to participate

when others are temporarily withdrawn,

theGroup intends to remain active in the

land market in FY23. We will be selective

and disciplined in identifying and acquiring

sites. We have increased our hurdle rates

and are focused on low-risk schemes in

high quality locations. FY22 average outlets

were 54 and we expect FY23 average

outlets to be slightly lower, reﬂecting the

backdrop outlined above. 2,771 plots have

been approved in FY22 for purchase at

a gross margin of 25.5% (after sales and

marketing costs).

The Group’s short-term land portfolio

at 31 October 2022 comprised 14,250

(FY21: 14,677) plots, representing

approximately ﬁve years of supply based

approximatelyon FY22 completion volumes

(FY21: ﬁve years supply based on FY21

completion volumes). In addition, the

Group’s strategic land portfolio comprised

22,450 plots (FY21: 22,308), resulting

in atotal land portfolio at 31 October

2022 of36,700 (FY21: 36,985) plots with

a GrossDevelopment Value (GDV) of

£12.1bn(FY21: £11.8bn).

During the year, the Group added 3,094

units to the short-term land portfolio

and delivered 2,734 home completions.

Additions were made in all divisions

including the new Yorkshire division.

The Group also added 415 units to

thestrategic land portfolio.

Duncan Cooper

Group Finance Director

FY22 FY21

Units

GDV

– £m Units

GDV

– £m

Short-term housing , , , ,

Short-term commercial –  – 

Total short term , , , ,

Strategic land , ,   , ,

Total land pipeline ,  , , ,

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 aordable 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.

Crest Nicholson

Annual Integrated Report 2022

Non-ﬁnancial

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.

Reporting

requirement

Description of policies

andstandards

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 help

us pursue activities that protect and

enhance the natural environment.

2 Safety, Health &

Environment (SHE)

9 Laws, policies

and regulations

10 Climate change

— Sustainability 26–43

— Carbon emissions 28–29,

— Waste 39–40

— Responsible procurement 43

— Task Force on Climate-related

Financial Disclosures

30–38

— Risk 34–36,

60–64

Employees — Corporate health and safety policy

— Whistleblowing 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 (SHE)

7 Attracting and

retaining our

skilled people

— Stakeholder relations 22–25,

76–79

— People 44–47

— Risk 60–64

— Board diversity 90–91

— Gender pay gap 47, 120

Human rights — Anti-slavery and human

tracking statement

— Whistleblowing policy

— Supply Chain Code of Conduct.

Our policies set out our commitment

to human rights and the steps taken to

reduce risk.

2 Safety, Health &

Environment (SHE)

3 Access to site labour

and materials

7 Attracting and

retaining our

skilled people

— Stakeholder relations 22–25,

76–79

— Responsible procurement 43

— Anti-slavery and

human tracking

— Whistleblowing 43, 99

Social matters — Sustainability policy

— Supply Chain Code of Conduct.

Our policies set out our commitment

to high social standards and the

requirements for our supply chain.

2 Safety, Health &

Environment (SHE)

4 Customer service

and quality

12 Combustible materials

— Sustainability 26–43

— People 44–47

— Risk 60–64

Anti-bribery

and corruption

— Anti-bribery and corruption policy

— Whistleblowing 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 99

— Whistleblowing 43, 99

Business model

— How we create value

forour stakeholders

22–25,

76–79

Non-ﬁnancial

KPIs

— Key Performance Indicators 50–51

— Sustainability 26–43

— Safety, Health &

Environment (SHE)

48–49

— People 44–47

1 Policies and standards are published on our corporate website: www.crestnicholson.com

Other ways we respond to material non-ﬁnancial matters

Customer Charter

Through our Customer Charter we have made commitments to provide our customers with comprehensive information on their new home

and to deal diligently with enquiries.

We look after personal data that customers provide us with or that we may hold. We never sell this personal data. We have a range of

technical and organisational measures to help ensure this data is used responsibly and to help keep it safe andsecure. We also take steps

to ensure any third party that provides services to us – such as hosting personal data on servers – alsoprotects any data they process on

our behalf.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Principal risks

anduncertainties

Eective risk management underpins the successful

delivery of our strategy and the longer-term

performance of the business. Our risk culture

isembedded in our decision making and central

toourvalues.

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, and 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

eciency and Group 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 eective risk-based

decision making.

Emerging risks

Emerging risks have the potential to

impactour Group 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

Executive Leadership Team including in

relation to industry and macro-economic

trends. This is supported by our divisional

riskreview process.

The Group’s ﬁnancial, operational

andstrategic 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 Executive Leadership

Team. The Board and Audit and Risk

Committee both have oversight of the

Group’s emerging and principal risks and

regularly assess these against the Group’s

risk appetite and its capacity to handle risk.

Risk governance framework

The Board

— Has overall responsibility for strategy, risk management

andinternal control

— Reviews the Group’s emerging and principal 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.

The Audit and Risk Committee

— Responsible for monitoring our risk management

processesand approving relevant disclosures

— Monitoring ﬁnancial reporting and internal and external

audit activities

— Providing assurance to the Board in relation to ﬁnancial,

operational and compliance controls.

The Executive Committee

— Oversees how we are managing the principal, emerging,

andthedivisional risks within the Group’s risk appetite

— Ensures risk management is embedded in the Group

— Monitors divisional performances and development risks.

Divisional board and site management

— Responsible for control and risk management with

thedivisionor function

— Monitors and assesses the divisional and operational risks

— Maintains an eective system of control and risk

managementat a site level, including Safety,

Health & Environment (SHE) and supplychain risks.

Top down

Assessment and

mitigation of risks

at a Group level

Bottom up

Assessment and

mitigation of risk

across divisional

andfunctional areas

Crest Nicholson

Annual Integrated Report 2022

Examples of emerging risks which

wereconsidered during the year are:

Economic outlook

We continue to monitor the developing

uncertainties surrounding the political and

economic outlook, rising interest rates and

mortgage availability. This is against the

backdrop of the rising cost of living and

higher energy prices in the UK, all ofwhich

are reducing disposable income levels which

may signiﬁcantly impact the housing market.

Regulatory change

This risk has continued to evolve during

theyear and impacts us in several ways.

We signed the Government’s Building Safety

Pledge to address life-critical ﬁre safety issues.

Amounts have been provided in the ﬁnancial

statements based on best estimates of the

work required. However, as work progresses

these estimates are clearly subject to

variability and could change as Government

legislation or regulation develops.

Given the signiﬁcance of this area,

the Boardhas agreed this should be

aprincipal risk.

The acquisition of land remains very

competitive and any proposed changes

to the planning and approval process

could impact our ability to deliver our

growth ambitions.

Corporate governance requirements are

evolving following the BEIS consultation

on audit reform and corporate governance.

Some of the detailed requirements

which may impact us are still unknown

and developing.

Build costs

Material shortages and labour availability

have continued to challenge our industry

due to rising input costs, energy prices and

supply chain dislocation through the year.

This has resulted in inﬂationary pressures,

having an impact on build costs.

We have managed to mitigate the impact

of the majority of these risks during the

year through our operational eciency

programme and have maintained close

working relationships with our supply

chain partners through comprehensive

trade agreements.

We are enhancing our build cost controls

and reporting through the introduction of

our new ERP system across the divisions.

Reputational impact

There are many internal and external

factors which could impact our reputation.

Several legacy matters have impacted

theperception of the housebuilding

sector. If matters continue to negatively

impact theindustry’s home buyers and

otherstakeholders there is a potential that

thiscould create a further principal risk.

ESG and climate change

Assessing the impacts and mitigations

of both physical and transitional risks

related to climate change are embedded

in our risk management process at a

Group and divisional level. Climate change

continues to be a principal risk and the

Group has disclosed its response to the

recommendations of the Task Force for

Climate-related Financial Disclosures

onpages 30–38.

Key updates and brieﬁngs on ESG matters,

including regulatory developments and

climate-related risks, are provided on a

regular basis to the Board.

Changes to our principal risks

As part of the Group’s risk review processes,

some risks have evolved or been added

tothe Group’s principal risks:

— Market conditions – increasing trend

— Customer service and quality –

increasing trend

— Build cost management –

increasing trend

— Attracting and retaining our skilled

people – reducing trend

— Solvency and liquidity – reducing trend

— Laws, policies and regulations –

reducing trend

— Land availability and planning – new risk

— Combustible materials – new risk.

The Board no longer views the risk

associated with a pandemic to be a principal

risk although continues to monitor and

manage any localised impacts arising

fromCOVID-19.

Please see further details about

Principal risks overleaf

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.

Overall, the Group has operated within

itsrisk tolerance. Actions are in place

overthe long term to address speciﬁc

riskswhere necessary, reducing the

levelofresidual risk.

Risk heat map

The Board has identiﬁed 12 principal risks that it considers material to the Group’s

performance which have been mapped on a residual risk basis considering likelihood

and impact.

Market conditions

Safety, Health & Environment

Access to site labour and materials

Customer service and quality

Build cost management

Information security and

business continuity

Attracting and retaining our skilled people

Solvency and liquidity

Laws, policies and regulations

Climate change

Land availability and planning

Combustible materials

INCREASING LIKELIHOOD

INCREASING IMPACT

411

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our principal risks

Link to strategic priorities Link to foundations Link to our stakeholders

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

Safety, Health & Environment (SHE)

Sustainability &Social Value

People

Financial Targets

Investors

Customers

Our people

Supply chain

Communities and environment

Government and other bodies

1. Market conditions

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, or higher costs

ofmortgage funding.

Decreased sales volumes occurring

froma drop in housing demand could

see an increasing number of units held

asunreserved stock and partexchange

stock, with a potential loss realised

onﬁnal sales.

Changes to regulations and taxes, for

example Stamp Duty Land Tax (SDLT)

andthe impact of Government schemes

like Help to Buy; Equity Loan (HtB).

An over-reliance on HtB, which is being

withdrawn, and other Government-backed

ownership schemes to boost sales

volumes and rates.

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current levels of demand.

Our Multi Channel Approach gives

usaccess to a range of tenure options

and earnings resilience in changing

market conditions.

We focus on strategic purchasing

ofsites,continued development of

sharedownership models and provision

ofavariety of incentive schemes.

Actively promoting First Homes and

Deposit Unlock asanalternative to HtB.

We continually assess whether our

organisational structures are appropriate

to meet the changing demands within

thehousebuilding sector.

Development in the year

Demand for housing has remained

strong during the year, however

there have been signiﬁcant economic

headwinds and political uncertainty in

the latter part of the year which is likely

to impact demand for housing in the

nearfuture. Rising inﬂation, interest rates

and increasing energy costs are leading

to reduced levels ofdisposable income.

The Board and Executive Leadership

Team continue to monitor market

conditions and are adjusting our

strategyand paceof growth to adapt

toprevailing market conditions.

We continue to build our pipeline

oftrusted partners and completed

several large transactionsin the year.

The Group renewed its £250m

RevolvingCredit Facility to 2026.

When allied to the strong cash proﬁle

exhibited throughout the year, the

Grouphas adequate liquidity to

deal with all reasonable downward

market scenarios.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High

Appetite

Medium

Movement inyear

Increasing

2. Safety, Health & Environment (SHE)

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

oces (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 eect on people aected

byour actions, our reputation and ability

to secure public contracts and/or, if illegal,

prosecution or signiﬁcant ﬁnancial losses.

Actions/mitigations

We have a strong safety leadership

culturewhich is embedded in our

operational processes and execution.

We have eective 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.

Use of external specialist consultants

and/or contractors where speciﬁc health

and safety requirements demand.

We have a network ofmental health

ﬁrst aiders and a dedicated Employee

Assistance Programme.

We have a dedicated central team and

strong governance processes to deliver

on our safety pledge commitments.

SHE performance is a bonus metric

targetused across the Group, including

forExecutive Directors.

Where appropriate, interim risk mitigation

solutions have been deployed in

buildings where ﬁre safety concerns

havebeen identiﬁed.

Developments in the year

Safety performance continues to be our

number one priority and performance

remains stable.

Our standard house type range

is reducing build complexity and

related risks.

We continue to have a rigorous

safety monitoring regime with safety

inspections at divisional levels, including

an independent safety advisory ﬁrm

toassist in monitoring site performance.

Safety performance is always discussed

and challenged in our divisional reviews

and we have enhanced and developed

our SHE policies and procedures.

We have launched new training materials

and communications across our build

teams and continue to provide safety

bulletins and guidance updates.

We have expanded our network of

mental healthﬁrst aiders across our

divisions. We have also launched the

FIKA mental health platform tosupport

employees’ wellbeing.

Delivering on our commitments

contained in the Building Safety Pledge,

the Group has continued to identify

andrisk assess any buildings impacted

bypossible safety issues.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Medium

Appetite

Low

Movement inyear

No change

Crest Nicholson

Annual Integrated Report 2022

3. Access to site labour and materials

Risk description

Rising production levels across the industry

putpressure on our materials supply chain.

The built environment struggles to attract

the next generation of talent into skilled

trade professions.

There is also a potential reduction in

labour availability from the EU market.

Increased use of more modern methods

of construction could result in a labour

market that no longer has the knowledge

and skills required to deliver these types

of construction projects. It isalso possible

that the supply chain struggles to maintain

capacity for new types of materials.

Materials availability can be impacted by

changes in demand, rising energy prices

and dislocation insupply chains due to

external events.

Given the current UK economic climate

and uncertainty there is an enhanced

likelihood of suppliers and subcontractors

facing insolvency.

Actions/mitigations

We encourage longer-term relationships

with our supply chain partners through

Group trading agreements and multi-year

subcontractor framework agreements.

These agreements alsoseek to mitigate

price increases.

We have standardised the supply chain

toensurecritical supply of materials.

We engage in dialogue with major

suppliers to understand critical supply

chain risks and respond eectively.

We have developed eective procurement

schedules to mitigate supply challenges.

We consider dierent construction

methods suchas timber frame or

using alternative materialssuch as

concrete bricks.

Developments in the year

Material shortages and labour

availability challenges continue to

impact the housebuilding industry

across various product ranges and

therehave been continued inﬂationary

pressures in the year. This has been

exacerbated by the energy crisis and

theUkraine conﬂict which has impacted

some supply chains.

We continue to work with our supply

chain partners through detailed demand

planning tomaximise our use of trade

agreements and supply of available

labour on key timelines.

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.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Medium

Appetite

Medium/Low

Movement inyear

No change

4. Customer service and quality

Risk description

Customer service and build quality

falls below our required standards,

resulting ina reduction of reputation

and trust, which could impact sales

ratesand volumes.

Unforeseen product safety, quality issues

or latentdefects emerge due to new

construction methods.

Failure to eectively implement new

regulations on build quality 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.

We have enhanced our quality and

buildstage inspections to monitor

adherence toour quality standards.

We have a standardised house type

range that reduces complexity and

drivesimprovements in quality.

Customer satisfaction and quality

performance is a bonus metric target

used across the Group, including

forExecutive Directors.

Developments in the year

We have continued to enhance

our quality processes, training and

performance measurement during

the year and have recruitedadditional

resources to support thedriveto

quality improvement.

We have developed processes to

support new regulatory requirements

forthe New Homes QualityCode

andthe Future Homes Standard.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High

Appetite

Low

Movement inyear

Increasing

5. Build cost management

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 prices and

volumes, and impact our reputation.

Actions/mitigations

We benchmark our costs against

existing sites toensure our rates

remaincompetitive. We build and

maintain strong relationships with

oursuppliers and seek to obtain

volumepurchasing beneﬁts.

We operate a fair and competitive

tender processand we are committed

to paying our suppliers and

subcontractors promptly.

There are rigorous and regular

divisionalbuild costreview processes

andsite-based quality reviews.

We continue to monitor alternative

sources of supply where possible

andutilise alternative production

methodsormaterials where it is

appropriate todo so.

Developments in the year

We have continued to see

inﬂationary pressures during the

year on build costsdue to higher

energy prices, supply shortages

and geopolitical impacts due to the

war in Ukraine. We have mitigated

some of these impacts through our

operational eciency programme.

Build costinﬂation has been oset

byincreases inselling prices.

The implementation of COINS as

our new ERP platform has enhanced

the reporting of build costsfor the

divisions implemented in FY22, and

we will continue this roll out across

theGroupin FY23.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High

Appetite

Medium/Low

Movement inyear

Increasing

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Link to strategic priorities Link to foundations Link to our stakeholders

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

Safety, Health & Environment (SHE)

Sustainability &Social Value

People

Financial Targets

Investors

Customers

Our people

Supply chain

Communities and environment

Government and other bodies

6. Information security and business continuity

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

compromises compliance with data

privacy requirements.

This could result in a higher risk offraud,

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

— IT disaster recovery and business

continuity plans

— IT Cyber Security and Data Sub-Board

Committee, chaired by the Group

Finance Director, that meets through

the year to address cyber security

matters, assess threat levels and

to develop appropriate policies

and procedures.

Developments in the year

The threat of external cyber security

risk is ever present and remains high.

We routinely experience phishing

attempts on our IT systems.

We continue to utilise a Security

Operations Centre (SOC) to monitor

our networks and have enhanced

oursecurity policies and procedures

with further training for employees.

We regularly perform phishing training

and mock exercises to highlight the

risksacross the Group.

We have passed Cyber Essentials

certiﬁcation and moving forward with

Cyber Essentials Plus certiﬁcation.

We have performed audits over our

cyber risks and control environment.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Medium

Appetite

Low

Movement inyear

No change

7. Attracting and retaining ourskilled people

Risk description

An increasing skills gap in the industry

at all levels resulting in diculty with

recruiting a qualiﬁed 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 ineciencies,

productivity loss, delays to business

operations, increasing costs, and an

overuse or reliance on consultants

andthesupply chain.

Actions/mitigations

Employee engagement surveys

toenabletheBoard and Executive

Leadership Team 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 business.

Providing quality training and professional

development opportunities through our

Crest Nicholson Academy programmes.

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.

Developments in the year

We are committed to providing

competitive salary packages, reﬂecting

market rates and oer a wide range

ofcareer development opportunities.

During the year we launched a new

people strategy and employee induction

programme and have made further

improvements to our learning and

development training across the Group.

We engage with our employees through

a variety of communications, forums

and surveys. Our engagement scores

increased year-on-year.

We became Silver Accredited

through The 5% Club in respect to

our recruitment and development

of trainees.

We continue to develop our diversity

and inclusion policies and initiatives

andhave launched our Anity Groups.

We have started a programme to

implement a new enterprise-wide

talentmanagement, recruitment,

HRandpayroll system next year.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High/Medium

Appetite

Medium

Movement inyear

Reducing

Our principal risks continued

Crest Nicholson

Annual Integrated Report 2022

8. Solvency and liquidity

Risk description

Cash generation for the Group is a

key part ofour strategy, and our cash

headroom could be aected 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.

Fall in sales during economic slowdown

and lack of available debt ﬁnance.

Reductions in margins as average

selling prices fall, inability to restructure

appropriately and unsustainable levels

ofwork-in-progress.

To reﬂect the cyclical nature of

housebuilding and following the GFC,

equity investors in housebuilders now

expect a lower risk investment proposition

by way of a more capitalised and robust

balance sheet.

Actions/mitigations

Cash generation is a key focus

fortheExecutive Leadership Team.

Cash performance is measured against

forecast with a variance analysis

issued weeklyby the Group Treasurer.

Cash performance is also considered

atdivisional board level.

We scrutinise the cash terms of land

transactions. Private Rented Sector

(PRS)andbulk sales also oer us the

potential forearly cash inﬂow.

The Group has available the use of a

£250m Revolving Credit Facility (RCF)

which was unused throughout FY22.

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

appraisal beforebeing drawn down.

Cash management is a bonus metric

targetused across the Group, including

forExecutive Directors.

Developments in the year

The Group continues to beneﬁt from

a strong balance sheet with diverse

sources of funding. The Group

operatedwith net cash throughout

the year and signed a new £250m

Sustainability Linked RCF which

expiresin October 2026.

We continue 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 capital allocation

throughout the year.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Low

Appetite

Low

Movement inyear

No change

9. Laws, policies andregulations

Risk description

This risk has continued to evolve during

the year with developing regulations and

progressing combustible materials works.

Future regulatory changes could impact

ourabilityto make medium and longer-

term decisions.

Failure to eectively implement new

regulations including the Future

Homes Standard and the Environment

Act2021, New Homes Quality Code,

theBuilding Safety Act 2022 and the

BEIS consultation on audit reform and

corporate governance.

Actions/mitigations

We engage with the Government

directly andthrough the HBF, via 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. Plans for

therequirements arising from

the Future Homes Standard and

the New Homes Quality Code

havesigniﬁcantly advanced.

We are developing our operating

framework to support developing

requirements from the BEIS

consultation on auditreform and

corporate governance.

We undertake close consultation

withthe Government, through the

HBFon evolving and developing

regulation.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High

Appetite

Medium

Movement inyear

Reducing

10. Climate change

Risk description

The Group will need to enhance its

sustainable practices and processes

as we transition to a carbon ‘net zero’

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 relate to the shift

to a low carbon economy and include

current and emerging regulations,

technological change and shifts in

stakeholder preferences.

Physical risks are direct impacts from

a changing climate, including rising

temperatures, changing weather

patternsincreasing risk of droughts

andﬂooding andmore frequent

andsevere weather events.

Failure to manage climate-related

riskscould leadto additional costs,

build programme delaysand damage

toour reputation.

Actions/mitigations

Our Sustainability Committee, chaired

by our ChiefExecutive, oversees

our sustainability strategy, including

our approach to climate change.

The Committee monitors performance

against our climate targets and

keeps abreast ofclimate-related

risksand opportunities.

We plan to transition to exclusive

useofrenewableelectricity by 2025.

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.

GHG emission reduction targets is

abonus metric used across the Group.

OurExecutive Directors have GHG

emission reduction targets within

theirLong-Term Incentive Plan.

Development in the year

We continue to collaborate with our

supplychainand consultants to ﬁnd

eective solutions tocomply with

theFuture Homes Standard.

We are committed to reducing our

GHG emissions and in FY22 developed

newscience-based targets. Our targets

include near-term scope 1, 2 and 3

emissions and a long-term ambition to

reach net zero GHG emissions across

ourvalue chain by 2045. The targets

havebeen approved by the Science

BasedTargets initiative.

We agreed a new £250m Sustainability

Linked RCF, which incorporates targets

toreduce GHG emissions associated

withour operations and the use of

our homes.

We established a climate risk working

group toreview our climate-related

risks and opportunities. External

consultants facilitated a review of

risks and opportunities under a range

of climate scenarios. Our divisions

have nowincorporated aclimate risk

assessmentwithin their risk register.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Medium

Appetite

Medium

Movement inyear

No change

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our principal risks continued

Link to strategic priorities Link to foundations Link to our stakeholders

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

Safety, Health & Environment (SHE)

Sustainability &Social Value

People

Financial Targets

Investors

Customers

Our people

Supply chain

Communities and environment

Government and other bodies

11. Land availability andplanning

Risk description

There is a risk that we may not be able

to source enough suitable strategic and

consented land at the right economic

terms to support our growth ambitions.

There are further risks that acquired

land is delayed in the planning process

where local authorities and public

sectorresources are constrained.

The regulatory planning and

environmental landscape continues

toevolve. There are further

environmental requirements such

asnutrients and waterneutrality and

increasing biodiversity obligations.

This increases the challenge of providing

quality and aordable homes in the

locations required.

Actions/mitigations

We have strategic and local market

expertise within our Land teams to ensure

we acquire sites in the best locations

and that allow us todemonstrate our

placemaking credentials.

We have formal relationships with key

landsuppliers, landowners and agents

and local authorities.

Land acquisitions are subject to formal

appraisal and viability assessment

through our approval process prior

tobidsubmission and exchange

of contracts.

The planning status of all our sites are

formally reviewed at our divisional

boardson a monthly basis.

We undertake close consultation with

theGovernment on planning reform.

Developments in the year

Our strategy continues to focus on

acquiring new sites and developing

long-term strategic land options.

Our investment decisions consider the

economic outlook and uncertainties

as well as the complexities in the

planning process.

The planning process continues

to behighly complex and time

consuming with ongoing demands

relating to aordable 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.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

High

Appetite

Medium

Movement inyear

Reducing

12. Combustible materials

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

dicult to identify and implement remedies

quickly. The rapidly changing landscape of

regulatory guidance and 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

dicult 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

We have a dedicated specialist team in

place with robust 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.

The forum reviews 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.

Developments in the year

The Group has continued to review

the risk register of legacy buildings in

scope, assessing the latest guidelines

against each aected building, advice

from technical or legal advisors along

with relevant notiﬁcations from a variety

of stakeholders. 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 Group has maintained an active

dialogue with DLUHC, coordinated

bythe HBF, to ensure the principles

of the Building Safety Pledge are

transferred into a long-form agreement,

and represent the contractual basis

forthe Group’s obligations in this area.

Link to strategic priority

Link to foundation

Link to our stakeholders

Residual

Medium

Appetite

Low

Movement inyear

New risk

Crest Nicholson

Annual Integrated Report 2022

Viability

statement

The following statement is made in

accordance with the UK Corporate

Governance Code. Despite the ongoing

uncertainty arising from the current

geopolitical and economic instability,

theBoard has concluded 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.

The Group also beneﬁts from a strong

forward order book of sales which provides

conﬁdence in near-term revenue delivery.

These inputs allow the Group to maintain

a rolling three-year forecast for the income

statement, balance sheet 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 deteriorating economic

backdrop throughout FY22, characterised

by high inﬂation, rising interest rates and

reduced levels of disposable income,

the Directors have already started to

downgrade their expectations for FY23

trading. Accordingly, lower volumes 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, to replace the previous

facility for the same amount. 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.

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

60–64, 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 recession forecast for the UK

economy in 2023, and beyond. If inﬂation

cannot be tempered byrising interest rates

then conﬁdence in the housing market will

continue to weaken. Mortgage lending

will become tighter and more expensive,

compounding the aordability 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 unaordable 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. The rapid reopening of

supply chains following COVID-19 and the

impact of the war in Ukraine, both in the

availability of raw materials it produces and

the indirect eect of rising energy prices

which impacts production of raw materials

globally, have contributed to this increase.

Although there are signs at the end of FY22

that these eects are starting to abate, it

is possible that high levels of build cost

inﬂation are more enduring 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 eectof all available

mitigations to achieve this.

Finally, the Directors have then also

exaggerated each of the three stress

tests referred to above to ﬁnd the point

at which any of these stress tests would

cause a covenant failure. More details

of the assumptions used to model these

stress tests, and their calculated impacts,

are set out in note 1 totheconsolidated

ﬁnancial statements.

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 2025.

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.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Financial

Statements

Governance and

Directors’ Report

Strong

governance

for a better

future

In this section

We are committed to building better

futures for our stakeholders through

eective leadership and oversight

andastrong governance framework.

67 Governance overview

68 Board leadership

and company purpose

82 Division of responsibilities

86 Composition, succession

and evaluation

92 Audit, risk and internal control

100 Remuneration

123 Directors’ Report

Crest Nicholson

Annual Integrated Report 2022

Board leadership

andcompanypurpose

Outlines the leadership of Crest Nicholson,

the main Boardactivities and how the

Board has considered its responsibilities

toits stakeholders.

For more information:

Chairman’s introduction –

pages 68–69

Board of Directors – pages 70–71

The Executive Leadership team –

page 72

Purpose, values and culture –

pages 73–75

Our stakeholders – page 76

Shareholder and stakeholder

engagement – page 77

Employee engagement – pages 78–79

Board activity – pages 80–81

Division of responsibilities

Overview of the governance framework of

theGroup, composition of the Board, roles

of each Director, Board balance, delegation

and Non-Executive Director independence.

For more information:

Board composition – page 82

Board site visits – page 83

Governance framework –

pages 84–85

Composition, succession

andevaluation

Overview of the Board’s evaluation process

andoutcomes and thereport of the work

oftheNomination Committee for the year.

For more information:

Board evaluation – pages 86–87

Nomination Committee Report –

pages 88–91

Audit, risk and

internal control

Describes the role of the Board and

Audit and Risk Committee in ensuring

the integrity of the ﬁnancial statements,

how they monitor the eectiveness of

theGroup’s internal controls, andthe

assessment oftheexternal auditor.

For more information:

Audit and Risk Committee Report –

pages 92–99

Remuneration

Provides detail of the proposed

Remuneration Policy whichwillbe subject

toshareholder approval at the 2023

AGM, an overview of the remuneration

arrangements fortheDirectors, the

workforce, and pay during the year.

For more information:

Letter from the Remuneration

Committee Chair – pages 100–102

Alignment with strategy – page 102

Remuneration at a glance –

page 103

Directors’ Remuneration Policy –

pages 104–110

Annual Report on Remuneration –

pages 111–122

Governance overview

Governance and

Directors’ Report

Financial

Statements

Strategic

Report

Crest Nicholson

Annual Integrated Report 2022

Board leadership and

company purpose

Chairman’s

introduction

The Board takes seriously its responsibility

for the long-term sustainable success

oftheCompany, generating value for

ourshareholders and contributing more

widelytosociety.

As Chairman of Crest Nicholson, I am

pleased to present this Governance

Report for FY22. The report sets out

the Board’s approach to governance

and our ways of working. It also

highlights our key areas of focus

during the year, the signiﬁcant

achievements made and the key

challenges we faced.”

Iain Ferguson CBE

Chairman

Further detail on the work of the

Nomination Committee can be

found on pages 88–91

Further detail on the work of the

Audit and Risk Committee can also

be found on pages 92–99

Further detail on the work of the

Remuneration Committee can be

found on pages 100–122

Our statement of compliance

withtheCode can be found

on page 69

As restrictions eased in respect of COVID-19,

our Board and Committee meetings have

returned to being in person. I know the

Board have appreciated the return of

meeting face-to-face to engage with each

other and the Executive Leadership Team

(ELT). During the uncertainties of COVID-19

weestablished monthly Board calls to

receive updates from Peter Truscott and

the ELT. Given the current political and

economic uncertainty we have chosen

to retain these virtual Board updates in

our calendar. The Board’s ﬂexibility and

engagement has enabled us to maintain

strong governance and make robust

decisions so that we have been able to

respond to challenges as they arise and

provide appropriate support to the ELT.

Board leadership and eectiveness

This year we held an internal Board

evaluation review which I led. I ﬁnd these

evaluations valuable as they reveal what

isworking well and where we can improve

our eectiveness as a Board. This year’s

review concluded that the Board and its

Committees continue to operate eectively.

Full details of the process and the outcomes

are set out on pages 86 and 87.

All Directors will stand for re-election at

theforthcoming Annual General Meeting

(AGM).

Crest Nicholson

Annual Integrated Report 2022

Audit and Risk Committee activity

With David Arnold having chaired the Audit

and Risk Committee for a year, Committee

operation, debate and meeting format

has continued to develop and this has

been welcomed by Committee members.

Last year we reported that we had appointed

an experienced Head of Internal Audit.

During the year we recruited further

resources in this area as we moved away

from a wholly outsourced model, provided

by Deloitte LLP. This change has worked

well and we continue to retain Deloitte’s

capabilities for specialist items of focus in

the agreed Internal Audit Plan. Further detail

on thework of the Audit and Risk Committee

can also be found on pages 92–99.

Remuneration Committee activity

Following shareholder and employee

engagement and in line with the three-yearly

cycle, the Group’s Remuneration Policy will

be put forward for shareholder consideration

at the 2023 AGM. The full Policy is found

in the Directors’ Remuneration Report on

pages 104–110.

Annual General Meeting

Our AGM will be held on 23 March 2023.

We realise that attending the AGM is

notpractical for many of our shareholders

sofollowing positive feedback we will

continue to provide a facility to enable

shareholders to ask questions in advance,

which will beanswered via our website.

Iain Ferguson CBE

Chairman

Stakeholder engagement

We recognise that constructive

stakeholder relations are critical for

delivering our strategy and long-term

success. We also have a responsibility

to make a positive contribution to wider

society that extends beyond delivering

ﬁnancial returns to shareholders. We

carefully consider our responsibilities

andduties to stakeholders under section

172of the Companies Act 2006 and further

detail can be found on pages 22–25.

Our continued focus on operating

sustainably has seen us commit to new

science-based targets aimed at reducing

the Group’s carbon footprint. Some of these

targets have also been incorporated into

ournew Sustainability Linked Revolving

Credit Facility which was completed

in October 2022. Delivering more

sustainable operations is now not only

beneﬁcial to those stakeholders who

are directly impacted but also provides

the Group withalower cost of ﬁnancing.

Further information on these topics is

setoutonpages 26–43.

Louise Hardy, our Non-Executive Director

responsible for employee engagement,

has continued to work closely with Jane

Cookson, our Group HR Director, to continue

to develop the Board’s understanding of the

key issues aecting our people and their

welfare at work. Further detail on what

wehave discussed and what actions we

aretaking inthis area can be found on

pages 78–79.

Nomination Committee activity

The Nomination Committee has focused

on strengthening the succession planning

process to ensure that we have the right

balance of skills and experience to lead

theGroup in the future.

In May 2022 the Board and Tom Nicholson

agreed that it was the appropriate time

for Tom to leave the Group. Following his

departure the Committee agreed to appoint

two of our existing Managing Directors,

David Brown and Alex Stark, to the ELT as

Executive Managing Directors, with eect

from 1 November 2022.

In FY23 we will be continuing to focus on

developing our diversity and inclusion

initiatives as we work in partnership with

our people toenable them to reach their

full potential. Further detail on the work

ofthe Nomination Committee can be

foundon pages 88–91.

Compliance with the UK

Corporate Governance Code

The Group complied in full with the

UKCorporate Governance Code 2018

(Code) for the ﬁnancial year ended

31 October 2022, other than provision

38 in respect of Chief Executive,

Peter Truscott’s pension contribution

whichiscurrently 10% of salary.

Peter’s pension provision was reduced

to 6% of salary on 31 December 2022.

At the time of the application of the

newCode, the Company had already

signed a contract with Peter that

entitled him to a pension equal to 10%

of his annual salary. This is higher than

the workforce average, which is 6% of

salary. Therefore, since the introduction

of Provision 38, the Group has been

non-compliant with that provision

fortheabove reason.

However, despite the contractual

obligations, theRemuneration

Committee agreed with Peter to reduce

his pension provision to 6% of salary on

31 December 2022 and his pension

will be aligned with employees by

1 January 2023.

This report, together with the reports

fromthe Nomination Committee,

Auditand Risk Committee and

Remuneration Committee provides

detailof how the Group has applied

theprinciples of the Code.

The Code is publicly

available at

www.frc.org.uk

If there are any changes to the

AGM arrangements these will be

communicated to shareholders through

our website and, where appropriate,

by regulatory announcement.

www.crestnicholson.com/investors/

shareholder-centre

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Board of

Directors

The Board is focused onembedding

the Group’s purposeand values through

leadingbyexample.

From left to right

Duncan Cooper (Group Finance Director)

Louise Hardy (Non-Executive Director)

Iain Ferguson CBE (Chairman)

Lucinda Bell (Non-Executive Director)

Peter Truscott (Chief Executive)

Octavia Morley (Senior Independent Director)

Kevin Maguire (General Counsel and

Company Secretary)

David Arnold (Non-Executive Director)

Crest Nicholson

Annual Integrated Report 2022

Iain Ferguson CBE

Chairman

Appointed September 2019

Age 67

Experience: Iain was Chief Executive Ocer

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 Aairs (DEFRA),

Chair of Wilton Park (Agency of the Foreign

and Commonwealth Oce) 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, Genus

plc and Chairman at externally managed

investment trust Personal Assets Trust plc,

ProChancellor, Cranﬁeld University,

Non-Executive Director, Copenhagen

Topco Ltd

Octavia Morley

Senior Independent Director

Appointed May 2017

Age 54

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 the Card

Factory plc andMarston’s plc and

Non-Executive Director Ascensos Ltd

Peter Truscott

Chief Executive

Appointed September 2019

Age 60

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, Anchor Housing Group

David Arnold

Non-Executive Director

Appointed September 2021

Age 57

Experience: David is Chief Financial Ocer

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

Ocerof Grafton Group plc

Louise Hardy

Non-Executive Director

Appointed January 2018

Age 56

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’s

engineering expertise across large and

complex projects has been particularly

insightful in the standardisation of technical

processes across the Group. 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

Duncan Cooper

Group Finance Director

Appointed June 2019

Age 43

Experience: Duncan has a breadth of ﬁnancial

experience from across a range of industries.

He formerly worked at J. Sainsbury plc where

he held multiple roles since 2010, culminating

in Director of Group Finance. Prior to that he

held ﬁnance roles at Sky plc, GlaxoSmithKline

plc and Deloitte LLP. Duncan is a chartered

accountant.

What Duncan brings to the Board: Duncan

provides ﬁnancial reporting and investor

engagement experience which prove

valuable to the Board and the Group when

communicating strategy and ﬁnancial targets.

External appointments: None

Lucinda Bell

Non-Executive Director

Appointed May 2018

Age 58

Experience: Lucinda was Chief Financial

Ocer at The British Land Company plc,

oneof Europe’s largest real estate investment

trusts, from May 2011 to January 2018. She

has held a range of ﬁnance roles in the real

estate industry. At British Land, Lucinda played

aleading role in its sustainability initiatives.

Lucinda currently chairs the Audit and Risk

Committee at Man Group plc and Audit

Committee at Derwent London plc. She is

achartered accountant.

What Lucinda brings to the Board: Lucinda’s

background in capital markets, investor

engagement, tax and the ﬁnancing of

corporate transactions provides valuable

insight to the Group.

External appointments: Non-Executive

Director of Derwent London plc and

ManGroup plc

Departures during the year

Tom Nicholson

Chief Operating Ocer

Tom stepped down from the Board on

27 May2022. A period of handover took place

until 31 August 2022, and his nine-month

notice period is being conducted as garden

leave until 26 February 2023.

Key to Committee membership

Audit and Risk Committee

Nomination Committee

Remuneration Committee

Executive Committee

Chair of Committee

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

The Executive

Leadership Team

Peter Truscott

Chief Executive

See biography on page 71

Duncan Cooper

Group Finance Director

See biography on page 71

David Brown

Executive Managing Director –

South and Yorkshire

Joined ELT November 2022

Age 43

Experience: David joined Crest Nicholson

in January 2020 and has been Managing

Director, Chiltern since July 2020.

In November 2022 David was promoted to

Executive Managing Director, transferring

his responsibilities to lead the South division

while also overseeing the launch of the new

Yorkshire division. David has over 20 years’

experience in the housebuilding industry and

held operational leadership roles including

Land & Planning Director, Technical Director

and Managing Director at Taylor Wimpey plc

and Berkeley Group Holdings plc prior to

joining Crest Nicholson.

Jane Cookson

Group HR Director

Joined ELT January 2021

Age 50

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 20 years.

She has also worked in HR functions

acrossarange ofother industries.

Kieran Daya

Executive Managing Director – Partnerships

and Strategic Land and South West

Joined ELT January 2021

Age 41

Experience: Kieran leads our Partnerships

and Strategic Land (PSL) division aswell as

providing oversight to our South West division.

Kieran is a qualiﬁed solicitor who has worked

with some of the country’s largest developers

and has a passion for the built environment.

Kieran joined Crest Nicholson in January 2020

to set up the PSL division to develop further

the multi channel and multi tenure capability

which provide additional sales channels.

Kieran has experience in signiﬁcant land

acquisitions, having taken a lead on some of

the larger transactions in the housebuilding

industry within recent years.

Kevin Maguire

General Counsel and Company Secretary

Joined ELT January 2009

Age 38

Experience: Kevin joined the Group in

March 2008 and became Group Company

Secretary in January 2009. Since joining Crest

Nicholson, he has been involved in a range of

signiﬁcant corporate transactions including

the initial public oering of the Group. With a

legal background Kevin has a comprehensive

understanding of the legal, compliance,

governance and risk considerations relevant

to the Group, and the regulatory environment

in which it operates. His responsibilities

include providing Board support and advice

on corporate governance and UK listing

obligations. Kevin is a fellow of the Chartered

Governance Institute and previously held

rolesin retail, pensions and technology.

David Marchant

Group Operations Director

Joined ELT March 2019

Age 58

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.

Alex Stark

Executive Managing Director –

Eastern and East Anglia

Joined ELT November 2022

Age 39

Experience: Alex joined Crest Nicholson as

Managing Director, Eastern in January 2020.

He was promoted to Executive Managing

Director in November 2022, remaining

responsible for the Eastern division while

also overseeing the launch of the new East

Anglia division. Alex has worked for some

of the largest UK developers including as

Managing Director at Redrow plc and Sales

Director at Barratt Developments plc, and

holds over 15 years’ extensive experience in

the industry. Alex has an in-depth knowledge

of sales, selling across a range of channels,

including registered providers and the

privaterented sector.

From left to right

Duncan Cooper

David Marchant

David Brown

Jane Cookson

Kieran Daya

Peter Truscott

Kevin Maguire

Alex Stark

Crest Nicholson

Annual Integrated Report 2022

Purpose, values

and culture

We strive to improve the quality of life for individuals

andcommunities by building attractive homes in

desirable surroundings. Our focus on placemaking

ensures wecreate sustainable communities

wherepeople andnature can thrive.

How the Board monitors 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 aected 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

andonnew or ongoing investigations

and their outcomes

— Employee engagement survey:

Anannual engagement survey is

conducted to assess how the Group

is meeting the expectations of its

employees. It includes several questions

that monitor and assess how colleagues

are feeling about our culture. The

results of the survey are reviewed by

theELT and divisional boards with

ﬁndings reported to the Board

— Non-Executive Director responsible

for employee engagement:

TheBoardcontinues to create

opportunities for the Non-Executive

Directors to meet employees.

Louise Hardy, the Non-Executive

Directorresponsible for employee

engagement, attends Employee

Voiceand other forums to engage

withemployees and regularly shares

employees’ views throughout

Board meetings

More details can befound

onpages 78–79

— Employee policies: The Board and

its Committees review key employee

policies to ensure they appropriately

capture and reﬂect theGroup’s

valuesand culture

— Employee retention: An employee-led

recruitment market continues todrive

high levels of voluntary employee

turnover. The Board regularly discusses

strategies toreduce employee turnover

— Customer satisfaction: This is

assessed using customer care survey

responses. Recommendation scores

are regularlyreported to the Board

and discussed

— Supplier activity: The Board reviews how

to support and manage subcontractor

and supplychain shortages and the

Group’spayment practices

— Business conduct: Reviewing business

conduct including employee training,

whistleblowing, SHE incidents and

InternalAudit reviews to identify and

address anyimprovement areas.

Our purpose

Building great places for ourcustomers,communities andtheenvironment

The culture of Crest Nicholson is the

outputof the Group’s purpose, behaviours

and values. The Board sets the Group’s

purpose and values and leads by example

in creating an honest and open culture.

This honest and open culture sets the

tone for good governance. High employee

turnover andchanges within the ELT and

senior management has made maintaining

aunifying culture challenging.

One of the key focuses for theBoard

andELT in FY23 is to embed further

theGroup’s purpose and values to help

createa great culture where employees

feel empowered to make good decisions

that support the Group’s long-term

successandstakeholders.

Further detail of these initiatives

canbe found in the People section

onpages 44–47

Our values

The Board is focused on embedding theGroup’s purpose and values throughleading

by example. This is also shown by actions taken within the Boardroom, as follows:

The Non-Executive Directors bring to the Board their

own personal knowledge and experience and support

the Executive Directors in ﬁnding solutions to support

thedelivery of the Group’s strategy.

Working

together

Focus in Board meetings and in particular the Group

strategy day is spent on how the Group is performing

considering not only ﬁnancial returns but the impact

ontheGroup’s stakeholders.

Being the

best we

canbe

With economic and market uncertainty, the Board sometimes

needs tomake decisions at pace. The Chairman facilitates

an open dialogue where all members of the Boardhave

theopportunity to contribute throughout meetings, ad hoc

calls and one-to-one dialogue.

Doing the

right thing

The Board sponsors a number of initiatives to support the

development of the Group’s employees including the

CrestAcademy. Employees presenting at Boardmeetings

always receive a warm welcome and aregiven time to

askand respond to questions.

Championing

our people

The Board considers ﬁnancial and non-ﬁnancial KPIs

toassessperformance, celebrating successes while

expecting high quality resultsso that the Group is

able to deliver itspromises togenerate long-term

sustainable performance.

Leaving

a positive

legacy

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Purpose, values

and culture continued

A conversation

between Adefehintola

Ajibola (known as FT),

Technical Trainee

andPeterTruscott,

ChiefExecutive

One of our trainees, FT spent

timewith Peter to learn more

aboutthe culture oftheGroup.

What do you gain from

engaging with employees

outside of scheduled

meetings?

When you are speaking to employees

outside of scheduled meetings, you are able

to speak with them more openly. While we

encourage open dialogue, some people

are often afraid to ask an awkward question

or to ask something they think is dierent,

unusual, controversial or risky. In a one-to-

one conversation you can talk around the

question and understand the ﬁner detail.

People are prepared to be a little more

challenging when engaging with me directly.

I really welcome employees being prepared

to stand up and constructively challenge

ona topic they believe in, in either a group

orprivate situation.

What qualities do you

thinkare most important

forfuture leaders?

There are two important qualities I think

arecritical for future leaders.

The ﬁrst one is making eective decisions.

There is always a risk you may be wrong

and, truthfully, you will be wrong sometimes,

but it’s about making intelligent decisions.

It’s thinking about what is actually the

problem and coming to a wellthought-out,

decision.

The second important quality is around

people choices. It doesn’t matter what

industry you’re in, we are only as good as

the people we employ. Sometimes people

choose weaker people as they think

they will be easier to inﬂuence or won’t

make them look bad and you couldn’t be

more wrong. Whatever job you have, if

you’ve got great people surrounding you,

youwillall succeed.

How do you identify

futureleaders?

Again, two to focus upon, one is about

performance, judging our future leaders

onoutput and their achievements.

Some people are worried that because

they are not brilliant presenters they

won’t succeed, but it’s their output that

willbe measured.

The second is around personal

characteristics, people have got to have

theability to lead and inspire others.

You have to step away from the mentality,

“I can do it better, I’ll just do it myself”.

Future leaders have the ability to deliver

results and inspire those around them.

Do you think this is something

that comes naturally to

individuals, orsomething

thatrequirestraining?

It’s both. While you need the drive and

ambition alongside training to succeed,

you also need the ability to self-reﬂect

and review.

Ihave made the mistake myself in the

pastofthinking ”I can do it better” but it

means people in your team do not mature

anddo not make their own mistakes;

youhave toletthem ﬁgure it out.

What key areas would

youwork on as a mentor

tosomeone aspiring to be

inyour position someday

asaChief Executive?

From personal experience, don’t set your

goaltoo high and just take one step at

atime. Focus on being really good in

your current role before thinking about

the next. If you start with “I want to be

theCEO”, itmight happen but that’s

not where it should start from. If you

aim toohigh, youwill miss all the really

importantintermediate steps.

If I wanted to take the

nextstep in my job, how

would I go about this?

The good thing for employees in our

industry looking to progress is that there

is a talent pool shortage so there are

lotsof opportunities.

What you need to be saying to yourline

manager is “if that role was to become

available, what would stop you giving

ittome?” Review the gap analysis and

focuson it. Sometimes you think you’re

notready for a promotion, but you’ll

neverknow if you’re good at a job until

youdo it. If you’re looking to progress,

thereare always opportunities.

Crest Nicholson

Annual Integrated Report 2022

What do you think the

housebuilding industry will

look like in ﬁve years’ time

and what do we need to

dotomeet the challenge?

It’s going to be subtly dierent. Broadly

speaking, change doesn’t happen as fast in

housebuilding as people may think itdoes.

I think overthe next ﬁve years, homes will

look slightly dierent but the core processes

willbe broadly the same as they are now.

The other thing is, I expect the sector to

be more consolidated. Ithink there will be

more large housebuilders as the barriers

to entry are so high, which is why growth

isimportant for us.

There are some worrying

headlines in news about

theeconomy. How doyou

think this will aect me

andmy team-mates over

thecoming year?

If you look at it over the medium to longer

term, there is a massive shortage of housing

in the UK. Housebuilding has always been

a cyclical business with highs and lows.

We may have a bumpy ride over the next

six to 12 months but we have built our cash

position signiﬁcantly in the last few years

so that we are in the strongest ﬁnancial

position we could possibly be in going

intoany downturn.

What advice would you

giveto new joiners like me?

The same advice I had when I joined the

housebuilding industry, it is a great industry

where something happens! This is where we

produce something that will be around for

100 to200years, and without us, it wouldn’t

happen. My advice is to enjoy coming to

work, accept that it’s going to be frustrating

at times, things don’t always go according

to plan – but if itwas easy, they wouldn’t

need us!

Questions from PeterTruscott ChiefExecutive

to FT, Technical Trainee

What do you ﬁnd most

rewarding about your

roleatCrest Nicholson?

Coming here I had a set of goals and

targets, after studying Architecture at

university. My line manager supports me

and gives me the freedom to succeed.

If I didn’t have as much accountability

as I have now it would have slowed me

down, I wouldn’t hit my targets and it

would be less enjoyable for me. I speak

to my line manager about what I want to

learn, and I liaise with other departments

to get exposure. I have started to really

understand how the whole business

works and the trainee rotations have

helped with this. I am always willing

tosetmyself the next challenge.

What do you think we do

wellat Crest Nicholson?

Crest Nicholson provides high quality

training programmes, which is supported

with fantastic rotations. I really enjoy

the employee roadshows that the ELT

do across the Group, the presentations

really help my understanding of the

widerbusiness andour goals.

What could we be

doingbetter?

I’d like to see some further training

programmes that are more geared

towardscommunication and

peopleskills. I think this would

alleviatestress, particularly

aroundyear end.

Although you have started

inTechnical, what other

parts of the business

interest you?

Deﬁnitely Land, I like the aspect

ofgoingout and securing deals.

Another one would be Build.

Ireallylikebeing out and about

andinteractingwith new people.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Two decisions made by the Board in the year and impact on stakeholders

Our stakeholders

£250m Revolving Credit Facility (RCF) Building Safety Pledge

With the Group’s existing £250m RCF due to expire in June 2024,

carefulconsideration was given by the Board to its capital requirements

andfuture ﬁnancing arrangements.

Reﬂective of this, the Board negotiated and agreed a new £250m

Sustainability Linked RCF in October 2022.

This renewed the previous facility of the same size. The facility not only

provides the Group with appropriate ﬂexible ﬁnancing, it is also linked

tosupporting our stakeholders and the Group’s sustainability strategy

witha lower interest paid if certain targets are achieved, being:

— 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.

The Board considers that for the Group’s long-term success it needs

tohaveaccess to certain ﬂexible debt to respond to a cyclical market.

Having a sustainability linked loan is a further step in demonstrating

theGroup’s commitment to a range of sustainability and ESG matters.

This Board decision means that delivering more sustainable operations

isnow not only beneﬁcial to those stakeholders who are directly

impactedbutalso provides the Group with a lower cost of ﬁnancing.

Since the Grenfell Tragedy in 2017, and the subsequent review of building

design and the construction methods and materials used, the Group has

acted swiftly to identify and remedy any legacy buildings where it has

aconstructive or legal obligation to do so.

Alongside this, the Group has always sought to engage constructively

withresidents, building owners, Government and other aected stakeholders.

In April 2022 the Board agreed to sign the Department for Levelling Up,

Housing and Communities (DLUHC) Building Safety Pledge (Pledge).

This Pledge commits to supporting leaseholders by funding or remediating

life-critical ﬁre safety works in buildings over 11 metres tall, which the Group

has developed over the last 30 years. The amounts that are provided in

the ﬁnancial statements reﬂect the current best estimate of theextent and

future costs of work required. However, these estimates may be updated

as work progresses, or as Government legislation or regulations develop.

DLUHC made it clear that failing to sign the Pledge would carry further

consequences such as limiting our ability to trade.

In making its decision, the Board carefully considered:

— The signiﬁcant work already underway and that would be required to

becompleted, relating to a large part ofthe commitments expected

under the Pledge

— The signiﬁcant distress caused to residents living in aected buildings

and the need to take the right approach to ﬁxing the issues

— The impact to the Group’s ﬁnancial position and how agreement

to the Pledge would be received by the Company’s investors.

With a strong balance sheet and net cash position, the Board agreed

thatentering into the Pledge was in the best interests of the Group

andwould help aected residents. By signing the Pledge the Group

alsohasthe ability to trade normally within the housing market.

Our key stakeholders are an integral part ofour

business model.

Principal activities and decisions

Principal activities and decisions relatingtothe

Board in the year are detailedonpages 80–81.

Outlined below are two examples ofprincipal decisions

undertaken bytheBoard which have a signiﬁcant

impact on the Group’s long-term success.

Our section 172 statement together with additional

information about our key stakeholders and why

theyare important to us are on pages 22–25.

Crest

Nicholson

stakeholders

Investors

Government

and other

bodies

Customers

Our people

Suppliers

Communities

and the

environment

Investors Additional liquidity and ﬁnancial stability.

A reduction in interest carry cost if targets met.

Customers The beneﬁt of a lower carbon and more

energyecient home.

Our people In addition to current initiatives, a further

commitment to investing in training roles

andopportunities to develop.

Suppliers Access to the Supply Chain Sustainability

School and encouragement to embrace the

beneﬁts thiswillprovide their own business.

Communities and

the environment

Low carbon housing will protect the

environmentand natural habitats, as well

asreducing air pollution.

Government and

other bodies

Our focus on Sustainability helps support

theUK’splan to be net zero by 2050.

Investors Investors ultimately pay for the

remediation costs.

Investors generally prioritise ESG matters

andwishthe Group to take responsibility

forsuch issues.

Customers Former customers and current owners of

CrestNicholson homes require the peace

ofmind that theirhomes are safe.

By working directly with aected freeholders

and leaseholder groups, appropriate action

can be takenas soon as possible to ﬁx issues

we identify.

Government and

other bodies

The DLUHC has encouraged house builders

toenterinto the Pledge.

Crest Nicholson

Annual Integrated Report 2022

Shareholder and

stakeholder engagement

Shareholder engagement

The Board is committed to engaging

proactively and constructively with the

Group’s shareholders.

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 in respect

to governance matters, including the

Remuneration Policy that will be proposed

toshareholders at the 2023 AGM. The

output of this consultation is contained

within the Directors’ Remuneration Report

onpages104–105.

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 each AGM and related

information are circulated to all shareholders

at least 20 business days before the

meeting. Directors are also invited to attend

the results presentations following the

announcement offull and half-year results.

The AGM ordinarily enables the Directors

to meet with some of the Group’s individual

shareholders. Following a closed AGM

in FY21, we were able to hold the FY22

AGM in person. Shareholders who were

unable to attend were also encouraged to

submit questions in advance to the Board

via email, and responses were replied to,

and published onthe Group’s website.

All resolutions werepassedby shareholders.

Engagement with lenders

We meet with our lenders and keep them

updated throughout the year about the

ﬁnancial health 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 timetable

Event Date

FY21 results

announcement

19 January 2022

FY21 investor

roadshow

19–25 January 2022

AGM 22 March 2022

HY22 results

announcement

14 June 2022

HY22 investor

roadshow

14–27 June 2022

FY22 year end 31 October 2022

Stakeholder engagement

Engagement with the Group’s other

stakeholders and consideration of

theirrespective interests in the Group’s

strategyand decision making took place

during theyear as described overleaf

andonpages 22–25.

Investor relations

The Head of Investor Relations is

the principal contact for institutional

shareholders, sell-side analysts and

the ﬁnancial media, and regularly

updates theBoard and ELT oninvestor

relations matters.

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othertrading updates.

These include formal events throughout

the year, along with a regular series

ofone-to-one and group meetings.

Additional information was provided in results announcements

and trading updates on the Group’s updated strategy.

The Group’s Investor Relations Programme

The Chief Executive or Group Finance Director attended 93 investor meetings,

engaging with over half of current shareholders (by shareholding value).

Key themes discussed included the Group’s strategy and the progress

againstitspriorities, the housebuilding sector, capital allocation,

dividend policy and other matters relevant to individual parties.

Investor roadshows were organised in person or virtually,

with investors primarily based in the UK.

Utilised the Group’s investor website, with analyst consensus forecasts

published inVuma, a specialist web-based system.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Employee

engagement

Employee engagement is important to the understanding

of our culture. By listening to employees’ views the

Board can address their concerns.

A conversation with

LouiseHardy, Non-Executive

Director responsible for

employee engagement

and Seb Skinner, Associate

StrategicLand Director

Our engagement forum,

The Employee Voice, is chaired

byLouise Hardy and made up

ofseveral volunteers from each

division. One of its members,

SebSkinner, sat down with

Louisetodiscuss employee

engagementduring theyear.

What employee engagement

activities did you participate

induring the year?

Employee Voice Forums have

beenheld twice this year, involving

employees from across the Group.

There has been a good mix of new and

pastattendees who have brought with

themquestions from their colleagues

toraise at the Forums. As well as having

spoken with colleagues from the Head

Oce and each division twice this year,

there have been other activities, suchas

divisional site visits, thathave provided

additional opportunities for us toobtain

feedback directly and understand

furthertheissues concerning employees

andwhether we areresolving them.

How often do you report to the

Board on employee engagement?

At every Board meeting this year I

have raised items that have been

discussed at one of the Forums.

The beneﬁt of these Forums isn’t just

providing a regular update to the Board

ontheir activities but adding to dialogue

onmatters raised within the Board meeting.

For example, with the implementation of

COINS, thenew ERP system, I was able to

share with the Board how employees are

responding to thischange programme.

Providing an employee perspective helps

theBoard shape its response.

As the Non-Executive Director

responsible for employee

engagement, what beneﬁts

doyoubelieve your role has

brought to theBoard?

Our people are our most important

and valuable resource. We can’t

operate without our people, and

theyhave the clearest understanding

ofwhat is happening within the business.

Itis therefore critical that we get their

perspective on how the Group is performing.

We have such talented people in our

organisation, sowhen they share their

perspectives itenables theBoard’s eyes

tobe opened toissues thatneed to be

addressed, orthings that can be made

moreecient and eective.

Has your role impacted any

decisions made by the Board?

Yes, it has. Two such examples are

around remuneration and resourcing.

We strive to provide alignment of

remuneration to objectives across the

organisation. It is therefore very important

that we understand how incentives aect

each function. The incentives we oer must

allow people to work together. These Forums

allow us to hear directly how incentives

workacross functions and we have made

necessary adjustments to align them.

The views of our employees have also led

us to proactively support the recruitment of

additional resource where weknow scarcity

ofsuitably qualiﬁed people is anissue.

We have also taken the opportunity

torecruit more trainees.

What are the three main things you

have taken away from engaging

with employees during FY22?

Number one is the war for talent;

ﬁnding skilled people with the right

experience, thatwe can bring into

Crest Nicholson to ﬁll any vacant roles

or where we need very speciﬁc skills

or experience – for example, our team

dedicated to remedying legacy buildings

withcombustible materials.

We also need to consider the current

cost-of-living and inﬂationary pressures.

Not just the impact that this has on the

business but also how the cost-of-living

crisis aects our employees. Personal

challenges that individuals are going

throughday-to-day understandably have

the potential to impact their welfare and

contribution at work. I was pleased to

seethat we responded to this feedback

during the year by making a one-o

payment of £1,000 toour people.

During the engagement sessions we

havealso had discussions around culture

in the business, ways of working across

theGroup, and the progress we have made

ondeveloping our people. While there

has been some success, such as the

CrestAcademy that has resulted with

somehigh quality internal promotions

overthe last year, we still have work

todoinsome areas.

Crest Nicholson

Annual Integrated Report 2022

Have you found the Employee

Voice sessions eective?

I am always pleasantly surprised

when I meet people in these sessions

with how open and honest they are.

They are at ease in expressing any problems

but also proactive and insightful in thinking

about what the solutions could be. I ﬁnd

the discussions very useful and eective

inthatsense. It is also important to receive

a range of inputs from all divisions as there

are often common issues which can be

seen from dierent angles. This breadth

of feedback undoubtedly enriches

the discussions.

How has the Board engaged

with, and monitored the Group’s

approach towards support and

inclusivity for colleagues in FY22?

We carefully look at the gender

pay gap and the composition of our

workforce. Following the introduction

of a Diversity andInclusion (D&I) Forum in

2020, some sessions of which I was able to

attend, we have decided to go further and

have introduced Anity Groups fora range

ofidentity characteristics. Reporting onthis

stream ofwork at Board level has enabled

the Board to monitor progress carefully and

provide inputs from what we are seeing

other organisations doin respect of D&I.

How do you think agile working

willcontinue to aect the

workplace foremployees?

The ﬁrst thing to say is that not

every role in our business can be

performed remotely so the design and

implementation of any agile working policy

needs careful consideration. For those that

can work in this way there is no doubt that

COVID-19 forced us all to think dierently.

Some people loved working exclusively

remotely and some people desperately

wanted to be back in the oce all the time.

What I have found in speaking to ourpeople

is that the ‘dust has now settled’ and

people are now talking positively about

how the agile working policy is supporting

their work/life balance. They have even

suggested it is something that enticed

themto come and work for Crest Nicholson

because they could achieve the balance

they desired. I think we have moved into

acompletely new era and it’s exciting for

thefuture of Crest Nicholson.

How we engaged during FY22

Diversity and inclusion

Throughout the year

To support the Diversity and Inclusion Forum, anity groups

were launched during the year. These groups will explore

the barriers people face within underrepresented groups

and ﬁndpractical solutions to overcome them.

Read more on page 83

Employee roadshows

May and September 2022

At key points in the year the ELT spent time with each division

to thank employees for their hard work, discuss how we

are progressing against our targets and outline our plans

for thefuture. Employees are encouraged to ask questions

inthesessions or submit them anonymously in advance.

The Exchange

Quarterly

Our newsletter delivers all the latest news and updates from across

the business . Regular features include a business update from

PeterTruscott, people news and a ‘day in the life’ of employees.

Snapcomms

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 throughout the year

using the IT tool Snapcomms.

Employee Voice

November 2021 | May, September and October 2022

The Employee Voice Forum is attended by volunteers from

Head Oce and the divisions. The Forum facilitates meaningful,

regular dialogue between the Board and employees from

acrossthe Group.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Board activity

Meetings of the Board

The Board held six scheduled meetings

during the year. At each scheduled meeting,

the Board receives updates on:

— External market and

operating environment

— SHE, sustainability (including

climate change), quality and

customerservice performance

— Group and divisional performance

— Partnership and strategic

land opportunities

— Financial performance of the Group

— People matters including employee

engagement and diversity and inclusion

— Corporate governance and

legal matters.

During COVID-19 the Board introduced

regular Board update calls between

scheduled meetings. These calls received

positive feedback from the Board and

have continued to take place. This enables

the Board toreceive both an update on

operational performance within the month

and also to consider and respond to

anyexternal market developments.

Meeting materials

Finalisation of meeting content

isacollaborative process involving

theChairman, Chief Executive, Group

Finance Director and General Counsel

and Company Secretary who ensure

adequate time is allocated to support

eective and constructive discussion.

Time is also scheduled for the

Non-Executive Directors to meet

without theExecutive Directors present.

Electronic Board packsareavailable

to the Directors aheadof meetings

and Directors receive accurate, timely

andclearinformation on the matters

tobeconsidered.

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

Former Directors

Tom Nicholson

3/3 – – –

1 Tom Nicholson stepped down from the Board on 27 May 2022.

Board Strategy Day

Each year the Board spends a dedicated

day reﬂecting on the Group’s strategy.

It considers whether the strategy

remains appropriate for the economic

and operating environment and what

progress is being made against its

targets and goals. It also considers

arange of external inputs on how the

Group’s strategy is being received.

This year the day opened with

a detailedinternal and external

consideration of the macro-economic

environment. Richard Donnell, Executive

Director from Zoopla, provided an

external perspective on what trends

and insights Zoopla are seeing in house

purchasing and to provide their outlook

on the housing market for next year.

The Group’s corporate brokers Barclays

and HSBC also provided their analysis

ofinvestor sentiment.

Several regulatory changes impacting

the sector were then reﬂected upon,

inparticular the New Homes Quality

Code and the Future Homes Standard,

and the impact this will have on the

Group’s operations andkey stakeholders.

The Board spent time reﬂecting on

the drivers behind thehigh voluntary

employee turnover during the year

and to hear updates on how this is

being addressed, including inrespect

to diversity and inclusion, talent

management and succession planning.

Another key priority for the day was

inviting input from employees below the

ELT, providing these individuals with

anopportunity to presentto the Board.

The following day, the Board reconvened

for its scheduled Board meeting and

theDirectors shared their reﬂections

onthe Strategy Day. It was agreed

that the presentation materials and

delivery were high quality and enabled

constructive and open debate.

Crest Nicholson

Annual Integrated Report 2022

Matters considered

— Regular updates on major 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 upcoming developments

incorporate reporting

— Reviewed the anti-slavery and

humantracking statement

for publication

— Received reports on engagement

with investors and other stakeholders

throughout the year

— Reviewed progress against the

Board’scontinuous development plan

— Carried out an internally-facilitated

Board evaluation covering the

Board’seectiveness, processes

andways of working

— 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

— Approved the signing of the

BuildingSafety Pledge

— Reviewed compliance with the Code

through robust decision making

— Approved and published the

anti-slavery and humantracking

statement for FY22

— Progressed a range of agreed

actions arising from the FY21

Board evaluation

— Concluded that the Board and its

Committees continued to operate

eectively during FY22, and set

actions for FY23.

Matters considered

— Continuously reviewed progress

against theGroup’s strategy

— Monitored trading performance

throughout the year

— Reviewed SHE performance

and initiatives

— Monitored and received regular

updates on sector, market

andregulatory landscape from

theGroup’s corporate brokers

— Considered the Group’s ﬁnancing

arrangements, capital allocation

andtax strategy

— Received regular reports from

management on customer service

andquality including preparations

forthe Future Homes Standard

andthe New HomesQuality Code

— Reviewed major land purchases

— Considered operational progress,

including with respect to the new

Yorkshire andEast Anglia divisions

— Considered progress against the

Group’s sustainability targets.

Outcomes

— Approved the annual budget,

business plan and KPIs

— Reviewed and approved the Group’s

FY21 and HY22 ﬁnancial statements

— Approved the Group’s FY21

Annual Integrated Report,

including a fair, balanced and

understandable assessment

— Agreed the dividend policy of2.5x

cover remained appropriate and

approved an FY21 ﬁnal dividend

andHY22 interim dividend

— Approved the Group’s ﬁnancial

targetsand communication to

the market

— Agreed to defer the planned

openingof a third new division in

FY23 and adjusted the expected

paceof growthacross the Group

— Approved the completion of a

newSustainability Linked RCF

— Approved the Group’s tax strategy

— Agreed new science-based targets,

which are designed to achieve

net zero by 2045.

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

— Continued to focus on the

composition, balance and

eectiveness of the Board

— Considered Group

succession planning.

Outcomes

— Carefully considered the Group’s

valueswhen making decisions

— Agreed with Tom Nicholson,

ChiefOperating Ocer, that it

was theappropriate time to leave

the Company.

Matters considered

— Debated the risk appetite and

signiﬁcantand emerging risks

— Reviewed the Group’s risk

management framework,

principalrisks and uncertainties

— Provided oversight on the

OperatingFramework Review

to be implemented within

the Group.

Outcomes

— Considered and approved

theGroup’s risk management

framework including the removal

of‘epidemic or pandemic from

infectious diseases’ as a principal

risk and added ‘land availability and

planning’ and ‘combustible materials’

— Conﬁrmed the Group’s viability

statement and going concern status.

Strategy, operations

andﬁnance

Governance and legal

Internal control and

risk management

Leadership and people

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Division of responsibilities

Board composition

There is a clear and eective division of

responsibilities between Board members.

The Chairman leads the Board and is

responsible for its overall eectiveness

in directing the Group, demonstrating

objective judgement and promoting a

culture of openness and debate. In addition,

the Chairman facilitates constructive Board

relations and the eective contribution

ofallDirectors. The Chief Executive leads

and manages the day-to-day business

withintheparameters of the authorities

delegated to him by the Board.

The Board includes an appropriate

combination of Executive Directors and

Non-Executive Directors, with over half

theBoard considered independent. No

one individual or small group of individuals

dominates the Board’s decision making.

The Non-Executive Directors provide

constructive challenge, strategic guidance

and specialist advice and hold management

to account.

The Chairman, supported by the General

Counsel and Company Secretary, ensures

that the Board has the policies, processes,

information, time and resources it needs

tofunction eectively and eciently.

Conﬂicts of interest

The Board has adopted a policy to

identifyand manage Directors’ conﬂicts

or potential conﬂicts of interest. Directors’

interests andthose of their close family

arereviewed by the Board at each meeting.

New conﬂicts arising between meetings are

dealt with at the time between the Chairman

and the General Counsel and Company

Secretary. The Board conﬁrms 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.

External appointments

The Board carefully considers each of

itsDirectors’ existing commitments and

time required to fulﬁl their obligations

totheGroup including with respect to

anychanges to external appointments

fromtime to time.

Iain Ferguson holds two Chair mandates

inFTSE 250 listed entities (Crest

Nicholson Holdings plc and Genus plc)

and a further Chair mandate at 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 Board remains satisﬁed that these

appointments do not result in overboarding

and do not count as conﬂicts of interest.

Professional development,

supportand training

During the year the Board received

updates from management on the Future

Homes Standard, upcoming corporate

governance and sustainability reporting

requirements and the New Homes Quality

Code. Time is always spent considering

the matters within Section 172 of the

Companies Act 2006 and the impact

oftheBoard’s deliberations.

Tenure (years) 0–1 1–2 2–3 3–4 4–5 5–6

Iain Ferguson

Peter Truscott

Duncan Cooper

Octavia Morley

David Arnold

Lucinda Bell

Louise Hardy

One Chairman

independent on appointment

Two Executive

Directors

Four independent

Non-Executive

Directors

Board composition

Board tenure

as at 31 October 2022

Crest Nicholson

Annual Integrated Report 2022

Board site visits

Site visit

Brooklands Park

Brooklands Park oers private and

aordable housing with one and two

bedroom apartments and three and

four bedroom homes. Situated on

the outskirts of Bristol with the city

centre being just seven miles away.

The Board met with the South West

divisional and site team and received

presentations on their current trading and

future plans. Time was spent with the

division understanding local community

matters, with Brooklands Park being

partof the newHarry Stoke Community

which willdeliver 1,250 homes.

The Board went on tours of the

construction site, looking at various

stages of build activity and the

sales suite.

The division highlighted how the

homes atBrooklands Park had been

well received by customers who liked

the large areas ofgreen space and

good location.

During the year the Board attended site visits at

Brooklands Park, Stoke Giord and Henley Gate, Ipswich.

Site visit

Henley Gate

Henley Gate is an exclusive development

of two, three, four and ﬁve bedroom

newbuild homes in Ipswich with a

focusonthe garden city principles,

withtree-lined streets, a country park,

aprimary school, local centre and

greenopen space.

The Board spent the day with the

Eastern division. The morning was

spent understanding Eastern’s strategy,

operationsand challenges and the

development at Henley Gate which

willdeliver 1,100 homes and is part

oftheIpswich Garden Village.

The Board enjoyed tours of the

constructionsite and the sales suite

includingtheSeaton and Winkﬁeld

showhomes. While construction

had juststarted the division were

excited abouttheopportunities

atthis development.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Iain Ferguson CBE

Chairman

Peter Truscott

Chief Executive

Duncan Cooper

Group Finance

Director

Octavia Morley

Senior Independent

Director

David Arnold, Lucinda Bell,

Louise Hardy and Octavia Morley

Independent Non-Executive Directors

Kevin Maguire

General Counsel

and Company Secretary

The Board Roles and responsibilities

The Board sets the Group’s strategy

topromote the long-term sustainable

success of the Group.

The Board provides leadership within

aframeworkof strong governance, risk

management and eective controls. It oversees

the performance and progress of the Executive

Committee against business plans, utilising

KPIsto support it in its assessment. The Board

isresponsible for monitoring the Group’s

purpose,values and culture.

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 Board, governance, 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 eective and balanced decision making

— Ensures that the Board receives accurate and

timely information to aid decision making

— Facilitates an environment for eective

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

— Ensures the views of stakeholders are considered

appropriately inBoard discussions

— Responsible for the eectiveness 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 eective 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, overseeing divisional

ﬁnancial control functions

— Responsible for the

consolidation of the Group’s

ﬁnancial statements, ﬁnancial

control mechanisms and the

Group’s tax strategy

— Delivers investor relations

communications to

capital markets

— Manages the Group’s risk

proﬁle and establishes

eective 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

— Develops agendas

forBoard meetings

— Oversees processes

forproviding information

tothe Board

— Advises and keeps

theBoardupdated on

corporate governance

developments

— Considers Board

eectiveness and

Directors’training needs

in conjunction with

the Chairman

— Supports the Chairman on

shareholder governance

engagement matters.

There is a clear corporate governance framework

toenabledecision making atappropriate levels

withintheGroup.

Division of responsibilities

Board composition

continued

Executive Committee

Provides executive leadership to

deliverthe Group’s strategy and

managesthe operations of the

Groupona day-to-day basis.

The Executive Committee:

— 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.

The divisional boards:

— Consider the operational matters

andkeyrisks of the division

— Monitor and control costs at a

divisional level

— Deliver high levels of customer service,

quality and SHE performance.

Further detail on our divisions can be

foundonpages 4–5.

The SHE Committee monitors performance

againstthe Group’s SHE strategy and sets

associated policies, procedures and initiatives.

It alsooversees the management of the

Group’sSHE risks.

The Sustainability Committee monitors

performanceagainst the Group’s

sustainabilitystrategy and recommends

associated targets, policies and initiatives

totheBoard. It also overseesthe management

ofthe Group’ssustainability risks.

Board Committees

Audit and Risk Committee

Nomination Committee Remuneration Committee

The Audit and Risk Committee oversees

externalﬁnancial reporting and disclosures

andmonitors internal controls and

risk management. The Audit and Risk

Committee alsoreviews the eectiveness

and independenceof the external and

internal auditors.

The Nomination Committee reviews the

balance,diversity, independence and

eectiveness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.

The Remuneration Committee 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 also considers

employee pay, when setting remuneration

forthe Executive Directors.

Crest Nicholson

Annual Integrated Report 2022

Iain Ferguson CBE

Chairman

Peter Truscott

Chief Executive

Duncan Cooper

Group Finance

Director

Octavia Morley

Senior Independent

Director

David Arnold, Lucinda Bell,

Louise Hardy and Octavia Morley

Independent Non-Executive Directors

Kevin Maguire

General Counsel

and Company Secretary

The Board Roles and responsibilities

The Board sets the Group’s strategy

topromote the long-term sustainable

success of the Group.

The Board provides leadership within

aframeworkof strong governance, risk

management and eective controls. It oversees

the performance and progress of the Executive

Committee against business plans, utilising

KPIsto support it in its assessment. The Board

isresponsible for monitoring the Group’s

purpose,values and culture.

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 Board, governance, 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 eective and balanced decision making

— Ensures that the Board receives accurate and

timely information to aid decision making

— Facilitates an environment for eective

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

— Ensures the views of stakeholders are considered

appropriately inBoard discussions

— Responsible for the eectiveness 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 eective 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, overseeing divisional

ﬁnancial control functions

— Responsible for the

consolidation of the Group’s

ﬁnancial statements, ﬁnancial

control mechanisms and the

Group’s tax strategy

— Delivers investor relations

communications to

capital markets

— Manages the Group’s risk

proﬁle and establishes

eective 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

— Develops agendas

forBoard meetings

— Oversees processes

forproviding information

tothe Board

— Advises and keeps

theBoardupdated on

corporate governance

developments

— Considers Board

eectiveness and

Directors’training needs

in conjunction with

the Chairman

— Supports the Chairman on

shareholder governance

engagement matters.

Management committees

Divisional boards

Safety, Health &

Environment Committee

Sustainability Committee

Each division is run by a divisional

board comprising directors responsible

forspeciﬁc disciplines.

The divisional boards:

— Consider the operational matters

andkeyrisks of the division

— Monitor and control costs at a

divisional level

— Deliver high levels of customer service,

quality and SHE performance.

Further detail on our divisions can be

foundonpages 4–5.

The SHE Committee monitors performance

againstthe Group’s SHE strategy and sets

associated policies, procedures and initiatives.

It alsooversees the management of the

Group’sSHE risks.

The Sustainability Committee monitors

performanceagainst the Group’s

sustainabilitystrategy and recommends

associated targets, policies and initiatives

totheBoard. It also overseesthe management

ofthe Group’ssustainability risks.

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.

An Investment Committee exists to provide

the relevant authority to acquire land prior

to exchange.

The land acquisition 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

The Audit and Risk Committee oversees

externalﬁnancial reporting and disclosures

andmonitors internal controls and

risk management. The Audit and Risk

Committee alsoreviews the eectiveness

and independenceof the external and

internal auditors.

The Nomination Committee reviews the

balance,diversity, independence and

eectiveness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.

The Remuneration Committee 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 also 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 92–99

Further detail on the work of the

Nomination Committee can be

found on pages 88–91

Further detail on the work of the

Remuneration Committee can be

foundon pages 100–122

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Composition, succession

and evaluation

Board evaluation

FY22 Board evaluation

The Nomination Committee agreed

thatGould Consulting had provided

goodquality engagement during their

external evaluation in the prior year

andagreed that an internal evaluation,

withthe useof atailored online

questionnaire was appropriate

for FY22.

The Board agreed this year’s evaluation

would be held as an internal evaluation

ledby the Chairman.

It was agreed that review of the

Chairman’s performance would be

ledbyOctavia Morley in her capacity

asSenior Independent Director.

The evaluation was conducted as follows:

— All Directors completed a tailored

online questionnaire, addressing

keyBoard matters in addition

tofurtherquestions covering

eachoftheBoard Committees

— A shorter survey of around six

questions 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

between each of the Directors

— A Non-Executive Director

meeting was led by the Senior

Independent Director to consider

theChairman’s performance.

The Chairman presented the output

fromthe evaluation at a Board meeting.

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 a Board Continuous

Improvement Plan.

Findings are outlined overleaf.

Stage 2

Board evaluation process

During the year, an internal evaluation

oftheBoard was conducted by the

Chairman. This review followed an

externalevaluation in FY21 which

wasconducted byGould Consulting.

The FY22 review process took place

fromSeptember to October 2022

andwasconducted in the format

outlined below.

Evaluation of Chairman’s

performance

Octavia Morley, Senior Independent

Director, led a review of Iain Ferguson’s

performance as Chairman. The review

concluded that the Board was chaired

eectively and Iain encouraged

constructive dialogue.

Board evaluation cycle

Internally facilitated evaluation led by the Chairman

FY20

Externally facilitated evaluation carried out byGould Consulting

(who have no connection with the Group or Directors)

FY21

Internally facilitated evaluation led by the Chairman

FY22

The review concluded that the Board continued to operate eectively. The Chairman, alongside the General Counsel

andCompany Secretary, will support the implementation of agreed actions during FY23.

Stage 1

Stage 3

Crest Nicholson

Annual Integrated Report 2022

Board meeting priorities

The Board intends to develop

its approachto meeting

format and agenda-setting

to maximise opportunity

for strategic debate at its

principal meetings including:

— Wider consultation

identifying specialtopics

and focus areas

leadingto better targeted

presentations as preparation

forBoard discussions

— Adapting interim virtual

meetings toconsider

speciﬁc focus areas

— Placing more emphasis on

feedback from Committee

Chairs and the Chairman

in relation to activities

outside Board meetings.

Sector developments

and meeting material

In support of developing the

Board’s agenda and debate,

anumber ofprocesschanges

will be made, such as:

— More formalised provision

of sectorandCompany

news to providegreater

context ahead of meetings

— A greater focus on pre-

reading materials before

Board presentations,

to focus meeting time

on debating keyissues

in evengreater detail

— Clearer identiﬁcation of

desired outcomes from

focus sessions, atthe

time of scheduling.

Board cohesion

Building on achievements

in FY21, furthertime will be

scheduled outside of meetings

for informal opportunities

tomeet and discuss emerging

themes, and establish

relationships. This will also

include regular and appropriate

time forthe Non-Executive

Directors to meetwithout the

Executive Directors present.

Succession planning

This will continue to be an area

of priorityfor the Board during

FY22, with a further focus on

Board succession planning as

well as succession planning

and talent development

throughout the Group.

The Board evaluation, and that

of its Committees, concluded

that the Board was operating

eectively and working

well towards its objectives.

The outcome of the evaluation

highlighted that the Board had

made good progress towards

a number of areas identiﬁed

last year, including in respect

to stakeholder relations and

developing Board relationships.

The evaluation highlighted

the strength in employee

engagement but that greater

focus was required in respect

to formalising the reporting

ofculture and values.

One strength highlighted was

the provision of high quality

sector news and reading

materials throughout the

year and not just ahead of

Board meetings.

Greater collaboration ahead

of the Board’s Strategy

Day led to high quality

focused discussions.

The review emphasised that

while signiﬁcant progress has

been made in risk management,

in a volatile and uncertain

external environment, the Board

should continue to consider

risk through ‘big picture’

horizon scanning.

Succession planning continued

to be a signiﬁcant focus in FY22,

particularly below Board level.

While it was acknowledged

that eorts had been made in

improving succession planning,

further work should continue

through FY23 including in

respect to compliance with the

Parker Review and the Group’s

diversity targets.

The FY22 Board evaluation

process was seen positively

by all Board members and

gave a platform for continuous

development in FY23.

Culture, values

andemployees

The Board intends to develop

its approach to engagement

with senior management and

employees in relation to the

Group’s values and culture:

— More dedicated

discussionsabout culture in

Board meetings, to enable

Non-Executive Directors

to further support senior

management in raising

awareness and visibility

ofthe Group’s values

— Prioritise opportunities

for the Non-Executive

Directors to meet with

members of the ELT outside

of formal meetings

— Enhancing the feedback

and reporting of employee

engagement activities.

Board meetings

Recognising the volatile and

uncertain external environment

to consider:

— Further reporting about the

land market and challenges

to provide greatercontext

ahead of meetings and

investment decisions

— Additional time to be

spent ‘horizon scanning’

for emerging risks facing

the Group

— Continuing the use of

update calls between

scheduled meetings

— With a larger ELT,

ensure the appropriate

rotation of attendees at

Board meetings.

Succession planning

The Board recognises that

executive succession planning

will continue to be a key priority

in FY23:

— Continued focus on

succession planning

for Board, ELT and

divisional boards

— Implement initiatives

throughout the Group

toenable individuals to

develop their careers

— Action will be taken by

the Board and Nomination

Committee to meet the

Parker Review requirements.

FY23 areas

of focus

FY22 areas of

focus in response

to the FY21 Board

evaluation

Implementing areas

of focus in FY22

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Nomination

Committee

Report

Committee role andmembership

The Nomination Committee is responsible for

reviewing the structure, size and composition

of the Board to ensure that itremainseective,

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, Executive

Leadership Team (ELT) and senior management.

The Committee leads the Board’s approach

todiversity and identiﬁes and oversees its

initiatives in this area.

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.

Individual meeting attendance is set out

onpage80. More information on the

skills andexperience of all Committee

memberscanbe found on pages 70–71.

Peter Truscott, Chief Executive, Jane Cookson,

Group HR Director and Kevin Maguire,

GeneralCounsel and Company Secretary

are invited to attend scheduled Committee

meetings, where they may contribute or

providemanagement updates.

External advice

The Committee is authorised to seek

externallegal or other independent

professionaladvice as it sees ﬁt but

hasnotdone so during the year.

I am pleased to present this year’s

Nomination Committee Report. It is the

Committee’s role to ensure the Group

has eective leadership oversight, with

the rightbalance of skills, experience

anddiversity on the Board and ELT.

Board changes

At the 2022 Annual General Meeting

(AGM), the appointment of David Arnold

was approved by shareholders. David is

a valuable addition to the Board who has

brought signiﬁcant ﬁnancial and commercial

experience. The Audit and Risk Committee

beneﬁts from his listed company and sector

experience through his role as Chair.

The year also saw the departure of Tom

Nicholson as the Group’s Chief Operating

Ocer. Tom was recruited in 2019 due

to his extensive industry experience and

record of improving operational eciency.

While Tom was with us he made signiﬁcant

progress in transforming the Group’s

operations and recruited an experienced

senior management team.

With the operational turnaround complete,

the Board, Committee and Tom recognised

that it wasan appropriate time for him to

leave theGroup. The Committee are grateful

forTom’s contribution to the Company.

ELTchanges

Following Tom Nicholson’s departure,

twoexisting Managing Directors, David

Brown and Alex Stark, were appointed to

theELT as Executive Managing Directors,

with eect from 1 November 2022.

These appointments will strengthen the

ELT as both David and Alex bring wide-

ranging industry expertise. These internal

promotions reﬂect the recent progress that

has been made with the Group’s succession

planning processes and development

programmes. In addition, these appointments

will create further leadership opportunities

for key talent within the Group.

Diversity and inclusion

We continue to recognise and embrace

the beneﬁts of having a diverse Board.

People with dierent perspectives,

backgrounds and experiences enhance

Board discussion and decision making.

While appointments will be made on

merit, we take seriously considerations

suchasbackground and experience,

age,ethnicity and gender in our reviews

ofthecomposition of the Board.

Our progress on enhancing Board

diversitycanbe found on pages 90–91.

Developing talent

In 2021 we launched the Crest Academy

withthree elements to the talent programme:

Future Leaders, Emerging Talent and Future

Talent. The Committee has received regular

reports on the programme’s performance

which has pleasingly started to generate

positive results. Further detail can be found

onpage 45.

Iain Ferguson CBE

Nomination Committee Chair

It is essential that the Board and Executive Leadership

Team have the rightbalance of skills, experience and

diversity to eectively lead the Group.

Committee overview

Iain Ferguson CBE

Nomination Committee

Chair

Committee members

Further detail on David Arnold’s

recruitment and induction process

canbe found in the Crest Nicholson

FY21 Annual Integrated Report

David Arnold

Non-Executive

Director

Lucinda Bell

Non-Executive

Director

Louise Hardy

Non-Executive

Director

Octavia Morley

Senior Independent

Director

Crest Nicholson

Annual Integrated Report 2022

The Committee considers succession

plans for ELT members and divisional

board members. These succession plans

are complemented by a performance

and development review (PDR) process.

Over the past year, the Group has

partnered 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. The Committee

acknowledges the barriers women face

when rising to senior management and

has agreed to develop a talent programme

speciﬁcally targeted for females.

Emergency succession planning

The Committee also 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.

Succession planning

The Committee plays a vital role in ensuring

the eectiveness 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 eective planning and implementation of

the Group’s strategy. Along with considering

Board succession regularly, the Committee

also reviews the capability of the ELT

and senior management roles, to ensure

there is a talented and diverse pipeline of

future leaders.

Activity during the year

Items of business considered by the Committee during the year:

Activity during the year Outcomes

Leadership

Reﬂected on the Board, Committees and ELT composition. With the operational turnaround complete, the Board, Committee and

TomNicholson recognised that it was an appropriate time for Tom to leave

the Group. Following Tom Nicholson’s departure, two existing Managing

Directors, DavidBrown and Alex Stark, were appointed to the Executive

Leadership Team asExecutive Managing Directors, with eect from

1November 2022.

Considered performance and eectiveness of the

individual Directors and their contribution to the Board.

Recommended to shareholders the re-appointment of all Directors

for election or re-election at the 2022 AGM.

Diversity and inclusion

Received updates from management on the Group’s

ongoing initiatives in respect to diversity and inclusion.

Supported and endorsed the Group’s diversity initiatives, including

theintroduction of Anity Groups. Further detail is available on page 47.

Reviewed the Board and Leadership Diversity Policy

andassociated targets.

Approved the Board and Leadership Diversity Policy and associated targets.

Succession planning

Considered the Group’s succession planning outputs. Agreed and made recommendations to strengthen succession plans,

including considering speciﬁc development and coaching needs.

Reviewed current initiatives in respect of talent

management across the Group at entry level,

mid-tier andsenior management.

Noted the initiatives and positive feedback from participants, and agreed

todevelop a talent programme that is speciﬁcally targeted at females.

Board evaluation

Considered the approach of the 2022 Board

evaluationprocess.

Recommended to the Board the approach for the internal Board evaluation.

Further details on the Board evaluation and output can be found on

pages86–87.

Reviewed the Committees’ composition. The Committee considered the Committees’ compositions, and agreed

thatthey remained appropriate.

Governance

Reviewed the Committee’s terms of reference. Endorsed updated terms of reference and recommended to the Board

theirapproval, which the Board approved.

The full terms of reference for

theCommittee can be found at

www.crestnicholson.com/investors/

corporate-governance

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Nomination Committee

Report continued

Diversity within

leadership

Board and Leadership

DiversityPolicy

The Group’s approach to diversity

and inclusion is set out in the Board

and Leadership Diversity Policy

which is reviewed annually by the

Committee and applies inasimilar

waytosenior management.

The Board and Leadership Diversity

Policy was recently updated, to reﬂect

therecommendations of the FTSE

WomenLeaders Review.

The Board and Leadership Diversity

Policy reﬂects:

— A recognition that a diverse

Board and leadership improves

operational performance

— 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 over time

— A recruitment approach that aims

toattract and encourage candidates

fromdiverse backgrounds

— 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

from other under-represented groups.

To support the Board and Committee,

Anity Groups were launched during

the year where volunteers from across

the Group discuss opportunities to

raiseawareness, develop ideas and

feedback concerns related to their area

offocus. These Anity Groups report

to theDiversity and Inclusion Forum.

Further details of these initiativescan

befound on page 47.

The Directors are committed to having a balanced Board

which recognises the beneﬁts of diversity in its broadest

sense and the value that this brings to the organisation

in terms of skills, knowledge andexperience.

Board

Executive Leadership Team

Senior management

At least 40% of the Board are female

Senior Board positions –

genderdiversity

At least one of the Senior Board

positions (comprised of either

Chairman, Chief Executive, Senior

Independent Director orGroup

Finance Director) is female.

Ethnic diversity

At least one member of the Board

isfromaminority ethnic background

byend of 2024.

No Director currently appointed.

Gender diversity Gender diversity

Gender diversity

Ethnic diversity

Crest Nicholson’s response

toappointing a Board

member froman ethnic

minoritybackground

The Board and Committee are

focused on appointing a Director

from anethnicminority background.

To meet this target it is the

Committee’sintention to recruit

anadditional independent Non-

Executive Director tomeet the

Parker Review requirements.

The recruitment for this role will

commenceduring FY23, with the

expectation that the individual

selectedwill be appointed to

theBoardahead of 31 December

2024 deadline.

Data is at 31 October 2022

✓

1 Male 4 57%

2 Female 3 43%

1 Male 5 83%

2 Female 1 17%

1 Male 27 6%

2 Female 14 34%

1 White

background 5 83%

2 Ethnic

minority

background 1 17%

1 White

background

37 90.2%

2 Ethnic

minority

background 4 9.8%

Crest Nicholson

Annual Integrated Report 2022

The Board’s skills and experience

Skills and experience

Number of Directors

Importance Direct experience Indirect experience

Industry/sector

Housebuilding High  

Construction High  

Engineering and infrastructure Medium  

Governance

UK listed companies High  –

Company chair experience High  –

Remuneration Committee chair experience High  –

Audit and Risk Committee chair experience High  –

Nomination Committee chair experience High  –

Senior Independent Director experience Medium  –

Strategic and operational

Strategy High  –

Finance High  

Management and leadership High  

Joint ventures and partnerships Medium  –

Marketing Medium  

Stakeholder experience

Investors High  –

ESG (including climate) High  –

Government and industry High  

People High  

Customer service High  

Supply chain High  

The Committee remains mindful of the

importance of broadening diversity within

the Board, ELT and senior management

teams. The Committee is aware that gender

representation is not the only means by

which a Board achieves diversity and each

Director’s skillsand experiences bring

dierent insights and contributions.

The Board skills and experience matrix

highlights our Board’s diversity in these

respects. The matrix was developed

this year and will support the Group

initssuccession planning processes.

Election and re-election

ofDirectors

Following review, the Committee concluded

that each of the Directors make an eective

contribution to the Board. The Committee

considered the time commitments, and any

other signiﬁcant appointments of each of

the Non-Executive Directors including the

Chairman, and concluded that each Director

continues to contribute eectively and

provides sucient time to the Company.

In accordance with the Code, each of

the Directors will submit themselves for

re-election at the 2023 AGM. Further

detail on the Board evaluation process

isoutlined on pages 86–87 and the

Directors’ biographies are detailed on

pages70–71.

Appointment process

The Board has an established approach

for identifying and evaluating suitable

candidates. The Committee is responsible

for conducting extensive searches for

potential candidates while considering

the Group’s strategy, purpose, values as

well as the skills, experience and diversity.

Following the Committee’s review, a ﬁnal

recommendation is put forward to the

Boardfor approval.

Upon appointment, each new Director

receives a comprehensive and tailored

induction. The induction programmes

are designed to help establish a broad

knowledge and full understanding of the

Group’s strategy, operations, challenges,

objectives and culture. Induction meetings

are held with the Directors and other

seniormanagement as well as external

advisors relevant to that Director’s role

andany speciﬁc Board responsibilities.

Committee evaluation

During the year the Committee’s

performance was reviewed as part of

theGroup’s internal Board evaluation.

The review explored the composition

of theCommittee, management scope,

processand the support it receives

andareas where improvements could

be made.

Following review, the Board agreed

that theCommittee continues to

operate eectively.

Committees

Gender diversity

Nomination Committee

Audit and Risk Committee

Remuneration Committee

1 Male 2 40%

2 Female 3 60%

1 Male 1 25%

2 Female 3 75%

1 Male 2 40%

2 Female 3 60%

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Audit, risk and

internal control

Audit and Risk

Committee Report

I am pleased to present this year’s Audit

and Risk Committee Report. The purpose of

this report is to outline how the Committee

discharged its responsibilities delegated

to it by the Board, predominantly in

respect to monitoring the integrity of

ﬁnancial reporting, the eectiveness

of riskmanagement and internal control

processes, and governance and

compliance matters.

This was my ﬁrst full year in position

asChairof the Committee. While many

challenges arising from COVID-19 had

dominated the prior year, this year has been

characterised by signiﬁcant economic and

geopolitical uncertainty. Alongside this,

TomNicholson left the Group as Chief

Operating Ocer leading to changes in

theway we deliver operational leadership

and oversight. Accordingly, we moved

swiftly to adapt our risk management

processes andinternal controls.

The changes made by the Committee last

year to enhance the Internal Audit function

including the appointment of Simon Rose,

asHead of Internal Audit, and the recruitment

of a strong Internal Audit team, have been

successfully implemented and the Group

isnow beneﬁting from an enhanced level

ofinsight and challenge.

This year we appointed Ryan Lee as

Operational Framework Director. Ryan will

ensure our Group operating policies and

suite of internal controls are reviewed and

position us appropriately for the audit and

corporate governance reforms proposed

bythe Department for Business, Energy

and Industrial Strategy (BEIS). This project

will also support a more comprehensive

induction process for new starters.

PricewaterhouseCoopers LLP (PwC) remain

our external auditor. During the year, Iheld

meetings with Darryl Phillips, the audit

partner, todiscuss the audit process.

Following the Board’s decision to sign the

Government’s Building Safety Pledge, time

was spent by the Committee on assessing

the provision in respect to combustible

materials and this will continue until all

works have been completed. More detail

isavailable on page94.

I am pleased to conﬁrm the Committee

continues to meet the Financial Reporting

Council’s (FRC) Guidance on Audit Committees,

issued in April 2016. We are committed to

ensuring that the accountability principles

set out within the UK Corporate Governance

Code (Code) are applied and that the interests

of shareholders and other stakeholders

areproperly protected in these areas.

Finally, I would like to extend a thank you

tomy fellow Committee members who

have supported and provided constructive

challenge at ourmeetings this year, and

toDuncan Cooper and the Group Finance

and Internal Audit teams who have provided

valuable input toCommittee meetings.

David Arnold

Audit and Risk

Committee Chair

The Committee protects the interests of shareholders

and stakeholders by providingcomprehensive oversight

to ﬁnancial reporting, riskmanagement and internal

control processes.

Committee overview

Committee members

David Arnold

Audit and Risk Committee

Chair

Committee role

andmembership

The Audit and Risk Committee is responsible

for reviewing the eectiveness of the Group’s

internal controls and risk management including

the Group’s procedures for detecting fraud,

itsprocesses and controls for the prevention

ofbribery and the eectiveness of the

Group’santi-money laundering systems.

A key function of the Committee is to monitor

and review the independence, objectivity and

eectiveness of Internal Audit. The Committee

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 also includes assessing

signiﬁcant ﬁnancial reporting judgements

contained within the ﬁnancial statements

and announcements.

The Committee is responsible for monitoring

andreviewing the eectiveness of the external

auditor including in respect to the annual

consolidated ﬁnancial statements and the

half-year review. 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.

Membership

The Committee has been chaired by

DavidArnold, since September 2021.

David Arnold and Lucinda Bell have recent

and relevant ﬁnancial experience. The Board

is satisﬁed that the Committee as a whole

hascompetence relevant to the sector.

Further details can be found in the Directors’

biographies on pages 70–71.

Other regular attendees, at the invitation

oftheCommittee, include the Chairman,

theChief Executive, the Group Finance

Director,the General Counsel and Company

Secretary, the Group Financial Controller,

theHead of Internal Audit, Group Tax

Director and representatives fromPwC,

theexternal auditor.

External advice

The Committee is authorised to seek outside

legalor other independent professional

adviceasit sees ﬁt but has notdone so

duringthe year.

Octavia Morley

Senior Independent

Director

Lucinda Bell

Non-Executive

Director

Louise Hardy

Non-Executive

Director

Crest Nicholson

Annual Integrated Report 2022

Activity during the year

Items of business considered by the Committee during the year:

Activity during the year Outcomes

Financial reporting

Considered and reviewed the reports from the Group Finance

teamon the ﬁnancial statements, considered management’s

signiﬁcant accounting judgements and the policies applied

forboththe half-year and full-year results.

Recommendations were made to the Board, supporting the approval

of the half-year and full-year results, associated announcement and

theFY21 Annual Integrated Report.

Reviewed the basis of preparation of the ﬁnancial statements

asagoing concern as set out in the accounting policies.

Recommendation made to the Board to support the going

concernstatement.

Reviewed the long-term viability statement proposed by management,

with focus on the judgements, estimates and testing.

Recommendation made to the Board to support the long-term

viabilitystatement.

Reviewed whether the FY21 Annual Integrated Report was a fair,

balanced and understandable assessment of the Company’s

positionand prospects.

Recommendation made to the Board that the FY21 Annual Integrated

Report was a fair, balanced and understandable assessment of the

Company’s position and prospects.

External audit

Assessed the eectiveness of the FY21 external audit. The Committee concluded that the audit was eective, and a

recommendation was made to the Board on the re-appointment

ofPwCas the external auditor at the 2022 AGM.

Considered PwC’s Group audit plan for the FY22 ﬁnancial results

andthe recommended Audit Quality Indicators (AQIs).

Noted and endorsed PwC’s Group audit plan and AQIs.

Received PwC’s ﬁndings from the FY21 external audit and the

HY22interim review.

Carefully considered PwC’s ﬁndings from the FY21 external audit

andthe HY22 interim review.

Considered the letter of representations to PwC inrespect to the

half-year and full-year results.

Recommendation made to the Board to approve the letter of

representations to PwC in respect to the half-year and full-year results.

Reviewed the non-audit related services and fees provided

by PwC for the ﬁnancial year, alongside the

supporting policy.

Approved the services and fees for non-audit related services provided by

PwC forthe ﬁnancial year. It also 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 ﬁnancial year. The statutory audit fee to be paid as agreed by the Committee.

Risk management and control environment

Considered the emerging and principal risks. Recommended to the Board the emerging and principal risks for inclusion

in the half-year and full-year results, including changes tothese risks.

Reviewed the eectiveness of the risk management activities

andtheGroup’s internal controls.

Recommendation made to the Board that the risk management

activities and internal controls were eective. Noted the key risks

andassociated mitigations.

Received a presentation on the Operating Framework Review

tobeimplemented within the Group.

Agreed with the priorities outlined in the Operating Framework Review,

challenging as necessary.

Received focused reviews on the replacement of the Group’s

ERPsystem and cyber security updates.

Agreed with the priorities outlined in the presentations, challenging

asnecessary. Agreed to a cyber security update report to be

considered at each Committee meeting.

Internal Audit

Reviewed the proposed Group’s Internal Audit Charter. Approved the Group’s Internal Audit Charter.

Considered the proposed Internal Audit plan for FY23. Agreed that the risk-based audit plan, and proposed audits were relevant

and appropriate inthelight of the Group’s principal andemerging risks.

Considered the Internal Audit reports, ﬁndings and agreed actions. The Committee was satisﬁed that management had resolved, or

werein the process of resolving, any outstanding issues or concerns

inrelation to matters scrutinised by the Internal Audit function.

Reviewed the scope, quality and eectiveness of Internal Audit. Concluded that the Internal Audit function was eective and has

implemented plans to evolve the Internal Audit function, moving fromafully

outsourced model to a combination of in-house andexternal expertise.

During the year this included recruiting a Senior Internal Audit Manager

and a senior internal auditor.

Governance

Reviewed the Committee’s terms of reference. Terms of reference were considered and remained in line with

bestpractice and compliance with the Code.

Monitored employee training compliance in respect to data privacy,

anti-money laundering, bribery and corruption, whistleblowing

reports and investigations and other compliance matters.

Supported management’s initiatives and received updates

asappropriate.

The full terms of reference for

theCommittee can be found at

www.crestnicholson.com/investors/

corporate-governance

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Audit and Risk

Committee Report continued

Key ﬁnancial and internal control matters

During FY22 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, NRV is recognised in the consolidated income statement. During FY22 £9.6m of

NRVhas been charged, mainly on three legacy developments already held at zero margin, and, £17.7m of NRV has been

used in the year on housing units sold, resulting in a net movement in the NRV provision of £8.1m 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. The Committee is

satisﬁed that the internal controls in place ensure the eective assessment of inventory carrying values. Where any

sites have low or negative margins, appropriate and sucient provisions are made. Where NRV has been recognised

during FY22, 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 inventory carrying

values, and associated NRV, 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 aordability 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 where appropriate. The Committee is satisﬁed that controls in this area and margins

recognised in the Group’s ﬁnancial statements are appropriate.

Combustible

materials provision

The Group has recognised an exceptional combustibles materials related charge of £105.0m in the year, in addition

to that recognised in prior years. The year end provision balance is £140.8m. 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.

During the year, the combustible materials provision has been increased to reﬂect the most contemporaneous

assessment of previous estimates and to reﬂect the impact of signing the Government’s Building Safety Pledge

(thePledge). As a result of signing the Pledge the Group has committed to funding the remediation of life-critical

ﬁresafety issues on buildings over 11 metres in which the Group was involved in their development going back

30years.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diering to the amounts notiﬁed by the BSF costed projects, and that ﬁre safety assessments in progress

mayrequire dierent 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 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. In particular, the Committee focused on the assessment of completeness

performed by management given the signiﬁcant expansion of potential scope of liabilities following the Group signing

the Pledge. 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 item, the Committee has agreed with management’s opinion to continue to treat

thecombustible materials charge, and associated recoveries, as an exceptional item.

Crest Nicholson

Annual Integrated Report 2022

Viability and going concern

The Committee reviewed management’s

consideration in relation to the prospects

of the Group, as set out in key audit

matters on the prior page. It also 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 65.

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 FY22 Annual

Integrated Report 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 FY22 Annual Integrated Report 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, the Company Secretariat, Investor

Relations, Sustainability, HR and Marketing

functions (AIR Group). This AIR Group

was responsible for regularly reviewing

the process and ensuring balanced

reporting with appropriate links between

key messages and sections of the Annual

Integrated Report. A recommendation was

made from the AIR Group to the Committee

conﬁrming that they considered the Annual

Integrated Report was fair, balanced

and understandable.

The Committee received a full draft of the

Annual Integrated Report and provided

feedback on it. The draft feedback was

incorporated into the report prior to ﬁnal

Board approval.

In particular, the Committee considered

whether the following aspects of the report

were fair, balanced and understandable:

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 Integrated Report with

key messages appropriately outlined

throughout.

Accurately described current operational

performance, including market trends

surrounding customer service levels,

political uncertainty, employee retention,

impact of industry supply and skills

shortages and the principal risks including

regulatory change faced by the Group

andthe actions taken to mitigate this.

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, with key performance indicators

rationalised to those most relevant to our

stakeholders’ assessment of the Group’s

performance.

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 Integrated Report 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 carried out in

2014. Darryl Phillips, the Group’s lead audit

partner, is in the third year of his tenure

in FY22. The Group is beginning to make

preparatory arrangements for carrying

outare-tender exercise in accordance

with the EU Audit Regulation and Directive

(as it forms part of UK law). The Group

will put the external audit contract out to

tender by 2024. 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 audit for the forthcoming

ﬁnancial year alongside proposed AQIs.

These AQIs are designed to assess

the quality of the audit and have been

developed by PwC alongside management.

These AQIs will assist the Committee

in measuring both management’s and

PwC’s performance.

The 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 eectiveness

An annual review of external audit eectiveness

is undertaken at the conclusion ofthe year

end audit. This uses a questionnaire-based

approach to seek insight and feedback

from management onkey areas of the audit

process, including the audit approach, the

team, communications with the Committee

andhow the external auditor brings

challenge and provides insight.

The review concluded that the audit

processand the audit team continue

toperform well.

The Committee also considered PwC’s

performance in respect to the FRC’s Audit

Quality Review (AQR) results for the year.

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

Company, 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 that all its partners and

employees complied with their ethics and

independence policies and procedures,

which are fully consistent with the FRC’s

Ethical Standard, including that none of

its employees working on the Group’s

audit hold any shares in Crest Nicholson

Holdings plc.

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.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Audit and Risk

Committee Report continued

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 pre-approval

ofthe Committee.

Non-audit fees

The Committee has pre-approved certain

permitted non-audit services below

a threshold as set out in the policy.

The current threshold is £50,000 per year.

Non-audit services were provided during

the year in respect of the interim review

ofthe half-year results. Fees payable were

£95,000 (FY21: £90,000). 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.

FY22 FY21

Audit fees (£’000)  

Non-audit fees (£’000)  

Ratio of non-audit fees

to audit fees .: .:

External auditor re-appointment

The Committee considers that PwC was

objective and independent throughout FY22

and is proposing that PwC be re-appointed

as external auditor to the Company at

the 2023 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 eective

risk management is key to the long-term

sustainable success of the Group and for

achieving the Group’s strategic priorities.

The Group’s emerging and principal risks are

considered by the Board. The Committee

regularly reviews the eectiveness of the

risk management process on behalf of the

Board. Both the Board and the Audit and

Risk Committee undertook dedicated risk

review sessions on the Group’s principal

and emerging risks during FY22 and were

satisﬁed that risk management and the

control environment were robust in the

ﬁnancial year.

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 emerging

and principal risks facing the Group and

how those risks aect 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. By the

Board regularly reviewing its risk appetite,

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 58–64.

To support the Board, the Committee

reviews the Group’s control environment

alongside the principal risks.

Eectiveness of risk management

andinternal controls

The Group’s internal controls are designed

to mitigate risks that may prevent the

achievement of the Group’s strategy.

The Group’s internal controls are designed

toprovide reasonable assurance that

potential weaknesses can be identiﬁed

promptly, and appropriate remedial

action taken.

The Group Finance Director has executive

responsibility for risk management and

thecontrol environment. He is supported

inthis role by the Head of Internal Audit and

General Counsel and Company Secretary.

The Group’s internal controls are designed

to mitigate, rather than eliminate, the risk

ofnot achieving corporate 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 overleaf.

Operational Framework summary plan

The summary plan to complete the Operational Framework project is as follows:

Operational Framework project

During the year the Group commenced aproject to review and update its Operational and KeyFinancial Controls Framework.

The recently appointed Operational Framework Director will be responsible forreviewing existing policies and procedures

to ensure that they contain sucient and consistent governance andoperational information, andfor developing a more

formalised framework to ensurethatﬁnancial controls acrossthebusinessaremore consistently documented andcan

bemore regularly tested.

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

Crest Nicholson

Annual Integrated Report 2022

Internal control

framework

The Group’s internal

controls are designed to

mitigate risks that may

prevent the achievement

of the Group’s strategy.

They are designed to

provide reasonable

assurance that potential

weaknesses can be

identiﬁed promptly, and

appropriate remedial

action taken.

Key assurance

activities

We have a well-established

governance framework which

deﬁnes roles and responsibilities

formanaging risks and operating

internal controls atall levels

ofthe Group:

— Approval levels and limits are

governed by the Group’s Delegated

Authority Manual and these are

built into our ﬁnancial and operating

systems, where necessary

— Group Finance have 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. These controls have

been improved during the year

withthe implementation of a new

ﬁnance system and an updated

Group Finance policy manual

— We have a Cost and Value

Reconciliation (CVR) process

ensuring that operational

performance is regularly reviewed

against budget. The controls over

our commercial processes have

been improved during the year with

the implementation of a new ERP

system and associated policy

— 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

— All major ﬁnancing activities are

operated by the Group Treasury

function in accordance with treasury

policies that are approved by

the Board

— Tax compliance is managed by

ourdedicated internal tax team,

with support from external advisors.

We maintain a positive and

transparent relationship with HMRC

and have a‘low risk’ tax status

— 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 any

training requirements identiﬁed

and agreed

— The Group operates a whistleblowing

policy which includes access to an

independent helpline for anonymous

reporting of concerns

— Carbon emissions data is reviewed

internally by the Group before being

veriﬁed by a third-party assessor

— Waste data is provided by our

wastemanagement partners and

the data is collated internally and

review processes are performed.

The risks identiﬁed with respect to

ﬁnancial fraud and error are mitigated

through the following key controls:

— The Group’s stance on fraud is

implemented via several Group

policies and procedures, including

anti-bribery and corruption,

anti-money laundering, gifts and

entertainment, whistleblowing,

expenses, cyber security, and

share dealing

— Financial systems have appropriate

segregation of duties following

predeﬁned approval limits and

the ability to maintain vendors

issegregated from purchasing,

goods receipts, accounts payable

and process disbursements.

Changes to supplier bank accounts

are veriﬁed to independent sources

— Stage-approval processes are in

place for invoices and transactions

and sucient support is required

bythe Group Finance team which

issubjectto validation before

payments are made

— Payroll is prepared by an experienced

team with appropriate controls prior

topayment being made

— 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

viaappropriate approval limits

— We use certain national supplier

agreements and preferred supplier

lists to maintain control of our

majormaterials and labour spend

— Work by subcontractors is

appropriately tendered and

awarded with background

vettingbeing performed

— All 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 solutions, and there

areappropriate controls in place.

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

— 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 allour 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.

External assurance activities

— As part of the annual external

audit, PwC tested a number

ofinternal controls

— The carbon emissions data

receivesthird party assurance

toISO 14064-3 standard

— We engage external independent

safety auditors to conduct

regularand unannounced site

safety reviews

— We utilise a Security Operations

Centre (SOC) to monitor our

networks and have passed

CyberEssentials certiﬁcation.

The Committee continues to believe that the Group’s risk management and internal control systems, including the control and compliance

culture within the business, provides a reasonable level of assurance that the ﬁnancial statements are free from material error

andmisstatement. The Committee is satisﬁed that relevant systems and processes have been in place for theduration of the

current year and up tothe date of approval of the Annual Integrated Report.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Audit and Risk

Committee Report continued

Internal Audit

The Committee’s role is to monitor and

provide oversight on the eectiveness

ofinternal controls and risk management.

It carries out this role in support of the

Board’s formal review of signiﬁcant risks

andmaterial controls.

The Internal Audit team leads the internal

audit process. This team is supported by

Deloitte LLP who provide speciﬁc input

on more specialist audits. Deloitte have

been engaged by the Groupsince 2016

toperform this role.

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, the

Boardand theExecutive Committee.

The Internal Audit function reviews

theeectiveness and eciency of internal

controls in place, providing assurance

thatinternal controls remain ﬁt for purpose

and are applied consistently throughout

the Group. In addition to reviewing the

eectiveness of these areas and reporting

on aspects of the Group’s compliance with

them, the Internal Audit function agrees

actions with management to address

any key issues and improve processes.

Once anyactions are agreed with

management, Internal Audit monitor their

implementation and report regularly to

theCommittee 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

and incorporates these recommendations

into the Internal Audit plan as appropriate.

During the year the Internal Audit team has

continued to build its internal capabilities

with the recruitment of two new team

members, one with industry experience from

the housebuilding sector. An internal audit

methodology has been developed against

the Institute of Internal Auditors Code of

Practice and International Professional

Practice Framework (IPPF). This provides

aquality benchmark for the performance

ofinternal work.

The Executive Committee and management

responsible for the area reviewed,

consider the reports on a regular basis.

They are 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atimely manner.

There are also a range of functions and

roles which are also an important source

of assurance. These include the Company

Secretariat, IT, Group Finance, SHE and

Quality Assurance. The Committee may

request assurance reports from these

functions or exploration of speciﬁc risks

andmitigations. Processes carried out

bythese functions are also subject to

reviewfrom Internal Audit.

Internal Audit eectiveness

The Committee continually reviews

InternalAudit’s eectiveness considering

the quality, objectivity and expertise of

the Internal Audit function. To support the

Committee in evaluating the eectiveness

of the Internal Audit function, feedback

isreceived by key stakeholders including

from the Board, Committee, divisional and

functional management and the Executive

Leadership Team. Following an evaluation

ofthe services provided in respect of

Internal Audit, the Committee conﬁrms

thatboth theprocess for determining the

Internal Audit plan and the plan itselfare

appropriateand eective.

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.

Internal Audit in FY22

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 Internal Audit plan in FY22 focused

on speciﬁc key and emerging risk areas

across the Group. Key examples during

the year included:

— A review of the Group’s talent

management strategy, succession

anddiversity and inclusion

processesand conduct policies

— A rolling audit programme

assessingthe eectiveness of

monthly divisional build cost

reviewsandassociated controls

— An audit of the design and

operatingeectiveness of HR

controlscovering recruitment,

rewardand compensation,

master data, disciplinary and

grievance processes

— A focused review of cyber security

controls tested against the National

Cyber Security Centre (NCSC)

frameworks using external cyber

security specialists

— The eectiveness of Group and

divisional procurement processes

— Agile programme audits and

advisory controls support of the

ERP implementation

— Continuous testing of the

operationaleectiveness of

divisionaloperational and

ﬁnancialkey controls

— A review of the eectiveness of

fraudcontrols across the Group

— A review of the design ofsite close

procedures and the eectiveness

ofthe sales process.

Crest Nicholson

Annual Integrated Report 2022

Speaking Up – Whistleblowing

The Board is responsible for the

Group’s arrangements with regard to

whistleblowing and receives updates on

anymatters raised at each of its meetings.

The Committee is responsible for reviewing

the adequacy and eectiveness of the

Group’s whistleblowing arrangements.

The Group’s Speaking Up (whistleblowing)

policy has been written in an accessible

language to support employees 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 notonly provides details

of a free independent helpline that

can be usedtoreport concerns but

also conﬁdential support services

thatindividuals could useif theyneed

assistance in making a report.

Ethical behaviours

and safeguarding

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 and they are expected towork

inline with theGroup’s values.

Anti-fraud and anti-bribery

The Committee has a zero tolerance

ofbribery, corruption or fraud. In the ﬁrst

instance of an incident being reported,

asummary of the allegation is passed to

the Group HR Director and the General

Counsel and Company Secretary to

decide on the appropriate course of

actionand investigation. The ﬁndings

of theinvestigation are reported to

the Committee.

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. As part

oftheir audit plan, during the year our

Internal Audit function reviewed our suite

of bribery and corruption polices and

procedures. As a result, an opportunity

was identiﬁed toenhance our gifts and

entertainment register process by moving

them to a web-based portal which the

Groupis currently developing.

The Group has in place robust anti-money

laundering (AML) policies, processes and

oversight, supported by AML guidance

andtraining available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.

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Remuneration

Directors’

Remuneration

Report

Providing fair and appropriate remuneration across

the Group is an important part of implementing the

Group’s strategy. Taking into account all stakeholders,

the Committee carefully formulates and applies the

Remuneration Policy throughout each year.

Introduction

I am pleased to introduce this Directors’

Remuneration Report for the year ended

31 October 2022 which consists of the

Annual Report on Remuneration and the

new Remuneration Policy being proposed

atour AGM on 23 March 2023 (2023 Policy).

The Report sets out how the Committee

hasconsidered remuneration in the context

of the performance of the Group and

prevailing market conditions in determining

remuneration outcomes, andinsetting

targets for FY23.

Having considered the overall pay outcomes,

the Committee is satisﬁed that the current

Director’s Remuneration Policy (2020 Policy)

operated as intended during the year and

remuneration is appropriate, taking into

account incentive outcomes across the

Group, the relativities between employees

and the Executive Directors andthe wider

stakeholder experience.

As the 2020Policy reaches the end of its

three-year cycle in FY23 theCommittee

reviewed the 2020 Policytaking into account

(among other things) the Group strategy,

corporate governance developments,

institutional investor viewsand market

practice.The review concluded that

our 2020 Policy is working eectively

and asaresult, after consultation with

stakeholders, weareonly proposing

minorchanges, andtheseare set out

laterinthe report.

I would like to thank the members of

theCommittee, major shareholders and

employees with whom we have consulted,

fortheir timeand support.

FY22 remuneration outcomes

Bonus scheme

In respect of the annual bonus we were

pleased that FY22 saw strong performance

in our key ﬁnancial measures of proﬁt growth

and cash generation, which accounted

for the majority of the bonus opportunity.

This was oset by weaker performance in

relation to Customer Service and Quality,

where we fell below our target of 90%,

thelevel required to achieve ﬁve-star

in theHome Builders Federation (HBF)

Customer Satisfaction Survey.

In addition, FY22 was the ﬁrst year that

we incorporated a speciﬁc performance

measure to reduce scope 1 and 2 combined

emissions intensity. We are particularly

pleased that we made strong progress

against this new measure in its ﬁrst year of

measurement for remuneration purposes.

Iain Ferguson CBE

Chairman

Committee overview

Octavia Morley

Remuneration Committee

Chair

Committee members

Activity during the year

— Reviewed and consulted with

shareholdersinrelation to the 2023

Directors’Remuneration Policy

tobeconsidered at the 2023 AGM

— Engaged with employees as part

of settingthe2023 Directors’

Remuneration Policy

— Reviewed employee pay and beneﬁts,

including pension

— Considered and approved a one-o

costofliving payment of £1,000

per employeebelowthe Executive

LeadershipTeam(ELT)

— Considered LTIP measures and targets

for FY23

— Considered FY22 bonus scheme

outcomesand ﬁnal vesting of

LTIP awards

— Reviewed the pay of Executive

Directors and Chairman

— Determined the bonus scheme

structure for FY23

— Reviewed 2022 AGM outcomes

andfeedback from shareholders

— Determined leaver terms for an

Executive Director.

Looking ahead

— Ongoing consideration of employee

pay including the currentcost-of-living

challenges

— Monitor performance of in-ﬂight incentive

awards during the year andconsider

FY23 outcomes

— Consider annual bonus and LTIP

measures and targets for FY24

— Review ESG measures link to remuneration

in context ofthe Group’s strategy.

Committee snapshot

— Octavia Morley has chaired the

Committeesince October 2017

— Members of the Committee are

independentNon-Executive Directors

andIain Ferguson (Chairman)

wasindependent on appointment

— Attendance at Committee meetings

issetouton page 80 and the relevant

Directors’ biographies canbefound

onpages71

— Other regular attendees at meetings

attheinvitation of the Committee

includetheChief Executive,

Group HRDirector and General

Counsel andCompany Secretary.

David Arnold

Non-Executive

Director

Lucinda Bell

Non-Executive

Director

Louise Hardy

Non-Executive

Director

100

Crest Nicholson

Annual Integrated Report 2022

This has led to an overall bonus outcome

of80.1% of maximum, for Executive

Directors, which the Committee considers

isappropriate in view of the performance

during the year. Employee bonus schemes

across the Group operated with similar

measures and opportunity.

LTIP

The 2020 LTIP award measured performance

over the three ﬁnancial years FY20-FY22,

assummarised below:

Target range

(to be achieved

in FY22) Performance Vesting

EPS

48.9–52.3

pence

42.0

pence

0.0% out

of 40.0%

ROCE 19.3%–23.3% 22.5% 34.1% out

of 40.0%

EBIT

14.2%–15.2% 15.4% 20.0% out

of 20.0%

Total 54.1% out

of 100.0%

1 Adjusted Earnings per Share (EPS).

2 Adjusted EBIT margin.

The Committee considers that this outturn

is an appropriate reﬂection of performance

over the three years and discretion has

notbeen used to adjust the outcome.

In addition, it was noted that awards were

granted in February 2020 at a higher share

price than at vesting, and as such, there is

no windfall gain.

Board changes

During the year, the Board and Tom

Nicholson agreed that it was the appropriate

time for Tom to leave the Group and

Tom stepped down from the Board on

27 May 2022. The Board recognises Tom’s

contribution tothe successful delivery of

the Group’s turnaround and thanks him for

his hard work and dedication during this

period. The Committee exercised discretion

to treat Tom as a good leaver. Details of

his remuneration for FY22and treatment

ofhisoutstanding incentive awards are

detailed later in this report onpage 115.

New Remuneration Policy

Our 2020 Policy reaches theend of its

three year cycle at the 2023 AGM and we

therefore seek shareholders’ approval for

the 2023 Policy. The Committee undertook

a thorough review, noting that the 2020

Policy has accommodated the signiﬁcant

challenges faced by the Group through the

COVID-19 pandemic, as well as management

changes over the period. Overall, taking

into account that there have been relatively

few external drivers for change, we propose

that the 2020 Policy, and its operation,

onlyneedminor adjustments.

The principal change is to increase Policy

headroom for annual bonus from 125%

to 150% of salary and LTIP awards from

150% of salary (or 200% in exceptional

circumstances) to 200% of salary in all

circumstances. While there is currently no

intention toincrease the current levels of

annual bonus and LTIP opportunities beyond

125%and 150% of salary respectively, these

are below our assessment ofmarket levels.

This additional headroom may be useful

in the future, for example, in management

succession, where we may wish to have

alower proportion for ﬁxed pay andhigher

proportion for incentive pay.

We have updated the wording for the 2023

Policyin relation to Executive Director

pension provision to reﬂect theposition

now where both Executive Directors

receive a pension contribution in line

with the contribution paidto the majority

of the workforce (currently 6% of salary).

The ChiefExecutive’s pension reduced

from 10% to6%of base salary from

1 January 2023.

We have also made minor changes in

relation to the structure of annual bonus

deferral and Committee discretion in

relationto the LTIP. Further details can be

found in the Policy section of this report

onpage 105.

FY23 remuneration approach

For FY23 we propose to make minimal

changes to the measures, and again

ensuringthat all variable pay is subject

to stretching performance targets linked

totheGroup strategy and outlook.

Salary

In light of the cost of living challenges

being faced byall employees, we have

considered wider employee pay through

the year. Where appropriate, the Group has

supported employees with salary increases.

This has led to an annual workforce average

increase of 6.4% and, following careful

consideration, we have applied a lower

increase of 5% to the Executive Directors.

This remains below the current rate of

inﬂation and also reﬂects the increase in

responsibilities for both Executive Directors

following the departure of Tom Nicholson.

In addition, the annual bonus and LTIP

opportunities are below our assessment

of midmarket levels, which results overall

in their packages remaining broadly in

line with the market. An increase of 3%

has been agreed for the Chairman, and

the Board agreed a 3% increase for Non-

Executive Directors.

Annual bonus

The annual bonus opportunity will

remain unchanged, based again on 50%

forproﬁt and 20% for cash ﬂow measures.

Customer Service and Quality will remain

but increases to a 15% weighting. The ESG

measures this year will consist of 7.5%

for waste reduction and 7.5% for further

targeted reduction inemployee turnover.

LTIP

We remain committed to our long term

carbon emissions goals (that we discuss

more fully on pages 26–29) and such

a measure will now be part of our long

term incentive for FY23. These combined

measures continue to aligntothe

strategy ofthe Group aswell as meeting

the Committee’s priorityfor simplicity

and transparency.

The Committee has reviewed the LTIP

measures as part of the 2020 Policy review

and proposes a slight change to the mix

of measures such that Total Shareholder

Return (TSR) will be increased from 40% to

50% and ROCE will increase from 30% to

35%. We have removed EBITmargin this year,

recognising the signiﬁcant improvement in

recent years andthe element of crossover

with return on capital employed (ROCE).

This is replaced by a long term ESG

measure (15%) that will incentivise further

reductions inscope1and 2 emissions

by FY25. This directly relates to our

sustainability strategy and Science Based

Targets, as well as being a measure linked

to our Sustainability Linked Revolving

Credit Facility.

We intend to grant awards to Executive

Director at 150% of salary as in prior years,

but the Committee will review this decision

inlight of the prevailing share priceat

the date of grant. Alternatively we would

consider a potential scale-back at the

time of vesting.

Renewal of LTIP

and SAYE Schemes

Our existing Long Term Incentive Plan

(LTIP)and Save-As-You-Earn (Sharesave)

Schemes have a 10 year cycle and expire

inFebruary 2023. Accordingly, shareholder

approval isbeing sought to renew these

schemes for a further 10 years. In respect

of Executive Directors, both schemes will

beoperated inline with the prevailing

Directors’ Remuneration Policy.

Employee pay

A signiﬁcant focus area for the Committee

during the year has been the operation

of employee pay across the Group and

speciﬁcally the increased cost of living

andthe levels of employee turnover.

As part of our response to this, the

Committeeapproved a one-o payment

of£1,000 in July 2022 to all employees

below the ELT.

In addition, the Group has looked closely

atbase salary levels through the year

and atthe annual review to ensure that

they remain appropriately benchmarked

to ourdesired market positioning and

whererequired, salary levels were adjusted.

The Group pays salaries above thereal

Living Wage (otherthan for apprentices

who are covered by other wage rates).

Inaddition, the Group is taking steps to

become formally accredited by the real

Living Wage Foundation during FY23.

We also reviewed our levels ofpension

contribution where theworkforce average

is 6% of salary. We considered whether

any employer increase was appropriate

but concluded that, at the current time,

there should beaconcentration of the

available budgetary spend toward base

salary increases.

The Group has made furthersalary

increases in FY22 across the workforce

reﬂecting changes to market rates.

101

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Alignment with strategy – FY22 performance

Directors’ Remuneration

Report continued

Combustible materials

With respect to the Group’s ongoing

work to remediate buildings where ﬁre

safety concerns have been identiﬁed,

theCommittee has carefully monitored the

operation of incentive schemes during the

year. Speciﬁcally, the Committee focused

on ensuring that no measure acted as

any incentive not to progress all remedial

solutions (as well as incurring associated

costs) asquickly as possible.

The Committee was prepared to make

adjustments to outcomes should

this havebeen necessary. No such

adjustmentswere required.

Committee eectiveness

andengagement

We undertook engagement activity with

ourinstitutional shareholders in FY22

withrespect to remuneration matters

andour proposed 2023 Policy.

We received no negative feedback

about pay outcomes for FY22.

Shareholders provided feedback with

respect to our draft 2023 Policy allof

which has been carefully considered,

andwhere appropriate, reﬂected in

theﬁnal2023 Policy.

I continue to remain available to

shareholders to discuss remuneration

matters.

As part of the annual Board evaluation

whichwas internally facilitated the

Committee’s performance was considered

and it was concluded that the Committee

continues to work eectively.

Details of how we have applied the

relevant requirements of the UK

Corporate Governance Code 2018

(Code) can befoundthroughout this

Remuneration Report.

Concluding remarks

I would like to thank our shareholders

fortheir ongoing support on our

approachto remuneration.

We believe that the minor changes

proposedtothe 2020 Policy provide

someﬂexibility for future operation

andareprudent in the circumstances.

We will continue to ensure that our

remuneration approach aligns to

our strategy and that all measures

will be subject to the achievement

ofstretching targets.

We hope that you will be able to

supporttheresolutions approving

thenew2023Policy, the advisory

voteonthe Directors’ Remuneration

Reportas well asthe resolutions

torenewour share schemes.

Octavia Morley

Remuneration Committee Chair

Link to strategy Performance

Annual bonus

Threshold Stretch

Adjusted proﬁt before tax (50%)

£137.8m

Net cash (20%)

£276.5.m

Carbon reduction (10%)

1.82

Customer service and quality (10%)

88.0%

Voluntary employee turnover (5%)

27.4%

Employee engagement (5%)

83%

SHE leadership (-10%)

LTIP

Adjusted EPS (40%)

42 pence

ROCE – FY22 (40%)

22.5%

Adjusted EBIT Margin – FY22 (20%)

15.4%

8 7

Strategic foundations and priorities

1 tCO

e/100 sq.m of completed ﬂoor area.

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

People

Sustainability & Social Value

Safety, Health & Environment (SHE)

Financial Targets

The full terms of reference for

theCommittee can be found at

www.crestnicholson.com/investors/

corporate-governance

102

Crest Nicholson

Annual Integrated Report 2022

Remuneration

at a glance

Remuneration

in FY22

Peter Truscott Duncan Cooper

Total pay

(single ﬁgure)

Details on

page 111

1. Fixed £757,474

2. Variable £998,621

3. Total pay £1,756,095

1. Fixed £419,026

2. Variable £514,633

3. Total pay £933,659

FY22 outcomes

vs performance

scenarios

Fixed remuneration

Bonus and LTIP

FY22 Performance scenarios

Expected minimum performance

FY22 Actual performance

Total pay (Single Figure) FY22

Expected maximum performance

Expected on-target performance

£760,635

£1,756,095

£2,601,760

£1,681,198

FY22 Performance scenarios

£420,872

Expected minimum performance

£933,659

FY22 Actual performance

Total pay (Single Figure) FY22

£1,454,735

Expected maximum performance

£918,294

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 113 of the Annual Integrated Report 2021.

2022 LTIP

Details on

page 113

Awarded 150% salary

Subject to the achievement of performance conditions

Awarded 150% salary

Subject to the achievement of performance conditions

FY22 annual

bonus outcome

Details on

page 112

£670,036

100.1% salary from a maximum 125% salary

£376,251

100.1% salary from a maximum 125% salary

FY20 LTIP

outcome

Details on

page 113

£328,586

54.1% of the award vested

£138,383

54.1% of the award vested

Shareholding

Details on

page 114

137.1% 62.9%

31.9% 168.1%

Progress towards holding requirement Balance to achieve 200% shareholding requirement

Remuneration

for FY23

2023 LTIP

Details on

page 121

Award of 150% salary Performance measures

TSR 50%

ROCE 35%

ESG 15%

FY23 annual

bonus

Details on

page 120

Peter Truscott

Maximum 125% salary

Duncan Cooper

Maximum 125% salary

1 Financial 70%

Adjusted operating proﬁt before tax 50%

Net cash 20%

2 Non-ﬁnancial 30%

Customer service and quality 15%

Waste reduction 7.5%

Reduction in voluntary employee turnover 7.5%

SHE Leadership up to -10%

Our employees

Details on

page 118

Sharesave participation across all plans

49%

% of employees in a bonus plan

97%

Employee engagement

Louise Hardy, Non-Executive Director responsible

foremployeeengagement, and Committee Chair,

OctaviaMorley, discussed the proposed 2023

Policyandtheapplication of remuneration across

the Group at Employee Voice events during the year.

The outcome of thesediscussions has been considered

bythe Committee aspart of its decisions in the year.

103

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Directors’

Remuneration Policy

2023 Policy

The Directors’ Remuneration Policy in force

from time to time, sets the overall framework

for the remuneration of the Directors of the

Group and is designed to attract, retain and

incentivise our Executive Directors in such

a way as to promote the long-term success

of Crest Nicholson and be aligned with

our shareholders’ and other stakeholders’

interests. Simplicity and transparency are

also key.

Subject to shareholder approval, the 2023

Policy which follows, will apply from the

date of the 2023 AGM for a period of three

years, unless changes to the 2023 Policy are

required earlier. All remuneration payments

and payments for loss of oce must be

consistent with theterms of the Policy in

place at that time.

If the Group wishes to make a payment

which is not consistent with a policy,

itmust seek shareholder approval for

anamendment to the prevailing policy

before the payment can be made.

Decision-making process

fordetermination, review and

implementation of the 2023 Policy

The 2023 Policy was developed by the

Committee taking into account:

— clear alignment with ﬁnancial and

operational performance as well

astheGroup’s strategy, purpose,

valuesand KPIs

— changes in institutional views and

thebroader corporate governance

environment

— alternative structures such as

restricted shares

— the remuneration arrangements,

policiesand practices for the

workforcethroughout the Group

— promotion of high levels of Executive

Director share ownership to align

the interests ofshareholders and

Executive Directors

— the importance of attracting, retaining

and incentivising high-calibre Executives.

The Committee communicated details

oftherevised 2023 Policy to major

shareholders and employees in consultation

exercises held during the ﬁnancial year.

The Committee also took into account the

views of management and its independent

remuneration consultants but no individual

was involved in discussions about their

own remuneration.

In considering the use of restricted shares,

the Committee concluded that the existing

LTIP structure with speciﬁc performance

conditions provided a stronger link to the

strategy thanalternative structures.

The Committee will continue to consult

withshareholders where there is a material

change proposed in the way in which we

operate our Policy throughout the Policy

period to ensure their views are taken

into account.

The implementation of the Policy is

considered annually by the Committee

for the year ahead in light of the strategic

priorities while incentive targets are

alsoreviewed to check if they remain

appropriate or need to be recalibrated.

Alignment of the proposed 2023 Policy with the UK Corporate Governance Code 2018

Clarity

Remuneration arrangements should

betransparent and promote eective

engagement with shareholders

and workforce.

— The Policy is clear and is described in straightforward concise terms.

Simplicity

Remuneration structures should avoid

complexity and their rationale and operation

should be easy to understand.

— Remuneration structures are as simple as possible and market typical,

while at thesame time structured to ensure a strong alignment to performance,

strategy andminimising the risk of rewarding failure.

Risk

Remuneration arrangements should minimise

reputational and other risks from excessive

rewards. Behavioural risks that can arisefrom

target-based incentive plans, areidentiﬁed

and mitigated.

— The Policy has been designed to discourage inappropriate risk taking through:

— A weighting of incentive pay towards long-term incentives

— The balance between ﬁnancial and non-ﬁnancial measures

— A signiﬁcant portion of the annual bonus being paid in shares, the presence

of recovery provisions, as well as in-employment and post-employment

shareholding requirements.

Predictability

The range of possible values of rewards

toindividual directors and any other limits

ordiscretions should be identiﬁed and

explained at the time of approving the policy.

— The annual bonus and LTIP awards are subject to caps and plan dilution limits.

Examples of how remuneration varies depending on performance are set out

inthescenario charts on page 110

— The Committee may exercise its discretion to adjust Executive Directors’

remuneration if a formula-driven incentive pay-out is inappropriate in

the circumstances

— Outcomes will not reward poor performance.

Proportionality

The link between individual awards,

thedeliveryof strategy and the long-term

performance of the company should

be clear.Outcomes should not reward

poor performance.

— There is a broadly equal balance between ﬁxed pay and variable pay

at a target level of performance.

Alignment with culture

Incentive schemes should drive

behavioursconsistent with company

purpose, values and strategy.

— The Committee considers the Group’s culture alongside employee policies across

the Group when developing and implementing Executive Director remuneration

policies. There is a constant focus onthe appropriateness and fairness of

remuneration structure and outcomes throughout the Group and its workforce.

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The changes to the Policy approved in 2020 are set out below:

Proposed change Rationale

Variable pay Limit for annual bonus increased from 125% to 150%

of salary.

Maximum award for LTIP simpliﬁed from 150% of salary,

or200% of salary in exceptional circumstances to

200% of salary in all cases.

This will provide additional ﬂexibility over the 2023

Policy period. There is no current intention to vary the

limits for current Directors’ annual bonus or LTIP (they

will remain at 125% and 150%respectively for FY23).

However, the ﬂexibility may be required in thefuture,

for example for management succession where we

may wish to have a lower proportion for ﬁxedpay and

higher proportion for incentive pay. Any use of higher

award limits will be disclosed and explained inthe

following Directors’ Remuneration Report.

Bonus deferral Currently, one-third of a bonus earned by Executive

Directors is deferred as share award underthe

Deferred Bonus Plan. Each award vests after three

years subject to service and shares are delivered

atthe end of this period.

Instead, one third of the total annual bonus net of tax,

national insurance and other statutory deductions

will be delivered in shares immediately, subject to

aholding periodofthree years (Deferred Shares).

Deferred Shares would continue to be subject to

theholding period after cessation of employment

andclawback and malus provisions will continue to

apply inthe same way as the existing arrangements.

Deferred Shares will receive the dividends paid

bytheCompany from time to time.

Immediate delivery of the shares provides a greater

alignment with the interests of shareholders andis a

simpler approach.

The Group will have in place an appropriate mechanism

to ensure that shares subject to the holding period,

areunder its control.

LTIP vesting The Committee currently has the ﬂexibility to

use itsdiscretion to reduce the value of an LTIP

awardatthe time of vesting. This ﬂexibility will

bebroadened to allow the Committee to also use

discretion to increase or decrease the value of

anLTIPaward on vesting.

This will bring this aspect of the LTIP in line with

market practice and be consistent with the annual

bonus plan. Discretion will continue to be used

carefully andwith full rationale given in the following

Directors’Remuneration Report.

Pension The section covering pensions has been simpliﬁed

to reﬂect the position on 1 January 2023 whereby

allExecutive Director pension contributions are

inlinewith the contribution applying to the majority

ofthe workforce (currently 6% of salary).

Transitional arrangements for the Chief Executive

arenolonger required and have been removed.

Payment of NED

feesinshares

Allow the option to pay some or all of a Non-Executive

Director’s fees in shares.

Although the Company has no current intention

todoso, it is aware that the Government has stated

that it wishes to see this reform.

The Committee considers it prudent to add thisability

to the 2023 Policy to give this ﬂexibility should market

practice develop in this way.

Statement of consideration of shareholder views

As part of developing the 2023 Policy, the Committee consulted with its major shareholders and noted that the majority of feedback was

positive. The feedback received was taken into account in the formulation of the 2023 Policy andthe new Long Term Incentive Plan rules.

In particular the individual limit in exceptional circumstances in the LTIP rules was reduced from300% to 200% ofsalary, following feedback.

In considering the operation of the Policy, the Committee takes into account the published remuneration guidelines and speciﬁc views of

shareholders and proxy voting agencies. The Committee consults with the Company’s major shareholders, where considered appropriate,

regarding changes to the operation of the 2023 Policy and when the 2023 Policy is being reviewed and brought to shareholders for approval.

The Committee considers speciﬁc concerns or matters raised at any time by shareholders. In addition, the Chair of the Committee regularly

participates in governance meetings with the Company Chairman, oered to larger institutional shareholders normally on an annual basis.

Engagement on Executive Director remuneration and the Directors’ Remuneration Policy

At the Employee Voice Forum (Forum) led by Louise Hardy, Non-Executive Director responsible for employee engagement during late

September and early October 2022, the Chair of the Committee attended and engaged with Forum members on remuneration matters.

During the course of the presentation, Octavia Morley covered such matters as the remit of the Committee, the Committee’s approach

toreward and how it seeks to achieve the right balance in remuneration decisions. A table showing how the reward package cascaded

across the Group was shared and a more detailed discussion was held on how the variable reward plans and their measures are developed.

As part of this, thedraft 2023 Policy was discussed and feedback 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 employees had

anyconcerns about the 2023 Policy.

In general, the Forum attendees were supportive of the 2023 Policy and thought it was transparent and fair. However, they agreed more

could bedone to assist with understanding how their own annual bonus schemes were tracking during the year.

105

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

This section sets out the 2023 Policy that will guide the Remuneration Committee’s decision-making process inthearea of Executive

Director remuneration. This can also be found at www.crestnicholson.com/investors/results-centre.

The 2020 Policy was approved at the Company’s AGM on 24 March 2020 and has reached the end of its three-year cycle. Subject to

receiving shareholder approval at the Company’s AGM in March 2023, the new Policy, set out below, will replace thecurrent Policy –

eective from the date of the 2023 AGM for a period of up to three years.

Element and link to strategy Operation (including maximum opportunity)

Base salary for

Executive Directors

Recognises individual

experience, responsibility

andperformance.

Provides an appropriate

levelofﬁxed pay without

over-reliance on variable pay.

Essential to recruit, incentivise

andretain the best people

in the market to execute

theGroup’s strategy.

Salaries are normally reviewed annually, or when there is a change in position or responsibility,

taking into account:

— Personal and Group performance

— Salary increase received by the wider workforce

— Inﬂation and earnings forecasts

— External marketplace comparisons.

Base salary is set with reference to similar roles in a group of UK housebuilders and other listed

companiesmore widely.

The exact positioning of salary depends on a variety of factors, including:

— The speciﬁc nature of the role and responsibility (particularly where this is not directly comparable

to roles outside the Group)

— Individual experience and performance

— Cost of living increases and inﬂation

— Group performance

— Relativities to other Group employees

— Market practice among other UK housebuilders.

A new Director may be appointed at a salary less than the prevailing market rate but which may increase

over a period to the desired positioning, subject to satisfactory performance.

While the Committee is guided by increases applied to employees in general, it retains discretion to

applyan above-employee increase to a Director’s salary. This may occur, for example, should there be

achange in: the scope of an individual’s role, the complexity of the business or market, or the size or

valueofthe business that the Committee believes justiﬁes a further adjustment of salary.

Performance framework

The Committee considers and sets appropriate individual Director salary levels annually having regard

to the factors noted in this element of the Policy. Salary is not linked to speciﬁc ﬁnancial or non-ﬁnancial

performance measures.

Fees for Non-Executive

Directors

Remunerates appropriately

based on individual experience,

time commitment and

responsibilities.

Non-Executive Directors’ fees are paid in cash and/or shares and are not performance related.

Fees are reviewed annually and set taking into consideration the time commitment and responsibilities

ofthe role, the sector and market practice.

Fees are determined and approved by the Board upon a recommendation from the Executive Directors.

The Chairman’s fee is set by the Committee. No Director is involved in setting his or her own fee.

Additional fees may be payable in relation to extra responsibilities or time commitments undertaken,

forexample chairing a Board Committee and/or holding the position of Senior Independent Director.

Any reasonable expenses incurred in carrying out duties will be fully reimbursed by the Company

includingany personal taxation associated with such expenses.

Beneﬁts

Provides a competitive level

ofbeneﬁts and encourages

thewellbeing and engagement

ofour people.

A range of beneﬁts are provided, including but not limited to:

— Family private medical insurance

— Company car or car allowance

— Income protection

— Personal accident insurance

— Life assurance

— Annual health check

— Holiday and sick pay.

The cost of these beneﬁts varies over time depending on their cost in the market and individual

circumstances.

Directors who are required to move for a business reason may, where appropriate, be provided with

relocation assistance.

Where the Group oers a ﬂexible beneﬁts approach to employees generally (where the value of one

beneﬁt may be exchanged for another), a Director would also have the option to do so. Other beneﬁts

inline with those received by employees generally may also be oered at the discretion of the Committee,

suchas long service awards or recognition of life events.

The Group may also operate all-employee share incentive plans including Sharesave (SAYE), Share

Incentive Plan (SIP) and other HMRC tax-approved all-employee schemes. Directors may participate

inthese on the same terms as other employees.

As a general principle, beneﬁts are not provided to Non-Executive Directors. However, there may be

exceptional circumstances under which the Group provides a beneﬁt, for example private medical cover,

either with or without their meeting the cost (at the Group’s negotiated rate).

Directors’ Remuneration

Policy continued

Remuneration Policy table

106

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Annual Integrated Report 2022

Element and link to strategy Operation (including maximum opportunity)

Pension

Provides retirement planning

and protection to employees

and their family during their

working life.

Executive Directors may participate in the Crest Nicholson deﬁned contribution pension scheme or,

wheredeemed appropriate, receive cash in lieu of all or some of such beneﬁt.

A contribution will be payable in line with the pension contribution available to the majority of the workforce,

currently 6% of salary.

Annual bonus

Incentivises and rewards

individuals to execute

theGroup’s strategy and

achieve objectives linked

to its 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).

Annual bonus is non-pensionable.

Deferred Shares will receive the dividends paid by the Company from time to time.

Performance framework

At least half of the bonus will be linked to one or more ﬁnancial metrics with the remainder linked to

non-ﬁnancial metrics, normally measured over a period of one ﬁnancial year. Non-ﬁnancial metrics will

be based on relevant operational, business, ESG or personalobjectives. The speciﬁc performance targets

are set withthe aim of setting stretching targets which incentivise and reward improved performance.

The Committee may, in exceptional circumstances, use its discretion to amend the bonus outcome

ifit believes that it does not properly reﬂect overall underlying business performance, an individual’s

contribution or some other factor.

The bonus (cash and Deferred Shares) is subject to recovery provisions for three years from the date of

payment in the event of serious misconduct, corporate failure, material misstatement of ﬁnancial statements,

material failure of risk management, material breach of health and safety or environmental regulations,

serious reputational damage arising from misconduct, error in calculation, or events that are similar in

natureor outcome to those above.

Repayments may be made through a reduction in future bonus or share awards on vesting, or by directrepayment.

Long-Term Incentive Plan (LTIP)

Incentivises long-term

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.

LTIP awards will 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 oce 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.

Performance framework

Awards will be subject to challenging performance conditions in line with the Group’s strategy

(includingESG measures) and Total Shareholder Return (TSR) and will be measured normally by reference

toathree-year performance period. A maximum of 25% of each element vests for achieving the

thresholdperformance target.

The Committee intends to use TSR (50%), ROCE (35%) and ESG (15%) for new awards and the range of

metrics over the policy period is expected to remain consistent, though the Committee reserves discretion

tochange these metrics. The Committee will review the measures, their relative weightings and targets

prior to each award and may make changes as is deemed appropriate.

The Committee reviews the measures, their relative weightings and targets prior to each award and makes

changes as are deemed appropriate.

The Committee may, in exceptional circumstances, use its discretion to adjust the level of vesting of LTIP

awards if it believes it does not properly reﬂect overall underlying business performance, shareholders’

experience, an individual’s contribution or any combination thereof.

LTIP awards are subject to clawback and malus at the Committee’s discretion in the event of material

misstatement of ﬁnancial statements, material failure of risk management, corporate failure, material

breachof health and safety or environmental regulations, serious reputational damage arising from

misconduct, serious misconduct, error in calculation, or events that are similar in nature or outcome

tothoseset out above.

Clawback and malus applies if such an event occurs within three years of an award vesting or, in the

caseofan option, when it ﬁrst becomes exercisable. Repayments may be made through a reduction

infuture bonus or share awards on vesting, or by direct repayment.

Minimum shareholding

requirement

Encourages long-term

commitment and alignment

withshareholder interests.

Executive Directors are expected to build up and retain a signiﬁcant shareholding equivalent to at least

200% of their base salary.

Executive Directors are required to retain 50% of vested deferred bonus/shares and LTIP awards after

saleofshares for tax, national insurance or other statutory deductions until the requirement is met.

Post-service requirement

An Executive Director shall continue to hold shares equivalent to 200% of their base salary for a

period of two years following termination of their employment. If an Executive Director holds less than

200% of their base salary at the date of cessation, they must continue to hold that lower level for the

same period oftwo years.

Shares purchased by an Executive Director from their own funds will not be required to be held.

The Committee may, in exceptional circumstances, exercise its discretion to adjust the holding requirement.

107

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Strategic

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Governance and

Directors’ Report

Financial

Statements

Remuneration policy for other employees

The 2023 Policy described in the previous table applies speciﬁcally to the Company’s Executive Directors and Non-Executive Directors.

The Committee believes that it is appropriate that the reward of the Group’s senior management be linked to Group performance

andaligned with the growth of shareholder value. The same remuneration and beneﬁts framework is operated across the Group:

Area Policy and operation

Salary The Policy applied to Executive Directors is applied in the same way to the wider workforce.

Beneﬁts The Policy applied to Executive Directors is applied in the same way to the wider workforce.

Certainbeneﬁts apply at higher levels based on seniority, relate to speciﬁc roles or have shorter

ornowaiting periods.

Annual bonus Annual bonus schemes operate throughout the Group at all levels of seniority. Performance targets and

theamount which can be earned are based on seniority and the nature of the role and responsibilities.

Long-Term Incentive Plan Share-based long-term incentive arrangements also apply to senior management at areduced opportunity

level commensurate with the seniority and level of responsibility of participants.

SAYE All eligible employees are invited to participate in the Crest Nicholson Sharesave scheme or any other

all-employee scheme operated by the Company.

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 wider workforce and carefully

considers the employee salary increase budget when making reward decisions for Directors. The Committee considers industry

benchmarking in the context of monitoring its overall position on Director and employee pay.

Approach to recruitment remuneration

The table below sets out the components that would be considered for inclusion in the remuneration package of an Executive Director

onappointment, and the approach the Committee will adopt in respect of each element.

Area Policy and operation

Overall For an external appointment, the Committee will take account of an individual’s remuneration package

intheir prior role, the market positioning of the package and their skills and experience. The Committee

willnot pay more than necessary to facilitate the recruitment of an individual.

For an internal appointment, the Committee may initially position remuneration below market level and

increase overall pay levels over a period of time to achieve alignment with market levels for the role,

subject to Group and individual performance.

Base salary Salary level will be set taking into account the skills and experience of the individual, responsibilities

of therole and salaries paid for similar roles in comparable organisations. The direct comparability or

otherwise of those other roles will be a material factor.

Pension and beneﬁts Directors will be eligible to participate in Crest Nicholson’s beneﬁt plans and the Crest Nicholson deﬁned

contribution pension scheme or salary supplement scheme in accordance with the Policy set out in the

Policy table.

Annual bonus Directors will be eligible to participate in the discretionary annual bonus scheme as set out in the

Policytable.

Depending on the timing of the appointment, the Committee may deem it appropriate to set dierent

annual bonus performance conditions to the current Executive Directors in the ﬁrst performance year

ofappointment.

Long-Term Incentive Plan An Executive Director will be eligible to participate in the LTIP set out in the Policy table. The opportunity

levels will be consistent with what is disclosed in the Policy table.

An LTIP award may be made shortly following an appointment.

Replacement awards The Committee may grant an Executive Director replacement awards to compensate for forfeited

remuneration (including bonus and long-term incentive awards) from previous employment.

Should replacement awards be made, the awards granted would be no more generous in terms of quantum

or vesting period than the awards due to be forfeited.

In determining the quantum and structure of these commitments, the Committee will seek to replicate the

fair value of the award and, as far as is practical, the timing and performance of the remuneration foregone.

For an internal appointment, any variable pay element awarded in respect of their prior role may be

permitted to pay out according to its terms.

Other The Committee may agree that the Group will meet certain relocation or other transitional expenses

deemed appropriate.

Directors’ Remuneration

Policy continued

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Annual Integrated Report 2022

Service contracts and policy on payment for loss of oce

For Executive Directors, nine months’ notice of termination is required from either party and this will be the approach for all new appointments.

The table below sets out the Committee’s policy on termination arrangements for Executive Directors. References to good or bad leavers

beloware examples of how the Policy could work and are not deﬁnitive:

Area Policy and operation

Overall Because terminations do not always ﬁt neatly into deﬁned categories, when considering the suitable

treatment of a termination, the Committee will have regard to all relevant facts and circumstances

availableat the time including the reason, contractual obligations and incentive plan rules.

The Committee is ﬁrmly set against rewarding failure. The Committee retains discretion for payments to

be made in good faith in relation to very speciﬁc legal circumstances, such as the discharge of an existing

legal obligation in respect of salary, beneﬁts and other contractual entitlements, damages for breach

ofobligation and a settlement or compromise of any claim or potential claim arising with the termination

of a person’s oce or employment. In any event the Committee will only make such payments where

itconsiders it to be in the best interests of the Group and its shareholders, with full disclosure of any

suchpayments in the following year’s Directors’ Remuneration Report.

Contractual payments Crest Nicholson may terminate service contracts immediately by making a payment in lieu of notice

consisting of base salary, pension and any contractual beneﬁts for the unexpired period of notice.

This payment may be made as either a lump sum or as instalments over the period.

If Crest Nicholson elects to make this payment by instalments, the Executive Director normally has

a duty to seek alternative employment and, where practical, any remuneration received from a new

role will be oset against the payment.

Annual bonus In the event of termination for a reason other than resignation or gross misconduct for material performance

or conduct concerns, a Director may be entitled, at the discretion of the Committee, to a bonus in respect

of the year in which their employment terminates.

Payment would be reduced on a pro rata basis to reﬂect the portion of the bonus year worked, be paid

atthe usual time and be subject to an assessment of performance over the period.

For any bonus payable in shares, these shares will normally continue to be subject to the holding period

post cessation of employment.

In relation to Deferred Bonus Awards made in or prior to 2023, if an individual is categorised as a good

leaver then, other than in exceptional circumstances, they will continue to hold the deferred share award,

which will vest on the normal vesting date. If an individual is considered by the Committee to be a bad

leaver, their deferred share awards will lapse in full.

Good leavers are those leaving under pre-determined circumstances such as retirement (proved to the

satisfaction of the Board), redundancy, ill-health, death or disability (proved to the satisfaction of the Board),

or those deemed by the Board in its absolute discretion to be good leavers given the circumstances

surrounding termination. All other leavers would be bad leavers.

Long-term incentives Individuals would be deﬁned as good or bad leavers, with good leavers being those leaving under

pre-determined circumstances such as retirement (proved to the satisfaction of the Board), redundancy,

ill-health, death or disability (proved to the satisfaction of the Board), or those deemed by the Board in its

absolute discretion to be good leavers given the circumstances surrounding termination. All other leavers

would be bad leavers.

If an individual is categorised as a good leaver then, other than in exceptional circumstances, the award

willvest on the normal vesting date reﬂecting the extent to which performance targets have been met.

Thenumber of shares would normally reﬂect the reduced service period, pro rata, and any amounts

equivalent to any dividends or shareholder distributions made during the vesting period. Thepost-vesting

holding period would also apply, other than in exceptional circumstances.

If an individual is determined to be a bad leaver, their awards will lapse in full.

Shareholding requirements The Committee would enforce the post cessation of employment shareholding requirements, as described

in the Policy.

Other The Committee may provide for outplacement services where it considers that this is reasonable.

109

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Performance conditions and target setting

Performance metrics for incentives, weightings and targets are considered annually for the year ahead. The Committee considers

theapplication of the prevailing policy inthe prior year and whether in light of the strategy, market practice or the remuneration policy

for the wider workforce, changesare required for the year ahead. Targets for the annual bonus and LTIP awards are also reviewed and

consideration is given as towhether these remain appropriate or need to be recalibrated. The speciﬁc performance targets seek to be

stretching to incentivise and reward improved performance. Shareholders’ views will be sought depending on the changes proposed.

Illustration of application of Policy in FY23

The composition and structure of the remuneration package for Executive Directors in three performance scenarios is set out in the

chartbelow:

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.

£774k

100% 45%

30%

29 %

32%

39%

£1,741k

£2,708k

£3,235k

25%

Minimum Target Maximum

£441k

100% 45%

30%

29 %

32%

39%

£984k

£1,526k

£1,823k

25%

Minimum Target Maximum

£3,500k

£3,000k

£2,500k

£2,000k

£1,500k

£1,000k

£500k

£0

Peter Truscott Duncan Cooper

Fixed pay

Annual bonus

LTI P

LTIP with 50% share

price growth

Directors’ Remuneration

Policy continued

Legacy arrangements

For the avoidance of doubt, authority is given to the Committee to honour any commitments entered into with current or former Directors

undera previous shareholder-approved remuneration policy that has been disclosed to shareholders in previous remuneration reports.

How the Committee will use its discretion

Incentive plans will be operated in line with the rules of each plan, together with relevant laws and regulations. However, it is important

that the Committee retains appropriate discretion (as is customary) over the administration and operation ofincentive plans.

Discretion includes, but is not limited to, the following in relation to incentive schemes:

— Changes or adjustments required in certain circumstances (e.g. change of control, rights issues, special corporate or dividend events,

orchange in business strategy)

— Determination of vesting (or payment) and the treatment of leavers and vesting for leavers

— As permitted by HMRC and other regulations, in respect of SAYE, SIP or any other all-employee schemes.

In relation to incentive schemes including annual bonus and LTIP, the Committee may adjust performance targets and/or measures

wherethese have ceased to be appropriate. Such adjusted targets or measures will not be materially less dicult to satisfy. Any use

ofthisdiscretion would, where relevant, be explained in future Directors’ Remuneration Reports and may be subject to consultation

withmajor shareholders where appropriate.

110

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Annual Integrated Report 2022

Annual Report

on Remuneration

The information in this Report is audited where this is indicated, and otherwise unaudited.

The table below sets out FY22 remuneration for Executive Directors and Non-Executive Directors.

FY22 remuneration payable to Directors (audited)

Salary

£000

Beneﬁts

£000

Bonus

£000

LTIPs

£000

Retirement

beneﬁts

£000

Total

pay

£000

Total

ﬁxed pay

£000

Total

variable pay

£000

Peter Truscott

2022 666 25 670 329 67 1,757 758 999

2021 650 24 683 – 65 1,422 739 683

Duncan Cooper

2022 374 22 376 138 22 932 418 514

2021 365 22 384 – 22 793 409 384

Former Director

Tom Nicholson

2022 219 12 220 142 13 606 244 362

2021 374 21 393 – 22 810 417 393

1 Salary: Where salaries are adjusted for beneﬁts which are provided via salary exchange, such salaries are quoted as the gross ﬁgure disregarding the eect 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 LTI Ps: This ﬁgure includes the value of additional shares awarded in respect of dividend equivalents and has been estimated based on the average share price of 224.2 pence over

the three months from 1 August 2022 to 31 October 2022 as these awards are notexercisable until after the date of this report. These estimated ﬁgures will be restated for the

actualshare price on the date they ﬁrst become exercisable in next year’s report.

4 Retirement beneﬁts: Salary supplement of 10% (employee maximum) in respect of Peter Truscott; 6% (employee majority rate) in respect of Tom Nicholson and Duncan Cooper.

No Directors have a prospective interest in a deﬁned beneﬁt scheme.

5 Tom Nicholson: The ﬁgures stated in columns Salary, Beneﬁts, Bonus and Retirement beneﬁts are to the date Tom Nicholson stepped down from the Board on 27 May 2022.

Column 4 (LTIP) represents the period 1 November 2019 to 31 October 2022 (the end of the Award’s performance period) as a result of ongoing garden leave. Further details

regarding Tom’s leaving arrangements can be found on page 115.

The table below shows the remuneration for the Non-Executive Directors who served during FY22.

2022 fee

£000

2021 fee

£000

Iain Ferguson 205 200

David Arnold

62 10

Lucinda Bell 53 52

Louise Hardy 58 56

Octavia Morley 70 68

1 David Arnold: joined Board as Non-Executive Director and Chair of the Audit and Risk Committee from 1 September 2021.

Pay for performance in FY22 (audited)

Annual bonus targets and outcomes

The performance measures set for FY22 were a combination of ﬁnancial elements (70% of the bonus maximum) and non-ﬁnancial elements

(30% of the bonus maximum) aligned to our strategy. The maximum bonus potential for PeterTruscott and Duncan Cooper was 125%

ofsalary. Tom Nicholson was entitled to a bonus of 125% of salary pro rated to 31 August 2022, the end of his handover period.

The following results were achieved for each element of the annual bonus incentive:

Measure

Weighting

(% of maximum)

Threshold

(10% or 20% of

maximum)

On-target

(50% of

maximum)

Stretch and

maximum

(100% of

maximum) Actual

% of maximum

bonus

achieved

% of

salary

Financial

Adjusted proﬁt before tax 50% £123.5m £130.0m £143.0m £137.8m 40.1 50.1

Net cash 20% £194.6m £204.8m £225.3m £276.5m 20 25

Non-ﬁnancial

Customer service and quality 10% 90% 92% 94% 88.0% 0 0

Environmental, Social and

Governance – reduction in carbon

emissions

10% 2.496 2.480 2.464 1.82 10 12.5

Personal and strategic objectives

Voluntary employee turnover 5% 33.25% 31.50% 29.75% 27. 39% 5 6.25

Employee engagement 5% 75.00% 76.88% 78.75% 83% 5 6.25

SHE leadership Less up to 10%

adjustment

– –

Total bonus 80.1 100.1

1 10% for ﬁnancial measures. 20% for non-ﬁnancial measures.

2 Financial measures and non-ﬁnancial measures are as deﬁned in the table overleaf.

3 Scope 1 and 2 emissions intensity – tCO

e per 100 sq. m of completed ﬂoor area.

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

As set out in the Financial Review on pages 52–56, the Group delivered strong ﬁnancial performance against its key ﬁnancial measures

during FY22 despite some market uncertainty in the second half. The FY22 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 and quality,

voluntary employee turnover, employee engagement, carbonreduction and SHE leadership. Appropriately stretching targets were set

basedon forecasts relating to the ﬁnancial and market outlook atthe endof 2021.

During the period, the Group made good progress reducing voluntary employee turnover and increasing employee engagement,

butdidnot perform as strongly with respect to customer service and quality with performance below the 90% threshold

. However,

strongprogress continued to be made in relation to carbon reduction during the year which is a key part of our sustainability strategy

assetoutonpages26–29.

The Committee reviewed the formulaic performance outcome against overall Group performance, the experience of shareholders,

employees and other stakeholders and determined that discretion was not needed to ensure a proportionate outcome.

During the year the Committee continued to carefully consider the Group’s ongoing progress in respect of remediating legacy buildings

aected by combustible materials or building safety concerns. Although aected buildings were constructed and sold prior to the Executive

Directors joining the Group in 2019, the Committee has carefully monitored the operation of schemes during the year to ensure that no

measure acted as any incentive not to progress all remedial solutions and incur associated costs as quickly as possible. The Committee

reviewed the circumstances in detailin determining the outcome of the FY22 bonus scheme and was satisﬁed that the schemes had

operated appropriately.

The Committee also considered the performance ahead of stretch with respect to net cash, reviewing the underlying reasons for these

inthe context of how the target was set. The Committee is satisﬁed that the original target was suitably stretching at the time it was set

inthecontext of market risk (late 2021), and the Group’s overall performance in the year.

1 Further information about our customer service performance can be found on page 14.

FY22 annual bonus metrics

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.

Bonus target Description Link to strategy

Adjusted proﬁt before tax

Adjusted proﬁt before tax as deﬁned on pages 188–189.

Net cash Cash and cash equivalents plus non-current and current interest-bearing loans and

borrowings as at 31 October 2022.

Customer service and quality

The 12-month NHBC ‘recommend your housebuilder’ score at31December 2022.

Environmental, Social

and Governance

Reduction in scope 1 and scope 2 carbon emissions during FY22 (tCO

e/100 sq. m

ofcompleted ﬂoor area) compared to FY19 equivalent. See page 38 for further

information about the Group’s greenhouse gas emissions.

Personal and strategic objectives

Voluntary employee turnover Resignations or retirements during the year as a proportion of total employees,

compared to the position at 31 October 2021.

Employee engagement Employee engagement performance score from the employee survey carried out

duringSeptember 2022.

SHE leadership A downwards adjustment of up to 10% of the bonus achieved should SHE leadership

fall below the standard expected by the Group.

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

People

Sustainability & Social Value

Safety, Health & Environment

Financial Targets

FY22 annual bonus payments and deferral

One-third of the annual bonus is deferred into a share award which will ordinarily become exercisable after three years from the date

ofgrant. Other than in certain good leaver situations, the awards are subject to being in service when the awards become exercisable

andare subject to certain withholding and recovery conditions, exercisable at the Committee’s discretion.

A full breakdown of the bonus payments and shares award deferral is set out below:

Bonus total Bonus paid in cash Bonus deferred into shares

£ £ % bonus £ % bonus

Peter Truscott 670,036 448,924 67 221,112 33

Duncan Cooper 376,251 252,088 67 124,163 33

Tom Nicholson 219,698

147,198 67 72,500 33

1 Bonus for the period 1 November 2021 to 27 May 2022. See Loss of oce payments and payments to past directors on page 115 for details of bonus applicable for the period

28 May 2022 to 31 August 2022 (end of handover period).

Annual Report

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Annual Integrated Report 2022

LTIP targets and outcomes (audited)

The FY20 LTIP award, granted on 20 February 2020, was based on performance over the three years ended 31 October 2022 and will

become exercisable from 20 February 2023 (subject to the Director still being in employment or otherwise having been a good leaver).

The table below sets out details of the measures, performance targets and actual performance which results in 54.1% of the awards vesting.

Measure Weighting

Performance

period

Threshold

(25%)

Maximum

(100%)

Actual

performance

% of award

achieved

Adjusted EPS in FY22 40% 3 years ending 31.10.22 48.9 pence 52.3 pence 42.0 pence 0.0%

Adjusted EBIT margin in FY22 20% 3 years ending 31.10.22 14.2% 15.2% 15.4% 100.0%

ROCE in FY22 40% 3 years ending 31.10.22 19.3% 23.3% 22.5%

85.2%

Total 100% 3 years ending 31.10.22 – – – 54.1%

1 Adjusted earnings per share as deﬁned on page 189.

2 Adjusted EBIT Margin as deﬁned on page 189.

3 ROCE has been calculated using unrounded numbers. ROCE presented in the ﬁnancial statements and elsewhere in the Annual Integrated Report has been calculated

using numbers rounded to £0.1m.

There was signiﬁcant disruption during the performance period associated with COVID-19. The Group navigated this uncertainty and

continued to implement its strategy over the performance period.

The targets for this award were set prior to the COVID-19 pandemic and were based on the business plan at that time. Nevertheless,

the Group has delivered signiﬁcant improvements in Adjusted EBIT Margin and ROCE during that time resulting in achievement of 100%

and 85.2% ofthose measures, respectively. Although Adjusted EPS has improved signiﬁcantly, it has not yet returned to levels anticipated

when the target was setresulting in no award being achieved for this measure.

The Committee considers that this level of vesting is appropriate reﬂecting the overall performance over the last three years.

In accordance with the LTIP rules, the vested award will be subject to a two-year post vesting holding period during which the Executive

Director cannot sell those shares other than to satisfy related tax liabilities. Dividends paid during the performance period will also be

awarded in additional shares. The Group will have in place an appropriate mechanism to ensure that shares subject to the holding period,

are under its control.

The resulting vesting will be as follows:

Original

number of

share awards

in 2020 LTIP

Overall

percentage

vesting

Number

of awards

vesting

based on

performance

Dividend

equivalents

(number of

shares)

Number

of awards

vesting

Estimate of

total values

of awards

vesting

(£)

Value

attributable

to share price

change since

award

(£)

Peter Truscott 253,016 54.1 136,882 9,669 146,551 328,586 -424,393

Duncan Cooper 106,558 54.1 57,648 4,072 61,719 138,383 -178,732

Tom Nicholson

109,186 54.1 59,070 4,172 63,242 141,796 -183,140

1 In accordance with the LTIP rules, the Committee has discretion to allow LTIP participants to receive the beneﬁt of any dividends arising between the grant date and exercise

date of the award in the form of additional shares.

2 This ﬁgure has been estimated based on the average share price of 224.21 pence over the three months from 1 August 2022 to 31 October 2022 as these awards are not

exercisableuntil after the date of this report. These estimated ﬁgures will be restated for the actual share price on the date they ﬁrst become exercisable in next year’s report.

3 The share price at the date of grant was 513.8 pence. At 31 October 2022 the value of shares that have vested has fallen by 56.4%.

4 Details of leaving arrangements can be found on page 115.

Scheme interests awarded during the ﬁnancial year (audited)

On 28 January 2022 in accordance with the Policy, an LTIP award of 150% of salary was made to Peter Truscott, Duncan Cooper

and Tom Nicholson.

The following table sets out the FY22 awards granted to Executive Directors under the Group’s LTIP for the performance period

1 November2021 to 31 October 2024:

Award

Type

Date of

grant

Number

ofshares

Face value

of award

£000

% of

salary

% of award

receivable

at threshold

Peter Truscott Performance Nil-cost option 28.01.22 320,764 1,004 150 25

Duncan Cooper Performance Nil-cost option 28.01.22 180,121 564 150 25

Tom Nicholson Performance Nil-cost option 28.01.22 184,563 578 150 25

1 Performance conditions in each case measured in FY24: 40% relative TSR (threshold median to maximum upper quartile), 30% average ROCE (threshold 19% to maximum 22%),

30%Adjusted EBIT margin (threshold 16% to maximum 18%).

2 Face value calculated based on 313.1 pence, the average of the closing middle market share price for the ﬁve preceding dealing days of the grant date.

On 28 January 2022, the following Directors received an award under the deferred bonus plan in respect of the deferred element

oftheirFY21 annual bonus as set out on page 115 of the Annual Integrated Report 2021.

Award

Type

Date of

grant

Number

ofshares

Face value

of award

£000

% of

bonus

payable

Peter Truscott Service Nil-cost option 28.01.22 73,597 226 33

Duncan Cooper Service Nil-cost option 28.01.22 41,328 127 33

Tom Nicholson Service Nil-cost option 28.01.22 42,347 130 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 and 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 306.4 pence, the closing middle market share price on the preceding dealing day.

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Governance and

Directors’ Report

Financial

Statements

Directors’ shareholdings at the end of the ﬁnancial year (audited)

The table below sets out the number of shares and share awards held by Directors (including any connected persons) as at 31 October 2022.

There have been no changes to Directors’ interests between 31 October 2022 and 17 January 2023.

Shares held, including

connected persons at

31 October 2022

Outstanding

share awards

31 October 2022

with performance

conditions

Outstanding

share awards

31 October 2022

without performance

conditions

Total share

interests at

31 October 2022

Shareholding

as a

percentage of salary

and share price of

202.0 pence at

31 October 2022

Iain Ferguson 150,000 N/A N/A 150,000 N/A

Peter Truscott 415,171 871,144 73,837 1,360,152 137.1%

Duncan Cooper 37,200 453,660 41,648 532,508 31.9%

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

Former Directors

Tom Nicholson

33,485 464,848 53,291 551,624 32.4%

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 2022.

2 Shareholding includes shares held including connected persons, outstanding share awards without performance conditions (e.g. Deferred Bonus Plan (DBP) and Sharesave)

netoftaxand excludes outstanding share awards with performance conditions (e.g. LTIP).

3 Shareholding as at date of stepping down from the Board: 27 May 2022.

Directors’ shareholdings and share interests

Share ownership plays a key role in aligning Executive Directors’ interests with the interests of shareholders and over the long term.

The Policy requires Executive Directors to build up and maintain a signiﬁcant shareholding in the Company of 200% of salary and, following

cessation ofemployment, 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. Peter Truscott and Duncan Cooper will build up theirshareholding over time.

The chart below shows the Executive Directors’ current shareholdings together with unvested DBP/Sharesave awards and the illustrative

eect 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

125.3% 28.1%34.8%11.8%

20.0% 11.8% 32.3% 135.9%

0% 180%160%140%120%100%80%60%40%20% 200%

Shares owned outright

Unvested DBP/Sharesave awards

Eect of 50% of LTIPs vesting Balance to achieve 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.

owned

outright

Unvested

DBP shares

(post-tax)

Unvested

Sharesave

Total

Indicative value

31 October 2022 (£)

Consequence of a +/- £1

share price change (£)

Peter Truscott 415,171 39,134 – 454,305 917,695 454,305

Duncan Cooper 37,200 22,073 – 59,273 119,732 59,273

1 Value calculated using the share price of 202.0 pence as at 31 October 2022.

Annual Report

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Annual Integrated Report 2022

Executive Directors’ scheme interests at the end of the ﬁnancial year (audited)

The tables below set out the Executive Directors’ outstanding share awards under the LTIP and DBP as at 31 October 2022 including

any dividend equivalents awarded in the year. The DBP and SAYE awards do not have any performance criteria attached to them.

The LTIP awards have performance criteria attached to them in accordance with the Policy and as set out in the relevant Directors’

Remuneration Report.

Outstanding

options/

awards at

31 October

2021

Date of

grant Granted Exercised Lapsed

Vested

but not

exercised

Outstanding

options/

awards at

31 October

2022

Market

price

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 – – – – 253,016 5.138 Nil – – 20.02.2023 19.02.2030

2021 297,364 08.02.2021 297,364 3.279 Nil – – 08.02.2024 07.02.2031

2022 28.01.2022 320,764 320,764 3.131 Nil – – 08.01.2025 27.01. 2032

DBP

2020

240 28.02.2020 – – – – 240 4.530 Nil – – 28.02.2023 27.02.2030

2022 28.01.2022 73,597 – – – 73,597 3.064 Nil – – 28.01.2025 27.01.2032

Duncan Cooper

LTIP

2019

141,389 21.06.2019 – – 141,389 – – 3.554 Nil – – 21.06.2022 20.06.2029

2020 106,558 20.02.2020 – – – – 106,558 5.138 Nil – – 20.02.2023 19.02.2030

2021 166,981 08.02.2021 – – – – 166,981 3.279 Nil – – 08.02.2024 07.02.2031

2022 – 28.01.2022 180,121 – – – 180,121 3.131 Nil – – 28.01.2025 27.01.2032

DBP

2020

320 28.02.2020 – – – – 320 4.530 Nil – – 28.02.2023 27.02.2030

2022 – 28.01.2022 41,328 – – – 41,328 3.064 Nil – – 28.01.2025 27.01.2032

Tom Nicholson

LTIP

2019

137,169 21.06.2019 – – 137,169 – – 3.554 Nil – – 21.06.2022 20.06.2029

2020 109,186 20.02.2020 – – – – 109,186 5.138 Nil – – 20.02.2023 19.02.2030

2021 171,099 08.02.2021 – – – – 171,099 3.279 Nil – – 08.02.2024 07.02.2031

2022 – 28.01.2022 184,563 – – – 184,563 3.131 Nil – – 28.01.2025 27.01.2032

DBP

2020

356 28.02.2020 – – – – 356 4.530 Nil – – 28.02.2023 27.02.2030

2022 – 28.01.2022 42,347 – – – 42,347 3.064 Nil – – 28.01.2025 27.01.2032

SAYE

2020

10,588 07.08.2020 – – – – 10,588 2.120 1.700 – – 01.09.2023 28.02.2024

Loss of oce payments and payments to past directors (audited)

Tom Nicholson

Tom Nicholson was served nine months’ notice by the Company on 27 May 2022 and stepped down from the Board as Chief Operating

Ocer with immediate eect. A period of handover took place until 31 August 2022, and the remainder of the nine-month notice period

isbeing taken as garden leave from 1 September 2022 until 26 February 2023 (Termination Date). During this period Tom will continue to

receive his salary, pensionand beneﬁts, paidmonthly. The salary, pension and beneﬁts received for the remainder of FY22 after stepping

down from the Boardare set out in the table on the following page, alongside the payments to be made in FY23 until the end of his notice

period. The Remuneration Committee has usedits discretion to determine the following approach to outstanding incentive awards:

— Pro rata FY22 bonus for the period 1 November 2021 to 31 August 2022 (the end of the period of handover) with 33% deferred into

sharesin accordance with the bonus plan

— Unvested 2019 and 2021 DBP (over 356 shares and 42,347 shares respectively) to vest at the normal time in accordance with

the relevantrules (being February 2023 and February 2025 respectively) together with any dividend equivalent payments

— Unvested 2020, 2021 and 2022 LTIP awards (over 109,186, 171,099 and 184,563 shares respectively) to be pro-rated to the Termination

Date to vest at the normal time (being February 2023, February 2024 and January 2025 respectively) based on the achievement

oftheperformance conditions together with any dividend equivalent payments. A two-year post-vesting holding period will continue

toapplyinaccordance with the condition of the awards

— Sharesave award over 10,588 shares to be treated in accordance with the Sharesave rules.

115

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Annual Integrated Report 2022

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Governance and

Directors’ Report

Financial

Statements

Remuneration in respect of

FY22

Remuneration in respect of

FY23

Salary 164,651 126,114

FY22 Bonus

101,575 –

Pension 9,879 7,567

Beneﬁts 8,788 6,746

Annual leave – accrued but untaken 17,779 –

Total 302,672 140,427

1 Represents bonus accrued between end of directorship on 27 May 2022 and end of handover period 31 August 2022. Amounts relating to the period of directorship are disclosed

onpages 111 and 112.

Payments to past Directors (audited)

Other than in respect of Tom Nicholson disclosed above under Loss of oce payments, there were no payments to past Directors

made during the year.

External directorships

Subject to Board approval, Executive Directors are able to 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 £30,000.

Directors’ service contracts and letters of appointment

In line with our Policy, 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 2022

Peter Truscott 9 September 2019 Nine months Terminable on

nine months’ notice

Duncan Cooper 17 June 2019 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

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.

Annual Report

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Annual Integrated Report 2022

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 the start of conditional share dealing. As a member of the FTSE 250 (since joining the index on

24 June2013), the Committee considers this to be an appropriate comparator.

The graph below shows the performance of a hypothetical £100 invested over that period since the Company’s listing in February 2013.

350

250

150

300

200

100

Oct ’14Feb ’13 Oct ’13 Oct ’16Oct ’15 Oct ’18Oct ’17 Oct ’21 Oct ’22Oct ’20Oct ’19

Crest Nicholson FTSE 250 (excl. investment trusts)

Historical Chief Executive remuneration

The table below sets out total Chief Executive remuneration for FY22 and prior years, together with the percentage of maximum annual

bonus outcome in that year and the percentage of maximum LTIP vested in that year.

£000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Chief Executive total remuneration 14,110

1,313 4,127 2,345 2,150 714

1,495

739 1,422 1,757

Annual bonus % of maximum 100 100 82 82 84 0 3.5 0 84 80

Long-term incentive plan award % of maximum 100 N/A

100 100 100 25 0 0 0 54

1 The total Chief Executive salary and beneﬁts remuneration in FY13 was £1,274,507 before inclusion of incentive plan shares and options included in the 2013 ﬁgure above.

2 No long-term incentive plans vested or had a performance period ending in FY14.

3 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.

4 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

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FY21 and FY22 are made up of cash paid to shareholders in each respective year.

The increase in total spend on pay is reﬂective of the increase in headcount over the last year including narrowing the time upon which

vacancies were open compared to FY21. This also includes a higher number of salary increases awarded during the year including

promotions. In addition, the one-o payment of £1,000 to each employee, excluding the ELT, is included as we support our people through

the cost-of-living challenges. The increased level of distributions to shareholders reﬂects the dividend policy’s application for a full year,

withonly the interim dividend made in the prior year following reinstatement of dividend payments.

The measures shown below are those speciﬁed by the applicable disclosure requirements and total spend on pay reﬂects actual

expenditure in the year.

The table below shows how employee remuneration costs compare to distributions made to shareholders in FY21 and FY22.

£9.1m

23%

Total spend on pay

Change

£49.0m

£27.9m

265%

Distributions to shareholders by way of dividend and share buyback

Change

£38.4m

2022

202 1

£49.0m

£39.9 m

2022

202 1

£38.4m

£10.5m

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Our employees

Statement of consideration of employment conditions elsewhere in the Group

During the year the Committee reviewed the remuneration framework applicable to all employees. The Directors’ 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.

The Committee also considered the following employee matters during the year:

Matter How our employees are treated

Annual bonus Where performance targets have been met, payments under employee schemes will be made. These are consistent

with the performance of the Executive Directors’ scheme.

Annual salary

increase

After consideration of Group performance and wider economic factors such as inﬂation and role benchmarking,

theaverage annual salary increase across the Group is 6.4%.

Beneﬁts The Committee considered management’s review of the Group’s beneﬁts programme, noting no signiﬁcant changes

were considered necessary. The Committee also reviewed the Group’s pension contribution framework and

considered thatbudgetary headroom would be more appropriately focused on base salaries.

Sharesave The Committee approved the launch of the 2022 Sharesave scheme to all employees which had 34% participation

thisyear. Unfortunately, the 2019 Sharesave option price was above the prevailing share price at the end of the

option period and employees had the option to return their savings in full.

When making remuneration decisions for Executive Directors, the Committee considers the wider economic environment and conditions

within the Group as detailed on page 108.

Executive Directors

Senior management

Management

Wider employee workforce

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.

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.

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 90% of our employees are members of the Group pension plan.

Annual bonus Yes Yes Yes Yes

LTIP Yes Yes No No

1 Executive Directors: Executive Directors of the Company.

2 Senior management: Executive Leadership Team (other than Executive Directors) and other senior roles.

3 Management: Management roles below senior management.

4 Wider employee workforce: Other roles not included in (1) to (3).

Chief Executive to employees’ pay ratio

The table below reports the pay ratio for FY22 and has been calculated using the method known as Option A as the Committee considers

this to be the most appropriate and robust way to calculate the ratio. This is our third 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 25

percentile pay ratio Median pay ratio 75

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

Employees’ total pay £32,062 £46,905 £71,167

Employees’ salary £ 27,500 £40,380 £65,508

Under Option A we calculated the total remuneration for all employees in FY22 on the same basis as the Chief Executive single total ﬁgure of

remuneration (see page 111) and then identiﬁed three employees that represent the lower quartile, median and upper quartile based on pay

and beneﬁts. Earnings for those who are part time, joined or left during the year have been annualised on a full time equivalent basis as at

31 October 2022. Employee pay includes such items as overtime, commission, annual bonus

and any long-term incentives. Beneﬁts include

company car or car allowance, private medical and employer pension contributions.

Other than any annual bonus, all other payments are included on a cash basis. The annual bonus element for the Chief Executive and all

other employees is the bonus earned during FY22 which is due to be paid in February 2023. The Company considers the median pay ratio

is consistent with the Group’s wider policies on employee pay, reward and progression. The ratio has increased this year because the

ChiefExecutive’s FY20LTIP award vested at 54.1% where no award vested in FY21.

1 An element of employee bonus schemes are based on customer satisfaction scores on 31 January 2023, which falls after publication of this report. These ﬁgures for the cohort

groupare therefore calculated using the customer satisfaction score on 31 December 2022.

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Percentage change in Directors’ remuneration

The table below sets out the percentage change between FY19 and FY20, FY20 and FY21 and FY21 and FY22 for salary, beneﬁts and

annualbonus of the 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

our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 9.4% for the cohort of employees

duringFY22 is due to role changes, promotions and market rate adjustments during the year. Due to their nature, the average increases

forbeneﬁts and bonus are aected by these salary and role changes.

Percentage change FY22 compared to FY21 Percentage change FY21 compared to FY20 Percentage change FY20 compared to FY19

Salary/Fees Beneﬁts Bonus

Peter Truscott

2.5% 1.7% -1.9% 0.0% -0.3% 100% 35.2% -6.1% -100%

Duncan Cooper

2.5% -2.6% -1.9% 1.4% 4.6% 100% 7.6% 18.4% -100%

Tom Nicholson

2.5% -0.3% -1.9% 2.2% 1.4% 100% 14.8% 6.3% -100%

Iain Ferguson

2.5% – – 0.0% – – -26.4% – –

David Arnold

2.5% – – 0.0% – – – – –

Octavia Morley

2.5% – – 5.5% – – 8.3% – –

Lucinda Bell 2.5% – – 0.0% – – 0.0% – –

Louise Hardy

2.5% – – 9.7% – – 0.0% – –

Average change for

cohort employee 9.4% 16.5% 4.7% 7.1% 11.2% 244.0% 2.8% 13.8% -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 For FY19, FY20 and FY22 we have used annualised amounts in respect of Tom Nicholson, and for FY20 included remuneration prior to joining the Board.

4 The ﬁgure used for FY19 is the salary for Stephen Stone who was Chairman during this period.

5 The ﬁgure used for FY20 is the fee for Sharon Flood who served in the same role during this period.

6 The FY21 increase for Octavia Morley reﬂected her extra responsibilities as Senior Independent Director.

7 The FY21 increase for Louise Hardy reﬂected her extra responsibilities as Non-Executive Director responsible for employee engagement.

8 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 therefore calculated using the customer satisfaction score on 31 December in the respective year.

Employee engagement

At the Employee Voice Forums led

by Louise Hardy, Non-Executive

Director responsible for employee

engagement, during late September

andearly October2022, the Chair of

theCommitteeengaged with Forum

members on remuneration matters.

Further detail canbe found on page 105.

In addition, the Chief Executive

hostsemployee update webinars

throughout the year.

The Group also carries out periodic

employee engagement surveys.

72%ofour employees tookpart in our

mostrecent survey in September 2022,

and the survey reported a83% overall

engagement score.

In relation to pay, around one-third

ofthose who participated disagreed

or strongly disagreed that the pay

they receive compares favourably

withother employers in our industry,

and around 7%felt the same about

thebeneﬁts package.

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 FY23.

Recent initiatives include:

— An additional £1,000 one-o

paymentto employees below ELT

— A range of salary increases in the year

reﬂecting changes to market rates

— Average annual salary increase

acrossthe total employee workforce

of6.4% of salary.

The Committee was pleased that 34%

of eligible employees joined the 2022

Sharesave scheme and that employee

participation across allshare schemes

remained at 49%. The Committee consider

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 FY23.

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Financial

Statements

Gender pay gap reporting

Our gender pay gap performance for 2021

is set out on page 47.

Whilst we saw the gap steadying and gradually reducing in previous years reporting, in 2021 we saw an increase in our mean hourly pay gap

to 27% (2020: 21%) and our median hourly pay gap to 22% (2020: 19%). This is as a result of a Group restructure in 2020. Men are still earning

more than women, as a result of having more men in senior roles than women. Although we have had an increase in the number ofwomen

in the lower quartile of 4.5% compared to the previous year we still have a high proportion of men in the higher salary bandings. We are

seeking toaddress this by increasing female representation at senior levels.

Initiatives supporting this focus include, ensuring that ﬂexible working practices are applied through our Agile Working Policy, continuous

monitoring of succession plans and development opportunities and a wider review and development of policies that support diversity,

inclusion and equality within the Group. More details can be found on pages 44–47. 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.

1 Gender pay gap 2022 will be published in April 2023.

Statement of implementation of Remuneration Policy in the following ﬁnancial year

In FY23 the Committee intends to implement the Executive Director and Non-Executive Director remuneration policies as set out below.

Executive Directors

Director Salary (annual) Change

Peter Truscott An increase of 5%, less than the

average employee award

2023 £702,975 5%

2022 £669,500

Duncan Cooper An increase of 5%, less than the

average employee award

2023 £394,748 5%

2022 £375,950

The average annual salary increase across the employee workforce was 6.4% of salary. The Committee considered the level of increase

for Executive Directors carefully and took into account the average salary increase across the employee workforce and the additional

responsibilities undertaken by both Executive Directors as a result of the Chief Operating Ocer leaving the Group. The Committee

concluded that an increase of 5%, being below the current level of inﬂation and below the average workforce salary increase was

appropriate in the circumstances eective from 1 January 2023.

Non-Executive Directors

Director Role 2022 fee (annual) 2023 fee (annual) Change

Iain Ferguson Chairman £206,000 £212,180 3.00%

David Arnold Non-Executive Director £61,800

£63,654

3.00%

Lucinda Bell Non-Executive Director £53,045 £54,636 3.00%

Louise Hardy Non-Executive Director £58,195

£59,941 3.00%

Octavia Morley Senior Independent Director £70,555

£72,672

3.00%

1 Includes an additional fee for role as Chair of the Audit and Risk Committee. This fee (on an annual basis) was £8,755 in 2022 and will be £9,018 in 2023.

2 Includes an additional for role as Non-Executive Director responsible for employee engagement. This fee (on an annual basis) was £5,150 in 2022 and will be £5,305 in 2023.

3 Includes additional fees for roles as Chair of the Remuneration Committee and as Senior Independent Director. Both such fees (on an annual basis) were£8,755in 2022 and

willbe£9,018 in 2023.

Pension and incentives

Pension or cash equivalent

Annual bonus LTIP

Peter Truscott 6% of salary 125% of salary 150% of salary

Duncan Cooper 6% of salary 125% of salary 150% of salary

1 6% is the rate applicable to the majority of the employee workforce.

All 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.

Annual bonus

The annual bonus opportunity will remain at 125% of salary for FY23.

For ﬁnancial targets and non-ﬁnancial targets, the threshold will be 20%, 50% for meeting target and 100% for maximum stretch performance.

The targets are considered to be commercially sensitive and will be disclosed in the FY23 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.

Subject to approval of the new Remuneration 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 the mix of measures in line with the Group’s strategy and, accordingly, the following measures and weightings

have been agreed for the FY23 annual bonus and are set out on the following page. The Committee is also satisﬁed that the bonus scheme

framework is applied in a similar way to employees across the Group, tailored to roles and functions.

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Performance

measure Measure detail Link to strategy

Weighting

(% of total bonus

opportunity)

Financial

Adjusted proﬁt

before tax

Adjusted PBT performance measured between a threshold

andmaximum

Net cash Net cash performance measured between a threshold and maximum

Non-ﬁnancial

Customer service

and quality

Customer Satisfaction Survey score measured between threshold

and maximum (7.5%)

Environment, Social

and Governance

Reduction in waste intensity (7.5%)

Reduce voluntary employee turnover (7.5%)

SHE Leadership Assessment of SHE leadership duringthe year

less up to 10%

downward adjuster

LTIP

Peter Truscott and Duncan Cooper will be granted an LTIP award with a face value of 150% of base salary. Vested awards will be subject to

atwo-year post vesting holding period which, together with the three-year performance period during which withholding applies, provides

aﬁve-year period overall.

Following careful consideration of the structure and weightings of its LTIP for FY23, and taking account of the Group’s future strategy, the

Committee has removed EBIT Margin. This reﬂects the signiﬁcant improvement in EBIT Margin in recent years and the element of crossover

with ROCE. The Committee has therefore introduced ESG as the third measure focusing on a reduction in scope 1 and scope 2 carbon

emissions. As the Group’s sustainability strategy develops which this year included thesetting of Science Based Targets, it is appropriate

toadd this carbon reduction measure. In addition, total shareholder return (TSR) measured against the FTSE 250 and certain sector peers

and ROCE is retained. At the same time the Committee has reviewed the relative weightings of the measures. All measures are considered

topromote the long-term success of the Group:

Measure % of award

Threshold

(25% of element)

Maximum

(100% of element) Link to strategy

TSR (FTSE 250 and sector peers) 50 Median Upper Quartile

ROCE FY25 35 17% 23%

ESG: Absolute scope 1 and 2

carbonemissions FY25

15 4,300 tCO

e 3,870 tCO

Placemaking & Quality

Land Portfolio

Operational Eciency

Five-Star Customer Service

Multi Channel Approach

People

Sustainability & Social Value

Safety, Health & Environment

Financial Targets

TSR is measured using the companies comprising the FTSE 250 index (excluding investment trusts) as at 1 November 2022 (50%) and

aselection of sector peers (50%). This has changed from one-third/two-thirds in FY21 to better align the award with the experience in

the wider FTSE 250. The FY23 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, following the Company’s

underperformance in recent years as well as providing a renewed focus on sustained growth in proﬁtability and dividend distribution.

ROCE will reward strong operational eciency and margin accretion and will be an adjusted measure as deﬁned on pages 188–189.

At its Capital Markets Day in October 2021, the Group announced a range of ﬁve-year ﬁnancial targets including in relation to ROCE

(FY24–FY26: 22%–25%). Since then, and in response to the signiﬁcant economic uncertainty, the Group has deferred the opening of its

third division. As a result of this and the eects of further uncertainty through 2023, the Committee has widened the ROCE target range

for FY25 starting this at 17% but has increased the maximum level to 23% an increase in the maximum used in the prior year award.

The Committee believes that this provides appropriate incentivisation to maximise ROCE towards the previously set ambitious range,

but reﬂects the uncertainty present inthe early years.

The ESG measure targets an reduction in absolute scope 1 and 2 emissions. Achievement of the maximum target would have the eect

of accelerating the path to the Group’s 2030 target by approximately three years. In addition, the nature of an absolute emissions target

means that even as the Group grows, the carbon emission targets stay the same making them harder to achieve. Taking these into

account, the Committee considers the targets to be stretching. The reduction in scope 1 and 2 emissions is also a target under the

Group’s Sustainability Linked Revolving Credit Facility (see pages 26 and 55 forfurther information).

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Directors’ Report

Financial

Statements

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.

Advisors to the Committee

The Chief Executive and Group HR Director provide input to the Committee on matters concerning remuneration and the General Counsel

andCompany Secretary acts as Secretary to the Committee.

The Committee received external advice in the year from Korn Ferry (total fees £53,657). 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. No other services are provided by Korn Ferry. Fees paid to external remuneration advisors are typically charged on

anhourly basis with costs for work agreed in advance where possible.

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. During the year the Committee’s performance was evaluated as part of the overall Board evaluation. The review explored

how the Committee operates, its scope of work and areas for development. The evaluation concluded that the Committee continues

towork eectively.

Statement of voting at Annual General Meeting

The tables below set out the votes received for the 2021 Directors’ Remuneration Report at the 2022 AGM and Remuneration Policy

at the 2020 AGM, respectively.

Directors’ Remuneration Report (2022 AGM)

1 Shares voted in favour 193,645,902 98.0%

2 Shares voted against 3,858,618 1.9%

Directors’ Remuneration Policy (2020 AGM)

1 Shares voted in favour 197,503, 370 98.3%

2 Shares voted against 3,465,781 1.7%

The Committee has maintained a regular dialogue with major shareholders on a range of matters, including remuneration. This year,

the Committee engaged with the Company’s major shareholders regarding the pay outcomes for FY22 along with the new Directors’

Remuneration Policy.

The Committee welcomes feedback and encourages shareholders to contact the Remuneration Committee Chair viathe General Counsel

andCompany Secretary to provide their views and feedback.

Approval

This Directors’ Remuneration Report and 2023 Policy were approved by the Board of Directors on 17 January 2023 and signed on its

behalf by

Octavia Morley

Remuneration Committee Chair

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Compliance and other disclosures

Directors’ Report

The Directors’ Report for the year ended

31 October 2022 comprises pages 66–125

together with other sections of the report

asreferenced below. In accordance with

the UK Financial Conduct Authority’s

ListingRules LR 9.8.4c, the information to

be included within the Annual Integrated

Report, where applicable, is set out

as follows:

Content Page(s)

Business model 20–21

Key performance indicators 50–51

Board of Directors 70–71

Principal risks 58–64

Stakeholder relation including

Section 172 Statement

22–25

Audit and Risk Committee 92–99

Directors’ interests 114–115

Directors’ responsibilities

statement

128

Dividend 55

Employee engagement 46, 78–79

Employment of persons

withadisability

Financial assets and liabilities 177

Going concern 142–144

Greenhouse gas emissions 38

Group proﬁt 138

Employee share schemes 166–169

Outlook 7, 1 0

Viability statement 65

Articles of Association (Articles)

The Articles regulate the internal aairs

of the Company and are available on the

Company’s website. The Articles were

notamended during the year.

Amendments to the Articles may be

madeinaccordance with the provisions

ofCompanies Act 2006 by special

resolution of the shareholders.

Going concern and viability statement

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.

The Company’s viability statement can

befound on page 65.

Directors

The current Directors and their biographical

details are detailed on pages 70–71.

Powers of Directors

The Directors’ powers are conferred

on them by UK legislation and by the

Company’s Articles.

Election and re-election of Directors

The Board may appoint any person to

bea Director (so long as the total number

of Directors does not exceed the limit

prescribed in the Company’s Articles).

Any such Director shall hold oce until

the next AGM and shall then be eligible

forelection. All current Directors will submit

themselves for re-election at the 2023

AGM. The Board conﬁrms that it has the

appropriate balance of skills, experience,

independence and knowledge, and

shareholders should support the

re-election of the Directors.

Directors’ and ocers’

liabilityinsurance

The Company maintains Directors’ and

ocers’ liability insurance for the Directors

and the General Counsel and Company

Secretary. 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 Company’s

deﬁned beneﬁt pension scheme.

Share capital

As at 31 October 2022 the Company had

issued share capital of 256,920,539 ordinary

shares of 5 pence. No ordinary shares have

been issued during the ﬁnancial year.

Rights 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 2022 the Company’s

shareholders delegated 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 oer

byway of a rights issue

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Directors’ Report

Financial

Statements

— Authority to disapply pre-emption rights

up to an aggregate nominal amount

of£642,301 (equivalent to 5% ofthe

Company’s issued share capital)

— Authority to disapply pre-emption

rightsup to an aggregate nominal

amount of £642,301 (equivalent to

5% ofthe Company’s issued share

capital) for transactions which the

Board determines to be an acquisition

orothercapital investment as deﬁned

by the Pre-Emption Group’s revised

Statement of Principles

— 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 2023 or at the conclusion

ofthenext AGM, whichever is earlier.

The Board currently intends to hold

theAGMon 23 March 2023.

At the 2023 AGM, the Company proposes

to seek authority to issue non pre-emptively

share capital of the Company in accordance

with the recently updated Pre-Emption

Group’s Statement of Principles 2022 on

Disapplying Pre-Emption Rights, being

no more than 24% in total rather than the

previous thresholds of 10% in accordance

with the Pre-Emption Group’s Statement

ofPrinciples published in 2015. Full details

will be included in the explanatory notes

inthe Notice of AGM.

In addition, the Company proposes to

seek approval for two new long-term

share schemes to ensure the Group has

appropriate share schemes in place and

that they operate consistently with the

proposed Directors’ Remuneration Policy.

The two new share schemes will replace

the existing share schemes that will expire

in 2023. Full details will be included in the

explanatory notes in the Notice of AGM.

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 beneﬁt trust

As at 31 October 2022, the Group’s

employee beneﬁt trust (EBT) held 788,140

ordinary shares in the Company for the

purposes of satisfying awards under the

Company’s share and incentive plans.

The EBT 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 developments go through a rigorous

approval and assessment process at

Group level.

The Group operates a range of compliance,

ethical and equal treatment policies,

including the equality and diversity policy

and the anti-bribery and corruption policy.

The Group also operates ‘Speaking

Up’, our whistleblowing policy whereby

employees and supply chain partners can

report concerns via an independent, free

and conﬁdential helpline. The Speaking

Up policy details the appropriate lines of

communication and an escalation procedure

enables any reports to be dealt with

eectively and eciently.

A copy is available on the Group’s

website www.crestnicholson.com/

supply-chain

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 2022 and 17 January 2023.

As at 31 October 2022 As at 17 January 2023

Shareholder

Number of voting

rights held

% of voting

rights held

Number of voting

rights held

% of voting

rights held

abrdn plc 17,908,723 6.97 Below 5% Below 5%

Boldhaven Management LLP 12,925,160 5.03 12,925,160 5.03

Liontrust Asset Management Plc 12,684,562 4.94 12,684,562 4.94

Norges Bank 10,079,020 3.92 10,079,020 3.92

Standard Life Assurance Limited Not disclosable Not disclosable 8,400,308 3.27

Lorsden (Jersey) Limited Not disclosable Not disclosable 7,976,420 3.10

Compliance and other disclosures

Directors’ Report continued

124

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Central functions

Strong central functions support the

Board, Executive Committee and divisional

businesses. These functions include, among

others: Legal and Company Secretarial,

Group Finance, IT, Human Resources,

Internal Audit, Marketing, Procurement,

Safety, Health & Environment (SHE),

Sustainability and Technical. Each central

function contributes in its area of expertise

to improve compliance, oversight, support

and education with the relevant legal

and regulatory requirements. In addition,

principal treasury-related risks, decisions

and control processes are managed by

theGroup Finance function.

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

eciency, 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 25 to the consolidated ﬁnancial

statements set out the Company’s

approachto ﬁnancial risk management

including ﬁnancial credit and liquidity risk.

Political donations

The Group made no political donations

during the year (FY21: 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 eect on 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.

Accordingly, they do not intend to disclose

speciﬁc details of these. In addition, all the

Group’s share schemes contain provisions

that, in the event of a change of control,

this would result in outstanding options

andawards becoming exercisable, subject

tothe rules of the relevant schemes.

There are no agreements between the

Group and its Directors or employees

providing for compensation for loss

of oceor employment that occurs

becauseofatakeover bid.

Directors’ Report approval

Disclosure of information

to the auditor

The Directors who held oce 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 2022 Annual

General Meeting (AGM) and is willing

to seek re-appointment this year.

Resolutions to re-appoint PwC will

be proposed at the 2023 AGM.

Approval

The Directors’ Report was approved

bytheBoard of Directors on 17 January

2023 and signed on its behalf.

Kevin Maguire

Company Secretary

125

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

A strong

financial

performance

in the year

The Group has made further good

progress implementing its strategy

and we have made good ﬁnancial

performance in the year.

126

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Annual Integrated Report 2022

128 Statement of Directors’

Responsibilities

129 Independent Auditors’ report

138 Consolidated income statement

138 Consolidated statement

of comprehensive income

139 Consolidated statement

of changes in equity

140 Consolidated statement

of ﬁnancial position

141 Consolidated cash ﬂow statement

142 Notes to the consolidated

ﬁnancial statements

183 Company statement

of ﬁnancial position

184 Company statement

of changes in equity

185 Notes to the Company

ﬁnancial statements

188 Alternative performance

measures (unaudited)

190 Historical summary (unaudited)

191 Shareholder services

192 Group directory

In this section

127

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Annual Integrated Report 2022

Financial

Statements

Governance and

Directors’ Report

Strategic

Report

Crest Nicholson

Annual Integrated Report 2022

127

The Directors are responsible for

preparingthe Annual Integrated 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 aairs 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 sucient 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dier from legislation

inother jurisdictions.

Directors’ conﬁrmations

The Directors consider that the

AnnualIntegrated 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 page 71 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 oce 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

Director

17 January 2023

Statement of Directors’ Responsibilities

in respect of the ﬁnancial statements

128

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Annual Integrated Report 2022

Independent Auditors’ report

to the members of Crest Nicholson Holdings plc

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 aairs as at 31 October 2022

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 Integrated

Report (the “Annual Report”), which

comprise: the Consolidated and Company

Statements of Financial Position as at

31 October 2022; 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sucient 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.

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Independent Auditors’ report

continued

Our audit approach

Context

Crest Nicholson Holdings plc is a residential housebuilder listed on the London Stock Exchange. The Group is wholly UK based, operating

primarily across the Midlands and the southern half of England. The Group is susceptible to external macro-economic factors such as

government regulation, mortgage availability and changes in the wider building 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 the valuation of inventory.

During the year ended 31 October 2022, the Group has increased its revenue as a result of higher unit sales and higher selling prices.

The Group hasrecorded an additional exceptional charge in relation to the combustible materials provision, as a result of increases in cost

estimates and the impact of the extension of scope from the government’s Building Safety Pledge. 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

Materiality

— Overall Group materiality: £6,400,000 (2021: £6,000,000) based on approximately 5% of current year proﬁt before tax and

exceptional items (2021: based on consideration of a number of acceptable benchmarks, this level of materiality isequivalent

toapproximately 6% of current year proﬁt before tax and exceptional items).

— Overall Company materiality: £2,200,000 (2021: £2,500,000) based on approximately 1% of total assets.

— Performance materiality: £4,800,000 (2021: £4,500,000) (Group) and £1,800,000 (2021: £1,650,000) (Company).

Audit scope

— We conducted an audit of the complete ﬁnancial information of each of the ﬁve geographically-based 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

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).

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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 eect on: the overall audit strategy; the allocation of resources in the audit;

and directing the eorts 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) Note 4 (Exceptional items)

andNote 19 (Inventories) of the Group ﬁnancial statements,

andpage94 (Key ﬁnancial and internal control matters).

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”). While the cost is relatively straightforward

to determine, theNRV of each development is judgemental, based

on forecasts ofcosts and sales prices. During the year, a NRV charge

of £9.6m was recognised resulting in a total NRV position at year

endof £12.6m, with the majority expected to be utilised in the next

ﬁnancial year.

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 is a signiﬁcant risk for the audit and therefore afocus of

ourwork.

Our audit procedures included:

— Conﬁrming and updating our understanding of management’s

process for preparing a forecast for each development, consistent

with the risk associated with the margin forecasting and recognition

process (see below);

— 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;

— 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 and ageing 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 if there are any valuation issues at the

period end;

— Evaluating the margins recognised on sites where we identiﬁed

potential valuation issues, being those 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 external evidence and testing 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, and conﬁrmed the appropriateness of the NRV utilised

during the year; and

— Testing management’s NRV model to conﬁrm the mathematical

accuracy of the workings.

Based upon the procedures performed we did not identify any sites

where we determined that further material impairments were required.

We are satisﬁed that the Group’s provisions were not materially

misstated.

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Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Independent Auditors’ report

continued

Key audit matter How our audit addressed the key audit matter

Margin forecasting and recognition (Group)

Refer to Note 1 (Accounting policies) of the Group ﬁnancial

statementsand page 94 (Key ﬁnancial and internal control matters).

TheGroup’s margin is 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. 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 the management’s best estimates of the ﬁnal

margin recognised on a development.

As a result, proﬁt margins could be manipulated 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 uncertain as they are inﬂuenced by changes in external

market factors, such as the availability and aordability 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 have implemented

internal controls and forecasting to assess land acquisition prior

to build commencement and assist the initial ﬁnancial appraisal

process, and further controls to monitor the ongoing costs and

salesprices within these 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 forecasting and monitoring controls

for the developments (including attendance at a selection of

management’s internal control meetings designed to monitor cost

movements) and testing over the data used in these meetings;

— Attending build cost control meetings at all divisions.

Where necessary we followed up the controls testing with

additional substantive procedures to obtain the required evidence;

— For a sample of sites where we noted variances in forecast build

costs comparing to the prior year, substantively testing a sample

of the inputs at a high level of assurance to conﬁrm these were

appropriate and appeared complete;

— Conﬁrming, through sampling of additions to inventory, that costs

were being allocated to appropriate developments and therefore

impacting the correct margin;

— Assessing management’s overall historic 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 might impact revenue recognition;

— Checking, by recalculating the margins, that the system correctly

calculates the margin following each cost or sales price amendment

made by management;

— Conﬁrming the consistent application of the margin recognition

framework through analysing the margins recognised on speciﬁc

sites compared to the developments’ forecast margin; and

— Auditing any material manual adjustments to margins to ensure

these were appropriate by agreeing these costs/income to third

party support.

Based on the procedures performed, we did not identify any sites

where we considered the actual margin recognised or forecast margin

to be materially misstated.

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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23 (Provisions) of the Group ﬁnancial statements and page 94

(Keyﬁnancial and internal control matters).

The Group ﬁrst recognised the combustible materials provision

in 2019. The provision reﬂects management’s best estimate of the

forecast costs to remediate legacy sites which are identiﬁed to have

defective or non-compliant ﬁre or other build safety related issues,

and where the Group has a legal or constructive obligation to

perform this remediation.

During the year the Group has recorded an exceptional cost of sales

charge of £102.5m, increasing the provision, which primarily reﬂects

the extended scope of the Group signing the UK government’s

Building Safety Pledge, but also reﬂects changes in cost estimates.

The calculation behind the provision is judgemental, in particular

given defective work cost estimates are provisional until detailed

intrusive works can be performed, and that defective works cannot

always be identiﬁed and assessed until a claim has been received

orintrusive works performed.

The provision is identiﬁed as a critical accounting estimate as there

remain several factors which could drive further changes to the level

of provision required in future periods, in particular government

guidance and intervention and new claims.

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:

— Enquiring with management, including the Executive Leadership

Team, which includes the CEO, Group Operations Director and

Group Legal Counsel, to understand the impact of signing the

Pledge and to understand the movement in the provision in the

year and whether the approach taken aligns with accounting

standards, as well as assessing completeness;

— Recalculating and checking the integrity of management’s manual

model to conﬁrm its accuracy;

— Reading and understanding the requirements of the Pledge

document as well as drafts of the long form agreement to conﬁrm

management’s assumptions and interpretations are reasonable

anddetermine the scope of required remediation;

— Testing the valuation of the provision recorded at the year end.

For sites where the Building Safety Fund (BSF) have made

full or partial awards, this involved agreeing the amounts to

correspondence from DLUHC. For the remaining sites where an

obligation exists but no award has been made by the BSF, our

focus was testing management’s internal estimates to understand

the extent of remediation required. This testing also included

assessing whether the provisions were recognised in the

correct period;

— Assessing the completeness of the provision through various

procedures, including internet searches on unnotiﬁed buildings,

trend analytics on sites by location and comparison of similar

buildings. We also performed external searches for management

companies who have notiﬁed the Group of remediation issues,

resulting in the recognition of a provision, to identify other potential

buildings and to assess exposure;

— Assessing the technical capabilities and expertise of the Group’s

employees and consultants involved in assessing the provision;

— Reviewing the disclosures made in the ﬁnancial statements and

considering these both in the context of IAS 37 and expected

disclosures around contingent liabilities; and

— Auditing the long-term and short-term split of the provision

based on management’s best estimate of the timing of plans for

remediation, which is likely to be impacted by the timing of signing

the long form agreement.

Overall, we concluded management’s assessment was reasonable

given the level of judgement involved.

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Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Independent Auditors’ report

continued

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 of £222.4m 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 a whole 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 eort.

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; and

— Verifying the level of cash held by the subsidiaries of the Group

andtheir ability to repay this if required.

Based on our procedures performed we did not identify any material

issues with regard to valuation ofclassiﬁcation of intercompany

receivables.

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 18 reporting units (each of which were deemed to be components)

representing the Group’s 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 geographically-based 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 96% of the Group’s proﬁt before tax and exceptional items.

We audited exceptional items at the Group level. The audit of speciﬁc ﬁnancial statement line items included a further two reporting units,

toprovide additional coverage over items such as 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, loans and borrowings, provisions and other ﬁnancial assets,

gave us the evidence we needed for our opinion on the Group 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 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 landbank that these costs

have to be absorbed by the Group. We have audited management’s assessment of this risk and it does not result in any material changes

tofuture margins or to current inventory valuation levels. Our procedures, therefore, 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 eect 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 £6,400,000 (2021: £6,000,000). £2,200,000 (2021: £2,500,000).

How we determined it Approximately 5% of current year proﬁt before tax

and exceptional items (2021: based on consideration

of a number of acceptable benchmarks, this level

ofmateriality is equivalent to approximately 6% of

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 entity and is a generally

accepted auditing benchmark.

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.

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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 £1 million and £6 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% (2021: 75%) of overall materiality, amounting to £4,800,000 (2021: £4,500,000) for the Group

ﬁnancialstatements and £1,800,000 (2021: £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 eectiveness 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 £300,000

(Group audit) (2021: £300,000) and £110,000 (Company audit) (2021: £125,000) 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, in particular in the base case model; and

— 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” scenario were suciently severe to model potential future

economicdownturn, above and beyond current market forecasts.

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, which includes reporting based on the Task Force on Climate-

related Financial Disclosures (TCFD) recommendations. 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.

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Independent Auditors’ report

continued

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 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 2022 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 eectiveness 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.

136

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Annual Integrated Report 2022

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 eect 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 estimation uncertainty as set

out in note 1 to the consolidated ﬁnancial

statements. Audit procedures performed

bythe Group engagement team 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

eectiveness of management’s controls

designed to prevent and detect

irregularities, in particular their controls

around cost and margin forecasting;

— Challenging the assumptions and

judgements made by management in

determining their signiﬁcant accounting

estimates, in particular in relation to

cost forecasting, margin estimation

andprovisions (see related key audit

matters above); and

— Identifying and testing journal entries,

inparticular any journal entries posted

with unusual account combinations

including unusual or unexpected

journal postings to the consolidated

income statement.

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 eight years, covering

the years ended 31 October 2015 to

31 October 2022.

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

17 January 2023

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Consolidated

income statement

Consolidated statement

of comprehensive income

Note

2022

Pre-exceptional

items

£m

2022

Exceptional

items

(note 4)

£m

2022

Total

£m

2021

Pre-exceptional

items

£m

2021

Exceptional

items

(note 4)

£m

2021

Total

£m

Revenue 3 913 . 6 – 913 . 6 786.6 – 786 .6

Cost of sales (719 . 3) (10 2 .5) (8 21. 8) (61 9 . 9) (20.8) (6 4 0.7)

Gross profit/(loss) 19 4 . 3 (10 2 . 5) 91. 8 16 6 .7 (2 0.8) 145.9

Administrative expenses ( 51 .1) – ( 51 .1) ( 51 .1) – ( 51 .1)

Net impairment losses

onfinancial assets 18 (2.3) – (2.3) (1. 0) – (1. 0)

Operating profit/(loss) 5 14 0 .9 (10 2 . 5) 38.4 11 4 . 6 (2 0.8) 93. 8

Finance income 7 3 .1 – 3 .1 3 .4 – 3.4

Finance expense 7 (10 . 2) (1.0) (11 . 2) (12 . 5) 0.5 (12 . 0)

Net finance expense ( 7.1) (1. 0) (8 .1) ( 9 .1) 0. 5 (8.6)

Share of post-tax profits/

(losses)of joint ventures

using the equity method 14 4.0 (1. 5) 2 .5 1.7 – 1.7

Profit/(loss) before tax 13 7. 8 (10 5. 0) 32 .8 10 7. 2 (2 0.3) 86.9

Income tax

(expense)/credit 8 (28.8) 22 .4 (6 .4) (19. 9) 3.9 (16 . 0)

Profit/(loss) for the

yearattributable to

equity shareholders 10 9.0 (82.6) 26.4 8 7. 3 (16 . 4) 70. 9

Earnings perordinary share

Basic 10 42 .5p 10 .3p 34.0p 2 7. 6 p

Diluted 10 42 .3p 10 . 2p 33.9p 2 7. 5 p

The notes on pages 142–182 form part of these financial statements.

Note

2022

£m

2021

£m

Profit for the year attributable to equity shareholders 26.4 7 0.9

Other comprehensive (expense)/income:

Items that will not be reclassified to the consolidated income statement:

Actuarial (losses)/gains of defined benefit schemes 17 (8.4) 20. 2

Change in deferred tax on actuarial (losses)/gains of defined benefit schemes 16 1. 6 (4.8)

Other comprehensive (expense)/income for the year net of income tax (6.8) 15. 4

Total comprehensive income attributable to equity shareholders 19. 6 86.3

The notes on pages 142–182 form part of these financial statements.

For the year ended 31 October 2022

138

Crest Nicholson

Annual Integrated Report 2022

Consolidated statement

of changes in equity

Note

capital

£m

premium

account

£m

Retained

earnings

£m

Total

equity

£m

Balance at 1 November 2020 12 . 8 74 . 2 738.3 825.3

Profit for the year attributable to equity shareholders – – 70.9 70.9

Actuarial gains of defined benefit schemes 17 – – 2 0.2 20. 2

Change in deferred tax on actuarial gains

of defined benefit schemes 16 – – (4.8) (4.8)

Total comprehensive income for the year – – 86.3 86.3

Transactions with shareholders:

Equity-settled share-based payments 17 – – 1. 8 1. 8

Deferred tax on equity-settled share-based payments 16 – – 0 .1 0 .1

Purchase of own shares 24 – – (1. 6) (1.6)

Transfers in respect of share options – – 0.2 0.2

Dividends paid 9 – – (10 .5) (10 . 5)

Balance at 31 October 2021 12 . 8 74 . 2 814 .6 9 01.6

Profit for the year attributable to equity shareholders – – 26.4 26.4

Actuarial losses of defined benefit schemes 17 – – (8 .4) (8.4)

Change in deferred tax on actuarial losses

of defined benefit schemes 16 – – 1.6 1. 6

Total comprehensive income for the year – – 19. 6 19 .6

Transactions with shareholders:

Equity-settled share-based payments 17 – – 1. 9 1. 9

Deferred tax on equity-settled share-based payments 16 – – (0.4) (0.4)

Purchase of own shares 24 – – (1 .1) (1 .1)

Dividends paid 9 – – (38.5) (38.5)

Balance at 31 October 2022 12 . 8 74 . 2 7 9 6 .1 8 8 3 .1

The notes on pages 142–182 form part of these financial statements.

For the year ended 31 October 2022

139

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Consolidated statement

of financial position

Note

2022

£m

2021

£m

ASSETS

Non-current assets

Intangible assets 11 29.0 29.0

Property, plant and equipment 12 0.9 1. 2

Right-of-use assets 13 3 .7 3 .7

Investments in joint ventures 14 9.0 6.8

Financial assets at fair value through profit and loss 15 3.3 4.2

Deferred tax assets 16 4.8 4. 8

Retirement benefit surplus 17 11 .1 16 .7

Trade and other receivables 18 35 .0 44. 5

96.8 11 0 . 9

Current assets

Inventories 19 9 9 0 .1 1,037 .5

Financial assets at fair value through profit and loss 15 1. 3 1 .1

Trade and other receivables 18 11 6 . 3 10 2 .4

Current income tax receivable 1 .1 5.8

Cash and cash equivalents 20 373.6 3 5 0.7

1, 48 2 . 4 1 , 4 9 7. 5

Total assets 1, 579 .2 1,6 0 8 .4

LIABILITIES

Non-current liabilities

Interest-bearing loans and borrowings 21 ( 9 7.1) (9 7. 9 )

Trade and other payables 22 (41. 8) (1 0 7. 6)

Lease liabilities 13 (2.3) (2 .7)

Deferred tax liabilities 16 (3. 2) (4 .1)

Provisions 23 (70.8) (28.4)

(215 . 2) (2 4 0.7)

Current liabilities

Trade and other payables 22 (4 0 7.1) (4 49.5)

Lease liabilities 13 (1. 6) (1. 9)

Provisions 23 (72.2) (14 .7)

(48 0.9) (4 6 6 .1)

Total liabilities (6 9 6 .1) (70 6. 8)

Net assets 8 8 3 .1 9 01. 6

EQUITY

Share capital 24 12 . 8 12 . 8

Share premium account 24 74 . 2 74 . 2

Retained earnings 7 9 6 .1 8 14. 6

Total equity 8 8 3 .1 9 01. 6

The notes on pages 142–182 form part of these financial statements.

These financial statements on pages 138–182 were approved by the Board of Directors on 17 January 2023.

On behalf of the Board

Peter Truscott Duncan Cooper

Director Director

As at 31 October 2022

140

Crest Nicholson

Annual Integrated Report 2022

Consolidated

cash flow statement

Note

2022

£m

2021

£m

Cash flows from operating activities

Profit for the year attributable to equity shareholders 26.4 70 .9

Adjustments for:

Depreciation on property, plant and equipment 12 0.4 1. 0

Depreciation on right-of-use assets 13 1. 9 2.4

Retirement benefit obligation administrative expenses 17 0.9 –

Net finance expense 7 8 .1 8 .6

Share-based payment expense 17 1. 9 1. 8

Share of post-tax profits of joint ventures using the equity method 14 (2.5) (1. 7)

Impairment of inventories movement 19 ( 8 .1) (16. 4)

Net impairment of financial assets 18 2.3 1. 0

Income tax expense 8 6.4 16 . 0

Operating profit before changes in working capital,

provisions and contributions to retirement benefit obligations 3 7. 7 8 3.6

(Increase)/decrease in trade and other receivables (1 7. 0 ) 4. 8

Decrease/(increase) in inventories 55.5 (3.4)

(Decrease)/increase in trade and other payables and provisions (13 . 4) 73.5

Contribution to retirement benefit obligations 17 (3.4) (11 . 2 )

Cash generated from operations 59. 4 1 4 7. 3

Finance expense paid (6.3) (6.9)

Income tax paid (1. 4) (13 . 9)

Net cash inflow from operating activities 51 .7 12 6 . 5

Cash flows from investing activities

Purchases of property, plant and equipment 12 (0 .1) (0. 2)

Disposal of financial assets at fair value through profit and loss 15 0 .7 1. 0

Funding to joint ventures ( 7. 5 ) (13 . 0)

Repayment of funding from joint ventures 18 . 8 11 . 5

Dividends received from joint ventures 2.4 –

Finance income received 0 .1 0 .1

Net cash inflow/(outflow) from investing activities 14 . 4 (0.6)

Cash flows from financing activities

Principal elements of lease payments 13 ( 2 .1) (2 .7)

Dividends paid 9 (38.5) (10 . 5)

Purchase of own shares 24 (1 .1) (1. 6)

Debt arrangement and facility fees (1. 5) –

Proceeds from share option transfers – 0. 2

Net cash outflow from financing activities (43. 2) (14 .6)

Net increase in cash and cash equivalents 22.9 111 . 3

Cash and cash equivalents at the beginning of the year 3 5 0.7 23 9.4

Cash and cash equivalents at end of the year 20 37 3.6 3 5 0 .7

The notes on pages 142–182 form part of these financial statements.

For the year ended 31 October 2022

141

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Notes to the consolidated

ﬁnancial statements

Going concern

The Directors have adopted the going concern basis in preparing the ﬁnancial statements and have concluded that there are no material

uncertainties leading to signiﬁcant doubt about the Group’s going concern status.

Assessment of principal risks

The Directors assessed the Group’s principal risks as detailed on pages 60–64 and considered three overarching risks when developing

thestress testing for this assessment. These risks were selected due to the potential impact over the period assessed for going concern,

which is a shorter than the period used for the principal risk assessment.

Risk Mitigation and other considerations Link to principal risks

Will the volume of home completions fall?

— Will the current economic activity disrupt

future operations and our ability to build

andsell properties?

— Will material and labour availability shortages

worsen and impact project timelines?

— The Group has successfully demonstrated

itsability to trade eectively in previous

downturns in the housing cycle and beneﬁts

from a strong balance sheet and forward

order book

— The UK Government has consistently

demonstrated its recent support for the

housingmarket through lowering Stamp

Dutyand encouraging lenders to maintain

goodlevelsofmortgage availability

— The Group beneﬁts from strong supplier

andsubcontractor relationships that help

mitigate availability issues.

— Market conditions

— Access to site labour

and materials

Will UK house prices fall?

— Will the current or further decline in macro

economic conditions result in lower prices for

UK property due to reduced demand through

unemployment or mortgage availability?

— Will the higher cost of mortgages persist

andcreate an aordability gap?

— The Group has a strong forward order

book ofreservations and exchanges

atprevailing prices

— There is strong appetite for institutional

capitalinvestment into the UK property

market that helps mitigate any cyclical

dropinconﬁdence inthe private market

— The Group participates in aordability

schemessuch as Deposit Unlock.

— Market conditions

Will build cost inﬂation remain high and sustained?

— Will the availability of materials and labour

remain scarce because of the war in Ukraine

andthe UK’s exit from the European Union?

— Will the move to more sustainable building

practices and materials lead to an increase

inconstruction costs?

— The Group beneﬁts from well-negotiated

centralcontracts with suppliers which

helpmitigate cost increases

— The Group’s implementation of COINS as

itsnewERP platform has enhanced the

reportingof build costs for the divisions

implemented inFY22, and will continue

tobedeployed acrossthe rest of the

Groupin FY23.

— Access to site labour

and materials

— Build cost management

1 Accounting policies

Basis of preparation

Crest Nicholson Holdings plc (Company)

is a public limited company incorporated,

listed and domiciled in the UK. The address

of the registered oce is Crest Nicholson

Holdings plc, Crest House, Pyrcroft Road,

Chertsey, Surrey, KT16 9GN. The Group

ﬁnancial statements consolidate those of

the Company and its subsidiaries (together

referred to as the Group) and include the

Group’s interest in jointly controlled entities.

The parent company ﬁnancial statements

present information about the Company as

aseparate entity and not about its Group.

The ﬁnancial statements are presented

in pounds sterling and amounts stated

are denominated in millions (£m), unless

otherwise stated.

The Group ﬁnancial statements have

been prepared and approved by the

Directors in accordance with UK-adopted

international accounting standards, and

with the requirements of the Companies Act

2006 as applicable to companies reporting

under those standards. On 31 December

2020, IFRS as adopted by the European

Union at that date were brought into UK

law and became UK-adopted international

accounting standards, with future changes

being subject to endorsement by the

UK Endorsement Board. The Group’s

consolidated and Company ﬁnancial

statements have, therefore, been prepared

in accordance with UK-adopted international

accounting standards and havebeen

prepared on the historical costbasis

exceptfor ﬁnancial assets at fairvalue

through proﬁt and loss, which areas

otherwise stated. The parent company

ﬁnancial statements are presentedon

pages183–187.

The preparation of ﬁnancial statements in

conformity with UK-adopted international

accounting standards requires the Directors

to make assumptions and judgements

that aect the application of policies and

reported amounts within the ﬁnancial

statements. Assumptions and judgements

arebased on experience and other factors

that the Directors consider reasonable

under the circumstances. Actual results

maydier from these estimates.

Judgements made by the Directors,

in the application of these accounting

policies that have a signiﬁcant eect

ontheﬁnancialstatements and

estimateswith asigniﬁcant risk of

material adjustment inthe next year

arediscussed below.

142

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Applying these risks

against future forecasts

The Directors have considered prior years’

trading performance and the completed

weeks of trading since 31 October 2022.

The Group has performed in line with

expectations and retains a strong level

ofworking capital and liquidity to execute

its strategy. During the year the Group

completed a £250.0m Sustainability Linked

Revolving Credit Facility (RCF) which

expires in October 2026. The Group also

beneﬁts from £100.0m of senior loan notes.

Both of these sources of ﬁnancing are

subject to three ﬁnancial covenant tests.

The Group does not disclose the terms of

these covenants as it considers them to be

commercially conﬁdential. The RCF is also

subject to sustainability targets which are

aligned to the Group’s sustainability strategy

with a lower interest payable if these are

achieved. See page 174 for more information.

Given the Group’s strong liquidity position

the Directors consider the possibility of

breaching one of the ﬁnancial covenants

as being the ﬁrst sign that the Group could

be in distress and should be the basis of

its going concern assessment in this year’s

ﬁnancial statements.

The Directors have then considered

three scenarios that stress test how the

Group would perform against the risks

outlined above.

1. ‘Base case’. The Directors have

considered the forecast for FY23 to

FY25. The forecasts include the Directors

current assessment of the potential

impact of the economic uncertainty

currently being experienced in the

UK. These impacts include sales price

and sales volume reductions, butare

not disclosed as the Group considers

themtobe commercially sensitive.

The Group has already secured a

signiﬁcant proportion of sales for FY23

by way of its strong forward order book.

Under this scenario the Group maintains

a strong level of liquidity and ﬁnancial

headroom throughout FY23 and beyond

and remains compliant with all three

covenants with comfortable headroom.

2. ‘Severe but plausible downside case’.

The Directors have applied the three

risks outlined above to the base case

scenario without double counting the

sales price and volume assumptions

implicit in that base case. These risks are

considered eective from 1 November

2022 and include a 0.37 SPOW rate (FY22

SPOW was 0.60), a12.0% reduction in

forecast average selling prices and a

10.0% increase in forecast build costs.

Build costs include the Group’s stated

commitment under the Building Safety

Pledge to remediate legacy buildings

and therefore any assumed increase

in build costs also increases the size of

this commitment. Each of these risks

has been applied individually and the

Group remains compliant with all three

covenants with comfortable headroom.

The Directors have then applied the

12.0% sales price reduction together with

the 0.37 SPOW rate, to reﬂect what they

consider to be a ‘severe but plausible

downside case’ outcome and trading

environment. The build cost inﬂation

risk was not included in this severe but

plausible downside case, as during a

downturn as severe as that considered,

the Group has historically seen build cost

deﬂation as suppliers and subcontractors

swiftly recalibrate their pricing to

compete for work in shrinking forward

order books. As such, applying all three

risks in aggregate was not considered

plausible. This combined scenario

inevitably places a higher stress than

the base case scenario, but again the

Group remains compliant with all three

covenants, withcomfortable headroom.

In all three ‘downside’ individual scenarios,

and in the combined scenario, the

Group has used appropriate mitigations

available to enable it to oset the

deterioration in ﬁnancial performance.

These mitigations are within the control

of the Group and can be enacted in

goodtime, and are outlined below.

3. ‘Test to failure’. The assumptions

have then individually, and again in

combination, been applied to each of

the risks above to a level beyond that

which is considered to be a plausible

‘downside’ scenario. This informs the

Directors as to what level of stress would

be needed to realise a breach in any of

the covenants. The results of these tests

are not disclosed as they are considered

commercially conﬁdential.

Mitigation options and considerations

Based on the assessment methodology

outlined above the Directors have

considered some of the mitigations that

could be applied in a deteriorating trading

environment. The Group has experience

ofapplying such mitigations in the past,

which include butare not limited to:

— The impact of any immediate reduction

inhome reservations or achieved

average selling prices would be mitigated

by the Group’s signiﬁcant forward order

book of reservations and exchanges

— A reduction in Group overheads

toreﬂectthe lower build and selling

activity in a weaker trading environment

— Renegotiation of supplier arrangements

asthe amount of build activity contracts

and materials suppliers and subcontractors

are required to be more competitive

— Mothballing unproductive and/or

capital-intensive schemes

— Repaying interest-bearing products

to reduce the net interest charge,

recognising the Group’s strong

liquidity position

— A reduction in sales and marketing

coststo reﬂect a fall in sales volumes.

Conclusion on going concern

In reviewing the assessment outlined

above the Directors are conﬁdent that the

Group has the necessary resources and

mitigations available to continue trading for

at least 12 months from the date of signing

of the ﬁnancial statements. Accordingly,

theﬁnancial statements continue to be

prepared on a going concern basis.

Critical accounting estimates

andjudgements

The preparation of the consolidated

ﬁnancial statements under UK-adopted

international accounting standards

requiresthe Directors to make estimates

and assumptions that aect the application

ofpolicies and reported amounts of assets

and liabilities, income and expenses and

related disclosures. In applying the

Group’s accounting policies, the key

judgements that have a signiﬁcant impact

on the ﬁnancial statements, include those

involving estimates, which are described

below, the judgement to present certain

items as exceptional (see note 4), certain

revenue policies relating to part exchange

sales (see note 3), theidentiﬁcation of

performance obligations where a revenue

transaction involves the sale of both land

and residential units and revenue on the

units is then subsequently recognised

overtime (see note 3), and the recognition

ofthedeﬁned beneﬁt pension scheme

surplus (see note 17).

Estimates and associated assumptions

aecting the ﬁnancial statements are based

on historical experience and various other

factors that are believed to be reasonable

under the circumstances. The estimates

andunderlying assumptions are reviewed

on an ongoing basis. Changes in accounting

estimates may be necessary if there are

changes in the circumstances on which

the estimate was based or as a result

ofnew information.

Revisions to accounting estimates are

recognised in the year in which the estimate

isrevised if the revision aects only

thatyear, or in the year of revision and

futureyears if the revision aects both

current andfuture years.

The Directors have made estimates

and assumptions in reviewing the going

concern assumption as detailed above.

The Directors consider the key sources

of estimation uncertainty that have a risk

of causing amaterial adjustment to the

carrying valueofassets and liabilities

asdescribedon page 144.

143

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Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Notes to the consolidated

ﬁnancial statements continued

1 Accounting policies continued

Carrying value of inventories

Inventories of work-in-progress, completed

buildings including show homes and part

exchange inventories are stated in the

consolidated statement of ﬁnancial position

at the lower of cost or net realisable value

(NRV). On a monthly basis management

update estimates of future revenue and

expenditure for each development.

Future revenue and expenditure may

dierfrom estimates which could lead to

animpairment of inventory if there are

adverse changes. Where forecast revenues

are lower than forecast total costs an

inventory provision is made. This provision

may be reversed in subsequent periods

ifthere is evidence of sustained improved

revenue or reduced expenditure forecast

ona development. If forecast revenue was

10.0% lower on sites within the short-term

portfolio as at 31 October 2022, the impact

on proﬁt before tax would have been £7.0m

lower (2021: £10.9m lower).

Estimation of development proﬁtability

Due to the nature of development

activity and, in particular, the length of

the development cycle, the Group has to

make estimates of the costs to complete

developments, in particular those which

are multi-phase and/or may have signiﬁcant

infrastructure costs. These estimates

are reﬂected in the margin recognised

on developments in relation to sales

recognised in the current and future years.

There is a degree of inherent uncertainty

in making such estimates. The Group

has established internal controls that

are designed to ensure an eective

assessment of estimates is made of the

costs to complete developments. The Group

considers estimates of the costs to complete

on longer-term sites, which typically have

higher upfront shared infrastructure costs

to have greater estimation uncertainty

than sites of shorter duration with less

infrastructure requirements. A change in

estimated margins on sites, for example

due to changes in estimates of build cost

inﬂation or a reduction in house prices,

couldalter future proﬁtability. If forecast

costs were 10.0% higher on sites which

contributed to the year ended 31 October

2022 and which are forecast to still be

in production beyond the year ending

31 October 2024 (2021: beyond the year

ending 31 October 2023), proﬁt before

tax in the current year would have been

£25.3mlower (2021: £12.8m lower).

The Group has considered the potential

ﬁnancial impacts associated with transitional

and physical climate-related risks and

opportunities. The primary known impact is

the Future Homes Standard (FHS), due to be

implemented from 2025, which is expected

to increase build cost for individual units.

The anticipated additional build cost has

been included in new project acquisition

appraisals since the FHS was announced.

Projects already underway will be

substantially built out before the new

regulations commence. It is not expected

that the additional build cost will have

amaterial impact on the carrying value

of inventories or their associated project

margins or the value of goodwill. The longer

term costs associated with climate-related

risks are considered to be beyond the

timescale of the projects the Group is

currently contracted to and as such do not

impact the carrying value ofinventories

or their associated project margins.

Further information on climate-related risks

and opportunities is provided on pages 34–

35 and this represents an area of estimation

rather than a critical accounting estimate.

Valuation of the pension scheme

assetsand liabilities

In determining the valuation of the

pension scheme assets and liabilities, the

Directors utilise the services of an actuary.

The actuary uses key assumptions being

inﬂation rate, life expectancy, discount

rate, pension growth rates and Guaranteed

Minimum Pensions, which are dependent

on factors outside the control of the Group.

To the extent that such assumptions dier

to that expected, the pension liability would

change. See note 17 for additional details.

Combustible materials

The combustible materials provision

requires a number of key estimates and

assumptions in its calculation. If it is deemed

that the costs are probable and can be

reliably measured then, as per IAS 37, a

provision is recorded. If costs are considered

possible or cannot be reliably estimated

then they are recorded as contingent

liabilities (see note 26). The key assumptions

include but are not limited to identiﬁcation

of the properties impacted through the

period of construction considered. The key

estimates then applied to these properties

include the potential costs of investigation,

replacement materials, works to complete

and disruption to customers, along

with the timing of forecast expenditure.

During the year, the combustible materials

provision has been increased to reﬂect

the most contemporaneous assessment

of these costs and to reﬂect the impact of

signing theGovernment’s Building Safety

Pledge (the Pledge). As a result of signing

the Pledge the Group has committed to

funding the remediation of life-critical ﬁre

safety issues on buildings over 11 metres

in which the Group was involved going

back 30 years. The Directors have used

Building Safety Fund (BSF) cost information,

other external information and internal

assessments as a basis for the estimated

remedial costs. These estimates are

inherently uncertain due to the highly

complex and bespoke nature of the

buildings, actual costs may dier to the

amounts notiﬁed by the BSF costed

projects, and ﬁre safety reports in progress

may require dierent levels of remediation

and associated costs than those currently

estimated. If forecast remediation costs

on buildings currently provided for are

20.0% higher than provided, the pre-tax

exceptional items charge in the consolidated

income statement would be £28.2m higher.

If further buildings are identiﬁed this could

also increase the required provision, but

the potential quantity of this change cannot

bereadily determined without further claims

or investigative work. See notes 4 and 23

foradditional details.

Adoption of new and

revisedstandards

During the year, the Group has adopted

thefollowing new and revised standards

andinterpretations that have had no

impacton the ﬁnancial statements:

— Amendment to IFRS 4: Insurance

Contracts – deferral of IFRS 9

— Amendments to IFRS 7, IFRS 4,

and IFRS 16: Interest rate benchmark

reform – Phase 2.

Impact of standards and

interpretations in issue but

not yet eective

There are a number of standards,

amendments and interpretations that have

been published that are not mandatory

for the 31 October 2022 reporting period

and have not been adopted early by the

Group. The Group does not expect that the

adoption of these standards, amendments

and interpretations will have a material

impact on the ﬁnancial statements of the

Group in future years.

Other accounting policies

The accounting policies set out below have,

unless otherwise stated, been applied

consistently to all periods presented in these

Group ﬁnancial statements except in respect

of the revenue policy relating to recognised

over time housing units as detailed below.

The Group reviewed the application of

its revenue policy relating to recognised

over time housing units. From 1 November

2021 revenue is now recognised on over

time units by reference to the stage of

completion, via surveys of work performed

on contract activity. The Group considers

this policy more closely aligns with the

beneﬁts transferred to the customer.

Previously revenue was recognised on

housing units as the build of the related

units progressed, using the input method

based on costs incurred. This is considered

a change in accounting estimate and so

hasbeen implemented prospectively.

144

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Alternative performance measures

The Group has adopted various Alternative

Performance Measures (APMs), as presented

on pages 188–189. These measures are not

deﬁned by IFRS and therefore may not be

directly comparable with other companies’

APMs, and should be considered in addition

to, and are not intended to be a substitute

for, or superior to, IFRS measurements.

Consolidation

The consolidated ﬁnancial statements

include the ﬁnancial statements of

CrestNicholson Holdings plc, its subsidiary

undertakings and the Group’s share of the

results of joint ventures and joint operations.

Inter-company transactions, balances

and unrealised gains on transactions

between group companies are eliminated

on consolidation.

(a) Subsidiaries

Subsidiaries are entities in which the

Grouphas control. The Group controls

an entity when the Group is exposed to,

or has rights to, variable returns through

its power over the entity. In assessing

control, potential voting rights that are

currently exercisable or convertible

are taken into account. The proﬁts and

losses ofsubsidiaries are included in the

consolidated ﬁnancial statements from

thedate that control commences until

thedate that control ceases.

The acquisition method of accounting

is used by the Group to account for the

acquisition of subsidiaries that are a

business under IFRS 3. On acquisition of a

subsidiary, all of the subsidiary’s separable,

identiﬁable assets and liabilities existing

at the date of acquisition are recorded at

their fair values reﬂecting their condition at

that date. All changes to those assets and

liabilities and the resulting gains and losses

that arise after the Group has gained control

of the subsidiary are charged to the post-

acquisition consolidated income statement

or consolidated statement of comprehensive

income. Accounting policies of acquired

subsidiaries are changed where necessary,

to ensure consistency with policies adopted

by the Group.

Acquisitions of subsidiaries which do

notqualify as a business under IFRS 3

are accounted for as an asset acquisition

rather than a business combination.

Under such circumstances the fair value

ofthe consideration paid for the subsidiary

is allocated to the assets and liabilities

purchased based on their relative fair value

at the date of purchase. No goodwill is

recognised on such transactions.

(b) Joint ventures

A joint venture is a contractual arrangementin

which the Group and otherparties undertake

an economic activity that is subject to joint

control andthese parties have rights to the

net assets of the arrangement. The Group

reports its interests in joint ventures using

the equity method of accounting. Under this

method, interests in joint ventures are initially

recognised atcost and adjusted thereafter

to recognise the Group’s share of the post-

acquisition proﬁts or losses and movements

in other comprehensive income. The Group’s

share of results of the joint venture after tax

is included in a single line in the consolidated

income statement. Where the share of losses

exceeds the Group’s interest in the entity and

there is no obligation to fund these losses,

thecarrying amount is reduced to nil and

recognition of further losses is discontinued,

unless there is a long-term receivable due from

the joint venture in which case, if appropriate,

the loss is recognised against the receivable.

If an obligation to fund losses exists the

further losses and a provision are recognised.

Unrealised gains ontransactions between

theGroup and its joint ventures are eliminated

on consolidation. Accounting policies of joint

ventures are changed where necessary,

toensure consistency with policies adopted

by the Group.

A joint operation is a joint arrangement

thatthe Group undertakes with other parties,

in which those parties have rights to the

assets and obligations of thearrangement.

The Group accounts for joint operations by

recognising its share ofthe jointly controlled

assets and liabilities and income and

expenditure on a line-by-line basis in the

consolidated statement of ﬁnancial position

and consolidated income statement.

Goodwill

Goodwill arising on consolidation represents

the excess of the cost of acquisition over

the Group’s interest in the fair value of the

identiﬁable assets and liabilities ofthe

acquired entity at the date of the acquisition

and is not amortised. Goodwill arising on

acquisition of subsidiaries and businesses

is capitalised as an asset. The goodwill

balance has been allocated to the strategic

land holdings within the Group. The Group

expects to beneﬁt from the strategic land

holdings for a further period of 14 years to

2036. The period used in the assessment

represents the estimated time it will take to

obtain planning and build out on the remaining

acquired strategic land holdings. Goodwill is

assessed for impairment at each reporting

date. The sites acquired are considered as a

singular cash-generating unit and the value

in use is calculated on a discounted cash

ﬂow basis with more speculative strategic

sites given a lower probability of reaching

development. The calculated discounted cash

ﬂow value iscompared to the goodwill balance

to assess if it is impaired. Any impairment

loss is recognised immediately in the

consolidated income statement.

Revenue and proﬁt recognition

Revenue comprises the fair value of the

consideration received or receivable, net

ofvalue added tax, rebates and discounts.

The Group has made a judgement to

not recognise revenue onthe proceeds

received on the disposal ofproperties

taken in part exchange against a new

property as they are incidental to the main

revenue-generating activities of the Group.

Surpluses or deﬁcits on the disposal of part

exchange properties, which are bought in

at their forecast recoverable amount, are

recognised directly within cost of sales and

are not material to the results of the Group.

Proceeds received on the disposal of part

exchange properties, whichis not included

in revenue, are £48.9m(2021: £48.6m).

Revenue is recognised on house and

apartment sales at legal completion.

For aordable and other sales in bulk,

revenue recognition is dependent on freehold

legal title being passed to the customer

as it is considered that upon transfer of

freehold title that the customer controls

the work-in-progress. Where freehold legal

title and control is passed to the customer,

revenue is recognised on any upfront sale

of land (where applicable) and then on the

housing units as the build of the related units

progresses, via surveys of work performed

on contract activity. Where freehold legal

title is not passed to the customer, revenue is

notrecognised on any upfront sale of land and

the revenue on the housing units and sale of

land is recognised at handover of completed

units to the customer. The transaction

price for all housing units is derived from

contractual negotiations and does not

include any material variable consideration.

Revenue is predominantly recognised

on land sales when legal title passes to

the customer. If the Group has remaining

performance obligations, such as the

provision of services to the land, an

elementof revenue is allocated to these

performance obligations and recognised

asthe obligations are performed, which

canbe when the works are ﬁnished if the

work-in-progress is controlled by the Group

or over the performance of the works if

theyare controlled by the customer.

Revenue recognition on commercial property

sales is dependent on freehold legal title

being passed to the customer, as it is

considered that upon transfer of freehold

title that the customer controls the work-in-

progress. Where freehold legal title is passed

to the customer, revenue is recognised on

any upfront sale of land (where applicable)

and then on the development revenue over

time as the build of the related commercial

units progress. Where freehold legal title is

not passed tothe customer revenue is not

recognised on any upfront sale of land and

the revenue on the commercial property is

recognised athandover of the completed

commercial unit to the customer.

145

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Strategic

Report

Governance and

Directors’ Report

Financial

Statements

1 Accounting policies continued

The transaction price for commercial

property revenue may include an element

of variable consideration based on the

commercial occupancy of the units when

they are completed, though this is not

expected to be material. If this is the case,

the Directors take the view that unless

the lettings not yet contracted are highly

probable they should not be included

in the calculation of the transaction

price. The transaction price is regularly

updated to reﬂect any changes in the

accounting period.

Revenue is recognised on freehold reversion

sales when the customer is contractually

entitled to the ground rent revenue stream

associated with the units purchased.

Revenue on speciﬁcation upgrades paid

for by the customer or on the cost of

speciﬁcation upgrades oered to the

customer as part of the purchase price is

recognised as revenue when legal title

passes to the customer.

Proﬁt is recognised on a plot-by-plot basis,

by reference to the margin forecast across

the related development site. Due to the

development cycle often exceeding one

ﬁnancial year, plot margins are forecast,

taking into account the allocation of

site-wide development costs such as

infrastructure, and estimates required for

thecost to complete such developments.

Government grants

Unconditional Government grants are

recognised against the line item to which

they relate in the consolidated income

statement or consolidated statement of

ﬁnancial position. Conditional Government

grants received arepresented in the

consolidated statement of ﬁnancial

position as accruals and deferred income.

As conditions are satisﬁed the Government

grants are recognised against the line

itemtowhichthey relate.

Exceptional items

Exceptional items are those which, in

the opinion of the Directors, are material

by size and/or non-recurring in nature

such as signiﬁcant costs and settlements

associated with combustible materials,

signiﬁcant costs associated with acquiring

another business and signiﬁcant inventory

impairments. Where appropriate, the

Directors consider that items should be

considered as categories or classes of

items, such as any credits/costs impacting

the consolidated income statement

which relate to combustible materials,

notwithstanding where an item may be

individually immaterial.

The Directors believe that these items

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. Where appropriate, the material

reversal of any of these amounts will also

be reﬂected through exceptional items.

Additional charges/credits to items classiﬁed

as exceptional items in prior years will be

classiﬁed as exceptional in the current

year, unless immaterial to the ﬁnancial

statements. As these exceptional items

can vary signiﬁcantly year on year, they

may introduce volatility into the reported

earnings. The income tax impacts of

exceptional items are reﬂected at the

actual tax rate related to these items.

Net ﬁnance expense

Interest income is recognised on a time

apportioned basis by reference to the

principal outstanding and the eective

interest rate. Interest costs are recognised

in the consolidated income statement on an

accruals basis in the period in which they

are incurred. Imputed interest expense on

deferred land creditors and combustible

materials discounting is recognised over

thelife of associated cash ﬂows.

Income and deferred tax

Income tax comprises current tax and

deferred tax. Income tax is recognised in the

consolidated income statement except to

the extent that it relates to items recognised

in other comprehensive income, in which

case it is recognised in other comprehensive

income. Current tax is the expected tax

payable on taxable proﬁt for the year and

any adjustment to tax payable in respect of

previous years. Taxable proﬁt is proﬁt before

tax per the consolidated income statement

after adjusting for income and expenditure

that is not subject to tax, and for items

that are subject to tax in other accounting

periods. The Group’s liability for current tax

is calculated using tax rates that have been

enacted or substantively enacted by the

consolidated statement of ﬁnancial position

date. Current tax assets are recognised

to the extent that it is probable the asset

is recoverable.

Deferred tax is provided in full on temporary

dierences between the carrying amounts

of assets and liabilities in the ﬁnancial

statements and the corresponding tax bases

used in the computation of taxable proﬁts.

Deferred tax assets are recognised to the

extent that it is probable that taxable proﬁts

will be available against which deductible

temporary dierences can be utilised.

Deferred tax liabilities are recognised for

all temporary dierences. Deferred tax is

calculated using tax rates that have been

substantively enacted by the consolidated

statement of ﬁnancial position date.

Dividends

Final and interim dividend distributions to

the Company’s shareholders are recorded

in the Group’s ﬁnancial statements in the

earlier of the period in which they are

approved by the Company’s shareholders,

or paid.

Employee beneﬁts

(a) Pensions

The Group operates a deﬁned beneﬁt (DB)

scheme (closed to new employees since

October 2001 and to future service accrual

since April 2010) and also makes payments

into a deﬁned contribution scheme

for employees.

In respect of the DB scheme, the retirement

beneﬁt deﬁcit or surplus is calculated by

estimating the amount of future beneﬁt that

employees have earned in return for their

service in the current and prior periods,

such beneﬁts measured at discounted

present value, less the fair value of the

scheme assets. The rate used to discount

the beneﬁts accrued is the yield at the

consolidated statement of ﬁnancial position

date on AA credit rated bonds that have

maturity dates approximating to the terms

of the Group’s obligations. The calculation

isperformed by a qualiﬁed actuary using the

projected unit method. The operating and

ﬁnancing costs of such plans are recognised

separately in the consolidated income

statement; past service costs and ﬁnancing

costs are recognised in the periods in

which they arise. The Group recognises

expected scheme gains and losses via

the consolidated income statement and

actuarial gains and losses are recognised

in the period they occur directly in other

comprehensive income, with associated

deferred tax.

The retirement beneﬁt deﬁcit or surplus

recognised in the consolidated statement

of ﬁnancial position represents the

deﬁcit or surplus of the fair value of the

scheme’s assets over the present value

of scheme liabilities, with any net surplus

recognised to the extent that the employer

can gain economic beneﬁt as set out

intherequirements of IFRIC 14.

Payments to the deﬁned contribution

scheme are accounted for on an

accruals basis.

Notes to the consolidated

ﬁnancial statements continued

146

Crest Nicholson

Annual Integrated Report 2022

(b) Share-based payments

The fair value of equity-settled, share-based

compensation plans is recognised as an

employee expense with a corresponding

increase in equity. The fair value is

measured as at the date the options

are granted and the charge amended if

vesting does not take place due to non-

market conditions (such as service or

performance) not being met. The fair value

is spread over the period during which

the employees become unconditionally

entitled to the shares and is adjusted to

reﬂect the actual number of options that

vest. At the consolidated statement of

ﬁnancial position date, if it is expected that

non-market conditions will not be satisﬁed,

the cumulative expense recognised in

relation to the relevant options is reversed.

The proceeds received are credited to share

capital (nominal value) and share premium

when the options are exercised if new

shares are issued. If treasury shares are

used the proceeds are credited to retained

reserves. There are no cash-settled share-

based compensation plans.

Own shares held by Employee Share

Ownership Plan trust (ESOP)

Transactions of the Company-sponsored

ESOP are included in both the Group

ﬁnancial statements and the Company’s

ownﬁnancial statements. The purchase

of shares in the Company by the trust

arecharged directly to equity.

Software as a Service (SaaS)

arrangements

Implementation costs including costs to

conﬁgure or customise a cloud provider’s

application software are recognised as

administrative expenses when the services

are received, and the Group determines

that there is no control over the asset

in development.

Property, plant and equipment

Property, plant and equipment is stated

at cost less accumulated depreciation.

Cost includes the original purchase price

of the asset and the costs attributable to

bringing the asset to its working condition.

Depreciation is calculated to write o the

cost of the assets on a straight-line basis

to their estimated residual value over its

expected useful life at the following rates:

Fixtures and ﬁttings %

Computer equipment

and non-SaaS software % to %

The asset residual values, carrying values

and useful lives are reviewed on an annual

basis and adjusted if appropriate at

each consolidated statement of ﬁnancial

position date.

Right-of-use assets and lease liabilities

The Group assesses at lease inception

whether a contract is, or contains, a lease.

The Group recognises a right-of-use asset

and a lease liability at lease commencement.

The right-of-use asset is initially recorded

at the present value of future lease

payments and subsequently measured

net of depreciation, which is charged to

the consolidated income statement as an

administrative expense over the shorter

ofits useful economic life or its lease term

on a straight-line basis.

The Group recognises lease liabilities at

the present value of future lease payments,

lease payments being discounted at the

rate implicit in the lease or the Group’s

incremental borrowing rate as determined

with reference to the most recently issued

ﬁnancial liabilities carrying interest.

The discount is subsequently unwound

and recorded in the consolidated income

statement over the lease term as a ﬁnance

expense. The lease term comprises the

non-cancellable period of the contract,

together with periods covered by an option

to extend the lease where the Group is

reasonably certain to exercise that option.

The Group has elected not to recognise

right-of-use assets and lease liabilities

forshort-term leases that have a lease

term of12 months or less and leases of

low value assets. The Group recognises

the lease payments associated with these

leases asanexpense on a straight-line

basisoverthe lease term.

Inventories

Inventories are stated at the lower of

costand net realisable value (NRV).

Work-in-progress and completed buildings

including show homes comprise land

underdevelopment, undeveloped land,

landoption payments, direct materials,

sub-contract work, labour costs, site

overheads, associated professional fees

andother attributable overheads, but

excludes interest costs.

Part exchange inventories are held at the

lower of cost and NRV, which includes an

assessment of costs ofmanagement and

resale. Any proﬁt or losson the disposal

of part exchange properties is recognised

within cost ofsalesin the consolidated

income statement.

Land inventories and the associated land

payables are recognised in the consolidated

statement of ﬁnancial position from the

dateof unconditional exchange of contracts.

Land payables are recognised as part of

trade and other payables.

Options purchased in respect of land

are recognised initially as a prepayment

within inventories and written down on

a straight-line basis over the life of the

option. If planning permission is granted

and the option exercised, the option is

not written down during that year and its

carrying value is included within the cost

ofland purchased.

Provisions are established to write down

inventories where the estimated net

sales proceeds less costs to complete

exceed thecurrent carrying value.

Adjustments tothe provisions will be

required where selling prices or costs

tocomplete change. NRV forinventories

is assessed by estimating selling prices

and costs, taking into accountcurrent

market conditions.

Financial assets

Financial assets are initially recognised

at fair value and subsequently

classiﬁed into one of the following

measurement categories:

— Measured at amortised cost

— Measured subsequently at fair value

through proﬁt and loss (FVTPL)

— Measured subsequently at fair

valuethrough other comprehensive

income (FVOCI).

The classiﬁcation of ﬁnancial assets

depends on the Group’s business model

for managing the asset and the contractual

terms of the cash ﬂows. Assets that are held

for the collection of contractual cash ﬂows

that represent solely payments of principal

and interest are measured at amortised

cost, with any interest income recognised

in theconsolidated income statement

usingthe eective interest rate method.

Financial assets that do not meet the

criteria to be measured at amortised cost

are classiﬁed by the Group as measured

at FVTPL. Fair value gains and losses

on ﬁnancial assets measured at FVTPL

are recognised in the consolidated

income statement and presented within

administrative expenses. The Group

currently has no ﬁnancial assets measured

at FVOCI.

147

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

1 Accounting policies continued

Financial assets at fair value

through proﬁt and loss

Financial assets at fair value through proﬁt

and loss (which comprise shared equity

receivables) are classiﬁed as being held

to collect and initially recognised at fair

value. Changes in fair value relating to

the expected recoverable amount are

recognised in the consolidated income

statement as a ﬁnance income or expense.

These assets are held as current or

non-current based on their contractual

repayment dates.

Trade and other receivables

Trade and other receivables are recognised

initially at fair value and subsequently

measured at amortised cost, using the

eective interest method, less provision

forimpairment. A provision for impairment

of trade and other receivables is established

based on an expected credit loss model

applying the simpliﬁed approach, which uses

a lifetime expected loss allowance forall

trade and other receivables. The amount

of the loss is recognised separately in

the consolidated income statement.

Current trade and other receivables do not

carry any interest and are stated at their

amortised cost, as reduced by appropriate

allowances for estimated irrecoverable

amounts. Non-current trade and other

receivables are discounted to present value

when the impact of discounting is deemed

to be material, with any discount to nominal

value being recognised in the consolidated

income statement as interest income over

the duration of the deferred payment.

Contract assets

Contract assets represent unbilled work-

in-progress on aordable and other sales

in bulk on contracts in which revenue is

recognised over time. Contract assets

are recognised initially at fair value and

subsequently measured at amortised cost,

using the eective interest method, less

provision for impairment. Contract assets

do not carry any interest and are stated

at their amortised cost, as reduced by

appropriate allowances for estimated

irrecoverable amounts.

Cash and cash equivalents

Cash and cash equivalents are cash

balances in hand and in the bank and are

carried in the consolidated statement

ofﬁnancial position at nominal value.

Interest-bearing loans and borrowings

are recognised initially at fair value, net of

direct transaction costs, and subsequently

measured at amortised cost. Finance charges

are accounted for on an accruals basis in

the consolidated income statement using

the eective interest method and are added

to the carrying amount of the instrument

tothe extent that they are not settled in the

period in which they arise or included within

interest accruals.

Financial liabilities

Financial liabilities are initially recognised

at fair value and subsequently classiﬁed

into one of the following measurement

categories:

— Measured at amortised cost

— Measured subsequently at FVTPL.

Non-derivative ﬁnancial liabilities are

measured at FVTPL when they are

considered held for trading or designated

assuch on initial recognition. The Group

has no non-derivative ﬁnancial liabilities

measured at FVTPL.

Land payables

Land payables are recognised in the

consolidated statement of ﬁnancial position

from the date of unconditional exchange

of contracts. Where land is purchased

on deferred settlement terms then the

land andthe land payable are discounted

to theirfair value using the eective

interest method in accordance with IFRS

9. The dierence between the fair value

and the nominal value is amortised over

the deferment period, with the ﬁnancing

element being charged as an interest

expense through the consolidated

income statement.

Trade and other payables

Trade and other payables are recognised

initially at their fair value and subsequently

measured at amortised cost using the

eective interest method. Trade and other

payables on deferred terms are initially

recorded at their fair value, with the

discountto nominal value being charged

tothe consolidated income statement

as aninterest expense over the duration

ofthedeferred period.

Contract liabilities

Contract liabilities represent payments

onaccount, received from customers,

in excess of billable work-in-progress

on aordable and other sales in bulk on

contracts. Contract liabilities are recognised

initially at their fair value and subsequently

measured at amortised cost using the

eective interest method.

Provisions

A provision is recognised in the consolidated

statement of ﬁnancial positionwhen the

Group has a present legalor constructive

obligation as a result of a past event and

it is probable that an outﬂow of economic

beneﬁts will be required to settle the

obligation, and the amount can be reliably

estimated. Provisions are discounted to

present value on a discounted cash ﬂow

basis using an interest rate appropriate

tothe class of the provision, where the

eect is material.

Seasonality

In common with the rest of the UK

housebuilding industry, activity occurs

throughout the year, with peaks in sales

completions in spring and autumn.

This creates seasonality in the Group’s

trading results and working capital.

2 Segmental reporting

The Executive Leadership Team

(comprisingPeter Truscott (Chief Executive),

Tom Nicholson (Chief Operating Ocer)

until 27 May 2022, Duncan Cooper

(Group Finance Director), David Marchant

(Group Operations Director), Kieran Daya

(Managing Director, Crest Nicholson

Partnerships and Strategic Land), Jane

Cookson (GroupHR Director) and Kevin

Maguire (General Counsel and Company

Secretary)), 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 Executive Leadership Team

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.

Notes to the consolidated

ﬁnancial statements continued

148

Crest Nicholson

Annual Integrated Report 2022

3 Revenue

Revenue type

2022

£m

2021

£m

Open market housing including speciﬁcation upgrades . .

Aordable housing . .

Total housing . .

Land and commercial sales . .

Freehold reversions . .

Total revenue . .

In the prior year land and commercial sales include revenue of £42.3m from the sale of the Longcross Film Studio to our joint unincorporated

arrangement partner on that scheme. Commercial sales are immaterial in each year.

Timing of revenue recognition

2022

£m

2021

£m

Revenue recognised at a point in time .  .

Revenue recognised over time . .

Total revenue . .

Proceeds received on the disposal of part exchange properties, which is not included in revenue, were £48.9m (2021: £48.6m).

These have been included within cost of sales.

Assets and liabilities related to contracts with customers

2022

£m

2021

£m

Contract assets (note 18)  . .

Contract liabilities (note 22) (.) (.)

Contract assets have decreased to £25.1m from £56.4m in 2021, reﬂecting less unbilled work-in-progress on aordable and other sales

inbulk at the year end. This is in line with the trading of the Group and the contractual arrangements in the Group’s contracts.

Contract liabilities have reduced to £19.0m from £25.0m in 2021, reﬂecting a lower amount of payments on account received from customers

inexcess of billable work-in-progress on aordable and other sales in bulk on contracts on which revenue is recognised over time. This fall

was driven primarily by a reduction in a number of sites where revenue was recognised at a point in time in the current year but the Group

had received progress payments from the customer in the prior year.

Based on historical trends, the Directors expect a signiﬁcant proportion of the contract liabilities total to be recognised as revenue in the

next reporting period.

Included in revenue during the year was £19.6m (2021: £21.3m) that was included in contract liabilities at the beginning of the year.

During the year £nil (2021: £nil) of revenue was recognised from performance obligations satisﬁed or partially satisﬁed in previous years.

At 31 October 2022 there was £322.4m (2021: £358.5m) of transaction price allocated to performance obligations that are unsatisﬁed or

partially unsatisﬁed on contracts exchanged with customers. We are forecasting to recognise £257.4m (2021: £261.7m) of transaction prices

allocated to performance obligations that are unsatisﬁed on contracts exchanged with customers within one year, £65.0m (2021: £96.8m)

within two to ﬁve years, and £nil (2021: £nil) over ﬁve years.

149

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

4 Exceptional items

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. Where appropriate, the Directors consider

that items should be considered as categories or classes of items, such as any credits/costs impacting the consolidated income statement

which relate to combustible materials, notwithstanding where an item may be individually immaterial. Where appropriate, a material reversal

of these amounts will be reﬂected through exceptional items.

Exceptional items for the year relate to the same category of items recognised in previous ﬁnancial years.

Cost of sales

2022

£m

2021

£m

Combustible materials charge . .

Combustible materials credit – (.)

Net combustible materials charge . .

Inventory impairment credit – (.)

Total cost of sales exceptional charge . .

Net ﬁnance expense

Finance expense credit – (.)

Combustible materials imputed interest . –

Share of post-tax loss of joint ventures

Combustible materials charge of joint ventures . –

Total exceptional charge . .

Tax credit on exceptional charge (.) (.)

Total exceptional charge after tax credit . .

Combustible materials related charges

Following the ﬁre at Grenfell Tower in 2017, and the subsequent review of building design, construction methods and materials used,

theGroup has acted swiftly to identify and remediate any legacy buildings where it has a constructive or legal obligation to do so.

The Group recognises the signiﬁcant distress caused to residents and as such has always sought to engage constructively with residents,

building owners, Government and other aected stakeholders.

Accordingly, the Group had cumulatively recorded £47.8m of net charges in respect of these obligations between the year ended

31 October 2019 to 31 October 2021.

On 19 April 2022, the Group signed the Government’s Building Safety Pledge, which has a wider parameter of potential buildings and

hasthus contributed to a further combustible material related total exceptional charge of £105.0m for the year ended 31 October 2022.

Due to the material nature of the charge, it has been recognised as an exceptional item. See note 23 for additional information.

The combustible materials charge of joint ventures represents the Group’s share of exceptional combustibles materials charge in its

jointventure Crest Nicholson Bioregional Quintain LLP. The joint venture completed a development in Brighton in 2011 and recognised

aprovision following an independent ﬁre engineers report recommending remedial works.

In January 2023, the Group received a £10.0m cash settlement from a third party relating to buildings included within the combustible

materials provision. As this was not contracted in the current ﬁnancial year, it has not been recognised in the FY22 consolidated ﬁnancial

statements. The receipt will be reﬂected in the FY23 consolidated ﬁnancial statements as an exceptional credit.

Inventory impairment credit and ﬁnance expense credit

In the year ended 31 October 2021 the Group released unused inventory impairment and reversed a ﬁnance expense charge which were

previously recognised as exceptional, resulting in a credit in those periods. For further details see note 4 within the Group’s consolidated

ﬁnancial statements for the year ended31 October 2021.

Taxation

An exceptional income tax credit of £22.4m (2021: £3.9m) has been recognised in relation to the above exceptional items using the actual

taxrate applicable to these items.

Notes to the consolidated

ﬁnancial statements continued

150

Crest Nicholson

Annual Integrated Report 2022

5 Operating proﬁt

Operating proﬁt of £38.4m (2021: £93.8m) from continuing activities is stated after charging/(crediting):

Note

2022

£m

2021

£m

Inventories expensed in the year . .

Inventories impairment movement in the year  (.) (.)

Employee costs  . .

Depreciation on property, plant and equipment  . .

Depreciation on right-of-use assets  . .

Joint venture project management fees received  (.) (.)

Government grants repaid – .

Government grants repaid

During the year ended 31 October 2020 the Group recognised a £2.5m credit within administrative expenses relating to the Government’s

Job Retention Scheme (JRS). On 14 December 2020, the Group voluntarily repaid the JRS grant, representing a charge within administrative

expenses in the prior year.

Auditors’ remuneration

2022

£000

2021

£000

Audit of these consolidated ﬁnancial statements  

Audit of ﬁnancial statements of subsidiaries pursuant to legislation  

Other non-audit services  

The audit fees payable in 2022 included £30,000 in relation to additional costs for the 2021 audit (2021: included £70,000 in relation

toadditional costs for the 2020 audit).

Fees payable to the Group’s auditors for non-audit services included £95,000 (2021: £90,000) in respect of an independent review

ofthehalf-year results.

In addition to the above, PricewaterhouseCoopers LLP provide audit services to the Crest Nicholson Group Pension and Life Assurance

Scheme and Group joint ventures. The fees associated with the services to the Crest Nicholson Group Pension and Life Assurance Scheme

are £25,400 (2021: £24,000) and are met by the assets of the scheme, and the fees associated with services to Group joint ventures are

£22,000 (2021: £28,000).

151

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

6 Employee numbers and costs

(a) Average monthly number of persons employed by the Group

2022

Number

2021

Number

Development  

The Directors consider all employees of the Group to be employed within the same category of Development.

(b) Employee costs (including Directors and key management)

2022

£m

2021

£m

Wages and salaries . .

Social security costs . .

Other pension costs . .

Share-based payments (note 17) . .

. .

2022

£m

2021

£m

Salaries and short-term employee beneﬁts . .

Directors’ remuneration for loss of oce . –

Share-based payments . .

. .

Key management comprises the Executive Leadership Team (which includes the Executive Directors of the Board) and Non-Executive

Directors as they are considered to have the authority and responsibility for planning, directing and controlling the activities of the Group.

(d) Directors’ remuneration

2022

£m

2021

£m

Salaries and short-term employee beneﬁts . .

Directors’ remuneration for loss of oce . –

Share-based payments . .

. .

Further information relating to Directors’ remuneration, incentive plans, share options, pension entitlement and the highest paid Director,

appears in the Directors’ Remuneration Report, which is presented on pages 100–122.

7 Finance income and expense

2022

£m

2021

£m

Finance income

Interest income . .

Interest on amounts due from joint ventures (note 28) . .

Interest on ﬁnancial assets at fair value through proﬁt and loss (note 15) – .

Net interest on deﬁned beneﬁt pension scheme (note 17) . –

. .

Finance expense

Interest on bank loans (.) ( . )

Revolving credit facility issue costs (.) (.)

Imputed interest on deferred land payables (.) (.)

Interest on lease liabilities (note 13) (.) (.)

Interest on ﬁnancial assets at fair value through proﬁt and loss – exceptional (note 15) – .

Net interest on deﬁned beneﬁt pension scheme (note 17) – (.)

Imputed interest on combustible materials provision – exceptional (note 23) (.) –

(.) (.)

Net ﬁnance expense ( .) (.)

Notes to the consolidated

ﬁnancial statements continued

152

Crest Nicholson

Annual Integrated Report 2022

8 Income tax expense

2022

£m

2021

£m

Current tax

UK corporation tax expense on proﬁt for the year (.) (. )

Adjustments in respect of prior periods – (.)

Total current tax expense ( .) (.)

Deferred tax

Origination and reversal of temporary dierences in the year (.) (.)

Adjustment in respect of prior periods – .

Total deferred tax charge (note 16) (.) (.)

Total income tax expense in consolidated income statement (.) (.)

Corporation tax is calculated at 19.0% (2021: 19.0%) of the proﬁt chargeable to tax for the year, and, from 1 April 2022 the Group is subject

totheResidential Property Developer Tax (RPDT) at a rate of 4.0%. This results in a weighted statutory rate of corporation tax of 21.3%

forthe year. The eective tax rate for the year is 19.5% (2021: 18.4%), which is lower than (2021: lower than) the weighted standard rate

ofUKcorporation tax due to the impact of the changes in UK tax rates on deferred tax and the RPDT annual allowance and adjustments.

The Group expects the eective tax rate to be more aligned to the standard rate of corporation tax in future years, adjusted for the

impactofchanges inthe rate of tax.

2022

£m

2021

£m

Reconciliation of tax expense in the year

Proﬁt before tax . .

Tax on proﬁt at 21.3% (inclusive of RPDT) (2021: 19.0%) ( .) (.)

Eects of:

Expenses not deductible for tax purposes (.) (.)

Enhanced tax deductions . .

Adjustments in respect of prior periods – .

Eect of change in rate of tax . .

Impact of RPDT annual allowance and adjustments . –

Total income tax expense in consolidated income statement (.) (.)

Expenses not deductible for tax purposes include business entertaining and other permanent disallowable expenses. Enhanced tax

deductions include items for which, under tax law, a corporation tax deduction is available in excess of the amount shown in the consolidated

income statement. Examples are share schemes, deﬁned beneﬁt pension payments and land remediation enhanced allowances.

Adjustments in respect of prior periods reﬂect the dierence between the estimated consolidated income statement tax chargein the

prioryear and that of the actual tax outcome.

Eect of change in rate of tax reﬂects the impact on deferred tax balances in respect of the RPDT tax rate of 4.0% which was eective

from1 April 2022. As a result, the deferred tax balances on the consolidated statement of ﬁnancial position have been measured using

theserevised rates.

RPDT was introduced by HM Treasury to obtain acontribution from the UK’s largest residential property developers towards the cost of

remediating defective cladding in the UK’s high-rise housing stock and is expected to remain in force for up to 10 years. RPDT is anadditional

tax on proﬁts generated from residential property development activity, in excess of an annual threshold and adjusting for interestexpense

disallowable under RPDT. The impact of RPDT annual allowance and adjustments reﬂects the net tax beneﬁt oftheannualthreshold and

interest adjustment.

The UK corporation tax rate will increase from 19.0% to 25.0% with eect from 1 April 2023.

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Financial

Statements

9 Dividends

2022

£m

2021

£m

Dividends recognised as distributions to equity shareholders in the year:

Current year interim dividend of 5.5 pence per share (2021: 4.1 pence per share) . .

Prior year ﬁnal dividend per share of 9.5 pence per share (2021: nil pence per share) . –

. .

2022

£m

2021

£m

Dividends proposed as distributions to equity shareholders in the year:

Final dividend for the year ended 31 October 2022 of 11.5 pence per share (2021: 9.5 pence per share) . .

The proposed ﬁnal dividend was approved by the Board on 17 January 2023 and, in accordance with IAS 10: Events after the Reporting

Period, has not been included as a liability in this ﬁnancial year. The ﬁnal dividend will be paid on 5 April 2023 to all ordinary shareholders

onthe Register of Members on 17 March 2023.

10 Earnings per ordinary share

Basic earnings per share is calculated by dividing proﬁt attributable to equity shareholders by the weighted average number of ordinary

shares in issue during the year. For diluted earnings per share, the weighted average number of shares is increased by the average number

ofpotential ordinary shares held under option during the year. This reﬂects the number of ordinary shares which would be purchased

using the dierence in value between the market value of shares and the share option exercise price. The market value of shares has

been calculated using the average ordinary share price during the year. Only share options which have met their cumulative performance

criteria have been included in the dilution calculation. The earnings and weighted average number of shares used in the calculations are

setout below.

Earnings

£m

Weighted average

number of

ordinary shares

Number

Per share

amount

Pence

Year ended 31 October 2022

Basic earnings per share . ,, .

Dilutive eect of share options – ,,

Diluted earnings per share . ,, .

Year ended 31 October 2022 – Pre-exceptional items

Adjusted basic earnings per share . ,, .

Dilutive eect of share options – ,,

Adjusted diluted earnings per share . ,, .

Year ended 31 October 2021

Basic earnings per share . ,, .

Dilutive eect of share options – ,,

Diluted earnings per share . ,, .

Year ended 31 October 2021 – Pre-exceptional items

Adjusted basic earnings per share . ,, .

Dilutive eect of share options – ,,

Adjusted diluted earnings per share . ,, .

Notes to the consolidated

ﬁnancial statements continued

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11 Intangible assets

2022

£m

2021

£m

Goodwill

Cost at beginning and end of the year . .

Accumulated impairment (.) (.)

At beginning and end of the year . .

Goodwill arose on the acquisition of CN Finance plc (formerly Castle Bidco plc) on 24 March 2009. The goodwill relating to items other than

the holding of strategic land was fully impaired in prior periods. The remaining goodwill was allocated to acquired strategic land holdings

(the cash-generating unit) within the Group and has not previously been impaired. The goodwill is assessed for impairment annually.

The recoverable amount is equal to the higher of value in use and fair value less costs of disposal. The Directors have therefore assessed

value in use, being the present value of the forecast cash ﬂows from the expected development and sale of properties on the strategic

land. These cash ﬂows are the key estimates in the value in use assessment. The forecast looks at the likelihood and scale of permitted

development, forecast build costs and forecast selling prices, using a pre-tax discount rate of 8.5% (2021: 8.5%), covering a further period

of 14 years to 2036, and based on current market conditions. The discount rate is based on an externally produced weighted average cost

of capital range estimate, for both 2021 and 2022 8.5% falls within the respective range. The Future Homes Standard will not impact the

estimated development cash ﬂows as sites in production already incorporate the forecast extra costs, and for those under option the extra

costs will be adjusted inthe land valuespayable. The period used in this assessment represents the estimated time it will take to obtain

planning and build out onthe remaining acquired strategic land holdings. The recoverable value of the cash-generating unit is substantially

in excess of the carrying valueof goodwill. Sensitivity analysis has been undertaken by changing the discount rates by plus or minus 1.0%

and the forecast proﬁt margins applicable to the site within the cash-generating unit. None of the sensitivities, either individually or in

aggregate, resulted inthefairvalue ofthe goodwill being reduced tobelow its current book value amount.

12 Property, plant and equipment

Fixtures and

ﬁttings

£m

Computer

equipment and

software

£m

Total

£m

Cost

At 1 November 2020 . . .

Additions – . .

Disposals (.) (.) (.)

At 31 October 2021 . . .

Additions – . .

Disposals (.) (.) (.)

At 31 October 2022 . . .

Accumulated depreciation

At 1 November 2020 . . .

Charge for the year . . .

Disposals (.) (.) (.)

At 31 October 2021 . . .

Charge for the year . . .

Disposals (.) (.) (.)

At 31 October 2022 . . .

Net book value

At 31 October 2022 . . .

At 31 October 2021 . . .

At 1 November 2020 . . .

The Group has contractual commitments for the acquisition of property, plant and equipment of £nil (2021: £nil).

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Financial

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13 Right-of-use assets and liabilities

Oce buildings

£m

Motor vehicles

£m

Photocopiers

£m

Total

£m

Cost

At 1 November 2020 . . . .

Additions – . – .

Disposals (.) (.) (.) (.)

At 31 October 2021  . . – .

Additions – . – .

Disposals – (.) – (.)

At 31 October 2022  . . – .

Accumulated depreciation

At 1 November 2020 . . . .

Charge for the year . .  . .

Disposals (.) (.) (.) (.)

At 31 October 2021 . . – .

Charge for the year . . – .

Disposals – (.) – (.)

Reclassiﬁcation* (.) – – (.)

At 31 October 2022 . . – .

Net book value

At 31 October 2022 . . – .

At 31 October 2021 . . – .

At 1 November 2020 .  .  . .

* Relates to the brought forward balance of dilapidations on Group oces, now presented in provisions (see note 23).

Lease liabilities included in the consolidated statement of ﬁnancial position

2022

£m

2021

£m

Non-current . .

Current . .

Total lease liabilities . .

Amounts recognised in the consolidated income statement

2022

£m

2021

£m

Depreciation on right-of-use assets . .

Interest on lease liabilities . .

Amounts recognised in the consolidated cash ﬂow statement

2022

£m

2021

£m

Principal element of lease payments . .

Maturity of undiscounted contracted lease cash ﬂows

2022

£m

2021

£m

Less than one year . .

One to ﬁve years . .

More than ﬁve years – –

Total . .

Notes to the consolidated

ﬁnancial statements continued

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Annual Integrated Report 2022

14 Investments

Investments in joint ventures

Below are the joint ventures that the Directors consider to be material to the Group:

— Crest Sovereign (Brooklands) LLP: In April 2019 the Group entered into a partnership agreement with Sovereign Housing Association

Limited to develop a site in Bristol. The LLP commenced construction in 2019, with sales completion forecast for 2027. The LLP will be

equally funded by both parties, who will receive interest on loaned sums. The Group performs the role of project manager, for which

itreceives a project management fee.

— Crest A2D (Walton Court) LLP: In January 2016 the Group entered into a partnership agreement with A2 Dominion Developments

Limited to procure and develop a site in Surrey. The LLP commenced construction in 2019, with sales completion forecast for 2026.

The development will be equally funded by both parties by way of interest free loans. The Group performs the role of project manager,

forwhich it receives a project management fee.

— Elmsbrook (Crest A2D) LLP: In July 2017 the Group entered into a partnership agreement with A2 Dominion Developments Limited

to procure and develop a site in Oxfordshire. The LLP commenced construction in 2018, with sales completion forecast for 2023.

The development will be equally funded by both parties by way of interest free loans. The Group performs the role of project manager,

forwhich it receives a project management fee.

Disposal of joint venture Bonner Road LLP

In August 2015 the Group entered into a partnership agreement with Your Lifespace Limited to procure and develop a site in London.

This site has been the subject of planning objections and delays and is a complex build programme with signiﬁcant levels of peak capital

investment. On 6 May 2022 the Group disposed of its 50% interest in Bonner Road LLP to its joint venture partner for consideration of

£16.0m, of which £8.0m was received in the year and £8.0m is receivable in the next ﬁnancial year. The carrying value of the amounts

duefrom thejoint venture was further impaired recording a £2.3m net impairment loss on ﬁnancial assets in the year as presented below

andrepresents the ﬁnal value to be realised upon the disposal:

£m

Proceeds from disposal of interest in Bonner Road LLP .

Amounts due from the joint venture at 6 May 2022 ( . )

Expected credit loss charged to the consolidated income statement to 31 October 2021 .

Cumulative loss recognised in the consolidated income statement to 31 October 2021 .

Loss recognised in the consolidated income statement from 1 November 2021 to 6 May 2022 .

Expected credit loss charged to the consolidated income statement in the year .

Total expected credit loss utilised in the year £14.1m (see note 18).

Total investments in joint ventures

2022

£m

2021

£m

Crest Sovereign (Brooklands) LLP . –

Crest A2D (Walton Court) LLP . .

Elmsbrook (Crest A2D) LLP . .

Other non-material joint ventures – .

Total investments in joint ventures . .

All material joint ventures have their place of business in Great Britain, are 50% owned and are accounted for using the equity method,

in line with theprior year. See note 29 for further details.

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Financial

Statements

14 Investments continued

Summarised ﬁnancial information for joint ventures

The tables below provide ﬁnancial information for joint ventures that are material to the Group. The information disclosed reﬂects the

amounts presented in the ﬁnancial statements of the relevant joint ventures, where the Group retains an interest, and not the Group’s

shareof those amounts.

2022

Crest

Sovereign

(Brooklands)

LLP

£m

Bonner

Road LLP

£m

Crest A2D

(Walton Court)

LLP

£m

Elmsbrook

(Crest A2D)

LLP

£m

Other

non-material

joint

ventures

£m

Total

£m

Summarised statement of ﬁnancial position

Current assets

Cash and cash equivalents . – . . . .

Inventories . – . . – .

Other current assets . – . . . .

Current liabilities

Financial liabilities (.) – (.) – – (.)

Other current liabilities (.) – (.) (.) (.) (.)

Non-current liabilities

Financial liabilities (.) – (.) – – (.)

Net assets/(liabilities) . – . . (.) .

Reconciliation to carrying amounts

Opening net (liabilities)/assets at 1 November 2021 (.) (.) . . . (.)

Proﬁt/(loss) for the year . (.) . . ( .) .

Capital contribution reserve – – . – – .

Dividends paid – – – (.) – (.)

Disposal in the year – .



– – – .

Closing net assets/(liabilities) at 31 October 2022 . – . . (.) .

Group’s share of closing net assets/(liabilities)

at 31 October 2022 . – . . (.) .

Losses recognised against receivable from joint

venture (note 18) – – – – . .

Fully provided in the Group ﬁnancial statements

(note 23) – – – – . .

Group’s share in joint venture . – . . – .

Amount due to the Group (note 18) .

–

.



. – .

Amount due from the Group (note 22) – – – – . .

Summarised income statement for the 12 months

ending 31 October 2022

Revenue .  – . . – .

Expenditure (.) – (.) (.) ( .) (.)

Expenditure – exceptional item (note 4) – – – – (.) (.)

Operating proﬁt/(loss) before ﬁnance expense . – . . ( .) .

Finance expense (.) (.) (.) – – (.)

Pre-tax and post-tax proﬁt/(loss) for the year . (.) . . ( .) .

Group’s share in joint venture proﬁt/(loss)

for the year . (.) . . (.) .

1 Group’s share of the net liabilities comprises £7.5m made up of brought forward net liabilities of £6.9m and current year loss of £0.6m.

2 £15.9m stated after expected credit loss of £0.1m.

The Group is committed to provide such funding to joint ventures as may be required by the joint venture in order to carry out the project

ifcalled. Funding of this nature is currently expected to be £1.2m (2021: £nil). The Group has recognised its share of the accumulated

lossesof its joint ventures against the carrying value of investments or loans in the joint venture where appropriate, in line with IAS 28.

Notes to the consolidated

ﬁnancial statements continued

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Annual Integrated Report 2022

2021

Crest

Sovereign

(Brooklands)

LLP

£m

Bonner

Road LLP

£m

Crest A2D

(Walton Court)

LLP

£m

Elmsbrook

(Crest A2D)

LLP

£m

Other

non-material

joint

ventures

£m

Total

£m

Summarised statement of ﬁnancial position

Current assets

Cash and cash equivalents . . – . . .

Inventories . . . .  – .

Other current assets . – . . . .

Current liabilities

Financial liabilities (.) – ( .  ) (.) – (.)

Other current liabilities (.) (.) (.) (.) (.) (.)

Non-current liabilities

Financial liabilities (.) (.) (.) – – (.)

Net (liabilities)/assets (.) (.) . . . (.)

Reconciliation to carrying amounts

Opening net (liabilities)/assets at 1 November 2020 (.) (.) . . . (.)

Proﬁt/(loss) for the year . (.) . . – .

Capital contribution reserve – – . – – .

Closing net (liabilities)/assets at 31 October 2021 (.) (.) . . . (.)

Group’s share of closing net (liabilities)/assets

at 31 October 2021 (.) (.) . .  . (.)

Losses recognised against receivable from joint

venture (note 18) . . – – – .

Group’s share in joint venture – – . . . .

Amount due to the Group (note 18) . .



.



. – .

Amount due from the Group (note 22) – – – – . .

Summarised income statement for the 12 months

ending 31 October 2021

Revenue . – . . –  .

Expenditure (.) – (.) (.) – (.)

Operating proﬁt before ﬁnance expense . – . . – .

Finance expense (.) (.) (.) – – (.)

Pre-tax and post-tax proﬁt/(loss) for the year . (.) . . – .

Group’s share in joint venture proﬁt/(loss)

for the year . (.) . . – .

1 £18.2m stated after expected credit loss of £11.8m, and £15.5m stated after expected credit loss of £0.1m.

The Group is committed to provide such funding to joint ventures as may be required by the joint venture in order to carry out the project

if called.

Subsidiary undertakings

The subsidiary undertakings that are signiﬁcant to the Group and traded during the year are set out below. The Group’s interest is in respect

of ordinary issued share capital that is wholly owned and all the subsidiary undertakings are incorporated in Great Britain and included in

theconsolidated ﬁnancial statements.

Subsidiary Nature of business

CN Finance plc Holding company (including group ﬁnancing)

Crest Nicholson plc Holding company

Crest Nicholson Operations Limited Residential and commercial property development

A full list of the Group’s undertakings including subsidiaries and joint ventures is set out in note 29.

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Financial

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15 Financial assets at fair value through proﬁt and loss

2022

£m

2021

£m

At beginning of the year . .

Disposals (.) (.)

Imputed interest – .

At end of the year . .

Of which:

Non-current assets . .

Current assets . .

. .

Financial assets at FVTPL are carried at fair value and categorised as level 3 (inputs not based on observable market data) within the

hierarchical classiﬁcation of IFRS 13: Revised.

FVTPL comprise shared equity loans secured by way of a second charge on the property. The loans can be repaid at any time within the

loan agreement, the amount of which is dependent on the market value of the asset at the date of repayment. The assets are recorded

atfairvalue, being the estimated amount receivable by the Group, discounted to present day values.

The fair value of future anticipated cash receipts takes into account Directors’ views of an appropriate discount rate (incorporating purchaser

default rate), future house price movements and the expected timing of receipts. These assumptions are given below and are reviewed at

each year end, although short-term house prices may fall, 3% is considered to be a fair medium-term assessment:

2022 2021

Assumptions

Discount rate, incorporating default rate .% .%

House price inﬂation for the next three years .% .%

Timing of receipt from loan issuance  to  years  to  years

2022

Increase

assumptions by

1%/year

£m

2022

Decrease

assumptions by

1%/year

£m

Sensitivity – eect on value of FVTPL (less)/more

Discount rate, incorporating default rate (.)  .

House price inﬂation for the next three years . ( .)

Timing of receipt ( .) –

The dierence between the anticipated future receipt and the initial fair value is charged over the estimated deferred term to ﬁnancing,

withthe ﬁnancial asset increasing to its full expected cash settlement value on the anticipated receipt date. The imputed ﬁnance income

credited to ﬁnancing for the year ended 31 October 2022 was £nil (2021: £0.9m).

At initial recognition, the fair values of the assets are calculated using a discount rate, appropriate to the class of assets, which reﬂects

market conditions at the date of entering into the transaction. The Directors consider at the end of each reporting period whether the initial

market discount rate still reﬂects up-to-date market conditions. If a revision is required, the fair values of the assets are remeasured at the

present value of the revised future cash ﬂows using this revised discount rate. The dierence between these values and the carrying values

ofthe assets is recorded against the carrying value of the assets and recognised directly in the consolidated income statement.

Notes to the consolidated

ﬁnancial statements continued

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16 Deferred tax assets and liabilities

Deferred tax assets

Inventories fair

value

£m

Share-based

payments

£m

Pension

deﬁcit

£m

Other temporary

dierences

£m

Total

£m

At 1 November 2020 . . . . .

Consolidated income statement movements (.) . (.) (.) (.)

Equity movements – . (.) – (.)

At 31 October 2021 . . – . .

Consolidated income statement movements – . – ( .) .

Equity movements – (.) – – (.)

At 31 October 2022 . . – . .

Deferred tax liabilities

Pension

surplus

£m

Total

£m

At 1 November 2020 – –

Equity movements ( .) (.)

At 31 October 2021 (.) ( .)

Consolidated income statement movements (.) (.)

Equity movements . .

At 31 October 2022 (.) (.)

Total deferred tax credited to equity in the year is £1.2m (2021: charged £4.7m). Deferred tax assets expected to be recovered in less than

12 months is £1.5m (2021: £0.7m), and in more than 12 months is £3.3m (2021: £4.1m). Deferred tax liabilities are expected to be settled in

more than 12 months.

At the consolidated statement of ﬁnancial position date the substantively enacted future corporation tax rate up to 31 March 2023 is 19.0%

and from 1 April 2023 is 25.0%. A new residential property developer tax (RPDT) became eective from 1 April 2022. RPDT is an additional

tax at 4.0% of proﬁts generated from residential property development activity, in excess of an annual threshold. Deferred tax assets and

liabilities have been evaluated using the applicable tax rates when the asset is forecast to be realised and the liability is forecast to be

settled. The Group has no material unrecognised deferred tax assets.

Inventories fair value represents temporary dierences on the carrying value of inventory fair valued on the acquisition of CN Finance

plc in 2009. These temporary dierences are expected to be recoverable in full as it is considered probable that taxable proﬁts will

be available against which the deductible temporary dierences can be utilised, and are therefore recognised as deferred tax assets

intheabove amounts.

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Directors’ Report

Financial

Statements

17 Employee beneﬁts

(a) Retirement beneﬁt obligations

Deﬁned contribution scheme

The Group operates a deﬁned contribution scheme for new employees. The assets of the scheme are held separately from those of the

Group in an independently administered fund. The contributions to this scheme for the year were £2.3m (2021: £2.0m). At the consolidated

statement of ﬁnancial position date there were no outstanding or prepaid contributions (2021: £nil).

Deﬁned beneﬁt scheme

The Company sponsors the Crest Nicholson Group Pension and Life Assurance Scheme (the Scheme), a funded deﬁned beneﬁt pension

scheme in the UK. The Scheme is administered within a trust that is legally separate from the Company. A Trustee company (the Trustee)

isappointed by the Company and the Company and the Scheme’s members appoint Trustee Directors. The Trustee is appointed to act

inthe interest of the Scheme and all relevant stakeholders, including the members and the Company. The Trustee is also responsible

fortheinvestment of the Scheme’s assets.

The Scheme closed to future accrual from 30 April 2010. Accrued pensions in relation to deferred members are revalued at statutory

revaluation in the period before retirement. Beneﬁts also increase either at a ﬁxed rate or in line with inﬂation while in payment.

The Scheme provides pensions to members on retirement and to their dependants on death.

The Company pays contributions to improve the Scheme’s funding position as determined by regular actuarial valuations. The Trustee

is required to use prudent assumptions to value the liabilities and costs of the Scheme whereas the accounting assumptions must be

best estimates.

Responsibility for meeting any deﬁcit within the Scheme lies with the Company and this introduces a number of risks for the Company.

The major risks are: interest rate risk, inﬂation risk, investment risk and longevity risk. The Company and Trustee are aware of these risks

andmanage them through appropriate investment and funding strategies.

The Scheme is subject to regular actuarial valuations, which are usually carried out every three years. The last actuarial valuation was

carriedout with an eective date of 31 January 2021. These actuarial valuations are carried out in accordance with the requirements

of thePensions Act 2004 and so include deliberate margins for prudence. This contrasts with these accounting disclosures, which are

determined using best estimate assumptions.

The results of the actuarial valuation as at 31 January 2021 have been projected to 31 October 2022 by a qualiﬁed independent actuary.

The ﬁgures in the following disclosure were measured using the Projected Unit Method.

The investment strategy in place for the Scheme is to invest in a mix of return seeking, index linked and ﬁxed interest investments.

At 31 October 2022, the allocation of the Scheme’s invested assets was 36% in return seeking investments, 45% in liability-driven investing,

16%incash and 3% in insured annuities. Details of the investment strategy can be found in the Scheme’s Statement of Investment Principles,

which the Trustee updates as their policy evolves.

It should also be noted that liabilities relating to insured members of the Scheme have been included as both an asset and a liability.

Following the High Court judgement in the Lloyds case, overall pension beneﬁts now need to be equalised to eliminate inequalities between

males and females in Guaranteed Minimum Pensions (GMP). The Company has allowed for this in its accounts by adding a 1.3% (2021: 2.0%)

reserve reﬂecting an approximate estimate of the additional liability. During the year, the impact of GMP on additional liabilities was

recalculated to be 1.3% rather than 2.0%, with the 0.7% ﬁnancial impact reduction being adjusted through total comprehensive income.

2022

£m

2021

£m

2020

£m

The amounts recognised in the consolidated statement of ﬁnancial

position are as follows:

Present value of scheme liabilities (.) (.) (.)

Fair value of scheme assets . . .

Net surplus/(deﬁcit) amount recognised at year end . . (.)

Deferred tax asset recognised at year end within non-current assets – – .

Deferred tax liability recognised at year end within non-current liabilities (.) (.) –

The retirement beneﬁt surplus/(deﬁcit) recognised in the consolidated statement of ﬁnancial position represents the surplus/(deﬁcit)

ofthefair value of the Scheme’s assets over the present value of the Scheme’s liabilities.

The rules of the Scheme provide the Group with an unconditional right to a refund of surplus assets on the gradual settlement of the

Scheme’s liabilities. In the ordinary course of business the Scheme Trustee has no unilateral right to wind the Scheme up. Based on

theserights and in accordance with IFRIC 14, the Group has made the judgement that the net surplus in the Scheme is recognised in full.

At the consolidated statement of ﬁnancial position date the substantively enacted future corporation tax rate up to 31 March 2023 is 19.0%

andfrom 1 April 2023 is 25.0%. The deferred tax liability on the retirement beneﬁt surplus has been evaluated applying a 29.0% tax rate,

made up of the corporation tax rate 25.0% and 4.0% RPDT.

Notes to the consolidated

ﬁnancial statements continued

162

Crest Nicholson

Annual Integrated Report 2022

Amounts recognised in comprehensive income:

The current and past service costs, settlements and curtailments, together with the net interest expense for the year are included inthe

consolidated statement of comprehensive income. Remeasurements of the net deﬁned beneﬁt asset are included in theconsolidated

statement of comprehensive income.

2022

£m

2021

£m

Service cost

Administrative expenses (.) (.)

Interest income/(expense) . ( .)

Recognised in the consolidated income statement (.) (.)

2022

£m

2021

£m

Remeasurements of the net liability

Return on Scheme assets (.) .

Gains/(losses) arising from changes in ﬁnancial assumptions . (.)

Loss arising from changes in demographic assumptions (.) (.)

Experience (losses)/gains (.) .

Actuarial (losses)/gains recorded in the consolidated statement of comprehensive income (.) .

Total deﬁned beneﬁt scheme (losses)/gains (.) .

The principal actuarial assumptions used were:

2022

2021

Liability discount rate . .

Inﬂation assumption – RPI . .

Inﬂation assumption – CPI . .

Revaluation of deferred pensions . .

Increases for pensions in payment

Beneﬁts accrued in respect of GMP . .

Beneﬁts accrued in excess of GMP pre-1997 . .

Beneﬁts accrued post-1997 . .

Proportion of employees opting for early retirement . .

Proportion of employees commuting pension for cash . .

Mortality assumption – pre-retirement AC AC

Mortality assumption – male and female post-retirement SPA light base tables

projected in line with

CMI_ core model

with core parameters

(Sk = ., an initial addition

of .%, w and

w set to zero) and

with a long-term rate of

improvement of .% p.a

SAPS S PMA _LCMI_

core model with initial

addition of .% and 

weighting of .% ltr .%

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Financial

Statements

17 Employee beneﬁts continued

(a) Retirement beneﬁt obligations continued

Amounts recognised in comprehensive income continued

2022

Years

2021

Years

Future expected lifetime of current pensioner at age 65

Male aged 65 at year end . .

Female aged 65 at year end . .

Future expected lifetime of future pensioner at age 65

Male aged 45 at year end . .

Female aged 45 at year end . .

Changes in the present value of assets over the year

2022

£m

2021

£m

Fair value of assets at beginning of the year . .

Interest income . .

Return on assets (excluding amount included in net interest expense) (.) .

Contributions from the employer . . 

Beneﬁts paid (.) (.)

Administrative expenses (.) (.)

Fair value of assets at end of the year . .

Actual return on assets over the year (.) .

Changes in the present value of liabilities over the year

2022

£m

2021

£m

Liabilities at beginning of the year (.) (.)

Interest cost (.) (.)

Remeasurement gains/(losses)

Gains/(losses) arising from changes in ﬁnancial assumptions . (.)

Losses arising from changes in demographic assumptions (.) (.)

Experience (losses)/gains (.) .

Beneﬁts paid . .

Liabilities at end of the year (.) (.)

Split of the Scheme’s liabilities by category of membership

2022

£m

2021

£m

Deferred pensioners (.) (. )

Pensions in payment ( .) (.)

(.) (.)

2022

Years

2021

Years

Average duration of the Scheme’s liabilities at end of the year . .

This can be subdivided as follows:

Deferred pensioners . .

Pensions in payment . .

Notes to the consolidated

ﬁnancial statements continued

164

Crest Nicholson

Annual Integrated Report 2022

Major categories of scheme assets

2022

£m

2021

£m

Return seeking

Overseas equities . .

Other (hedge funds, multi asset strategy and absolute return funds) . .

. .

Debt instruments

Corporates – .

Liability-driven investing .  .

. . 

Other

Cash . .

Insured annuities . .

. .

Total market value of assets . .

The Scheme has implemented a liability-driven investment strategy designed to closely align investment returns with movements in the

Scheme’s liabilities on a Technical Provisions basis. The Scheme was able to maintain the interest rate and inﬂation hedge through the

recent gilt market volatility.

£nil (2021: £17.8m) of Scheme assets have a quoted market price in active markets, £106.2m (2021: £137.4m) of Scheme assets have valuation

inputs other than quoted market prices, including quoted market prices for similar assets in active markets, £42.4m (2021: £75.4m) of Scheme

assets are instruments that are valued based on quoted prices for similar instruments but for which signiﬁcant unobservable adjustments

or assumptions are required to reﬂect the dierences between the instruments, and £11.4m (2021: £11.3m) of Scheme assets are cash and

insured pension annuities.

The Scheme has no investments in the Group or in property occupied by the Group.

The Scheme had a deﬁcit as at the latest valuation date of 31 January 2021, with a recovery plan agreed between the Group and the Trustee.

The Scheme was in surplus on the Technical Provisions basis, and so no further contributions were payable in respect of the shortfall in

funding in accordance with the Recovery Plan dated 8 February 2022. In order to continue to move the Scheme towards the Trustee’s

secondary funding objective, the Trustees and the Group have agreed that the Company will fund the Scheme with contributions of £1.5m

per annum, payable monthly until 30 April 2025. When the Scheme is at least 95% funded on the Secondary Funding Basis for a period

of three consecutive months then the Group has the option to pay any remaining contributions to an escrow account. The Group expects

tocontribute £1.5m to scheme funding in the year ending 31 October 2023.

Sensitivity of the liability value to changes in the principal assumptions

The sensitivities included are consistent with those shown in prior years and show the change in the consolidated statement of ﬁnancial

position as at 31 October2022 as a result of a change to the key assumptions. Please note that ﬁnancial markets have been volatile over the

year to 31 October 2022, in particular the discount rate assumption changed by much more than 0.25% p.a. As the Scheme has implemented

aliability driven investment strategy, the changes in bond yields and inﬂation expectations had less impact on the net consolidated

statement of ﬁnancial position.

If the discount rate was 0.25% higher/(lower), the Scheme liabilities would decrease by £4.4m (increase by £4.3m) if all the other

assumptionsremained unchanged.

If the inﬂation assumption was 0.25% higher/(lower), the Scheme liabilities would increase by £2.6m (decrease by £2.9m) if all the

otherassumptions remained unchanged.

If life expectancies were to increase by one year, the scheme liabilities would increase by £6.4m if all the other assumptions

remained unchanged.

165

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Financial

Statements

17 Employee beneﬁts continued

(b) Share-based payments

The Group operates a Long-Term Incentive Plan (LTIP), save as you earn (SAYE) and a deferred bonus plan.

Long-Term Incentive Plan

The Group’s LTIP is open to the Executive Directors and senior management with awards being made at the discretion of the Remuneration

Committee. Options granted under the plan are exercisable between three and 10 years after the date of grant. Awards may be satisﬁed by

shares held in the employee beneﬁt trust (EBT), the issue of new shares (directly or to the EBT) or the acquisition of shares in the market.

Awards made prior to 31 October 2020 vest over three years and are subject to three years’ service, and return on capital and proﬁt

performance conditions.

Awards issued in 2021 and 2022 are subject to three years’ service and assessed against return on capital, proﬁt performance conditions

and relative total shareholder returns (TSR). The non-market based return on capital and proﬁt performance conditions applies to 60%

oftheaward and values the options using a binomial option valuation model. The market-based TSR performance conditions apply

to40%ofthe award and value the options using the Monte Carlo valuation model. The TSR-based performance conditions are split

one-third FTSE250 excluding investment funds and two-thirds sector peer group. 961,765 of the options awarded in 2022 are subject

toanadditionalpost-vesting holding period, where shares cannot be sold for two years after vesting date.

The 2021 fair value at measurement date of the dierent valuation elements are £2.25 TSR (FTSE 250), £1.85 TSR (peer group), and £2.84

forthe non-market-based return on capital and proﬁt performance conditions. The correlation of FTSE 250 and peer group calculated for

each individual comparator company relative to the Group is 30% and 67% respectively. The average fair value at measurement date is

£2.50per option.

The 28 January 2022 grant fair value at measurement date of the dierent valuation elements of the unrestricted options are £1.68 TSR

(FTSE 250), £1.55 TSR (peer group), and £2.62 for the non-market-based return on capital and proﬁt performance conditions. The 2022 fair value

atmeasurement date of the dierent valuation elements of the restricted options are £1.51 TSR (FTSE 250), £1.40 TSR (peer group), and £2.36

forthe non-market-based return on capital and proﬁt performance conditions. The correlation of FTSE 250 and peer group calculated for

each individual comparator company relative to the Group is 31% and 68% respectively. The average fair value at measurement date is

£2.10per option. The average fair value at measurement date of the 25 August 2022 grant is £1.59 per option.

Date of grant

26 Feb

2016

28 Feb

2018

16 Apr

2019

21 Jun

2019

20 Feb

2020

04 Aug

2020

08 Feb

2021

28 Jan

2022

25 Aug

2022

Options granted ,, ,,  ,, , ,, ,  ,, ,, ,

Fair value at

measurement date £. £. £ . £ . £. £. £. £  . £.

Share price on date

of grant £. £. £. £. £ . £. £. £. £.

Exercise price £. £. £. £. £. £. £. £. £.

Vesting period  years  years  years  years  years  years  years  years  years

Expected dividend yield .% .% .% .% .% .% .% .% .%

Expected volatility .% .% .% .% .% .% .% .% .%

Risk-free interest rate .% .% .% .% .% .% .% .% .%

Valuation model Binomial Binomial Binomial Binomial Binomial Binomial

Binomial/

Monte

Carlo

Binomial/

Monte

Carlo

Binomial/

Monte

Carlo

Contractual life from .. . .  . . .. .. .. .. .. ..

Contractual life to ..  . .  .. .. .. .. .  .  . . .. 

Movements in the year

Number

of options

Number

of options

Number

of options

Number

of options

Number

of options

Number

of options

Number

of options

Number

of options

Number

of options

Total

number

of options

Outstanding at

1 November 2020 , , , , ,, ,  – – – ,,

Granted during the year – – – – – – ,, – – ,,

Lapsed during the year – (,) (,) – (,) – ( ,) – – (,)

Outstanding at

31 October 2021 , – , ,  , , ,, – – ,,

Granted during the year – – – – – – – ,, , ,,

Exercised during the year (,) – – – – – – – – (,)

Lapsed during the year – – (,) (,) (,) – ( ,) (,) – (,,)

Outstanding at

31 October 2022 – – – – , ,  ,, ,, , ,,

Exercisable at

31 October 2022 – – – – – – – – – –

Exercisable at

31 October 2021 , – – – – – – – – ,

Notes to the consolidated

ﬁnancial statements continued

166

Crest Nicholson

Annual Integrated Report 2022

Date of grant

26 Feb

2016

28 Feb

2018

16 Apr

2019

21 Jun

2019

20 Feb

2020

04 Aug

2020

08 Feb

2021

28 Jan

2022

25 Aug

2022

Movements in the year £m £m £m £m £m £m £m £m

£m

Total

£m

Charge to income

for the current year – – – – . – (.) . – .

Charge to income

for the prior year – – – – . – . – – .

The weighted average exercise price of LTIP options was £nil (2021: £nil).

Save As You Earn

Executive Directors and eligible employees are invited to make regular monthly contributions to a Sharesave scheme administered by EQ

(formally Equiniti). On completion of the three-year contract period employees are able to purchase ordinary shares in the Company based

on the market price at the date of invitation less a 20% discount. There are no performance conditions.

Date of grant

03 Aug

2017

26 Jul

2018

30 Jul

2019

07 Aug

2020

03 Aug

2021

02 Aug

2022

Options granted , , , ,,  , ,

Fair value at

measurement date £. £. £. £. £. £.

Share price on date

of grant £. £. £. £. £. £.

Exercise price £. £ . £. £. £. £.

Vesting period  years  years  years  years  years  years

Expected dividend yield  . % .% .% .% .% .%

Expected volatility .% .% .% .% .% .%

Risk-free interest rate .% .% .% -.%  .% .%

Valuation model Binomial Binomial Binomial Binomial Binomial Binomial

Contractual life from . . .. .  . .. .. ..

Contractual life to .. .. .. .. .. ..

Movements in the year

Number of

options

Number of

options

Number of

options

Number of

options

Number of

options

Number of

options

Total

number of

options

Weighted

average

exercise

price

Outstanding at

1 November 2020 , , , ,, – – ,, £.

Granted during the year – – – – , – , £.

Exercised during the year – (,) (,) (,) – – (,) £.

Lapsed during the year (,) (,  ) (,) ( ,  ) (,  ) – (,) £.

Outstanding at

31 October 2021 – , ,  ,,  , – ,, £ .

Granted during the year – – – – – , , £.

Exercised during the year – (,) – (,) – – (,) £.

Lapsed during the year – (,) (,) (,) (,) (,) ( , ) £.

Outstanding at

31 October 2022 – – ,  , , , ,, £.

Exercisable at

31 October 2022 – – , – – – ,

Exercisable at

31 October 2021 – , – – – – ,

£m £m £m £m £m £m Total £m

Charge toincome

for the current year – – – . . . .

Charge to income

forthe prior year – – – . – –  .

167

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

17 Employee beneﬁts continued

Deferred bonus plan

Under the terms of certain bonus schemes, some parts of bonus payments must be deferred into share options. The options carry no

performance criteria and vest over one or three years. Options granted under the plan are exercisable between one and 10 years after

thedate of grant. Deferred bonus plan option numbers are based on the share price on the date of grant.

Date of grant

28 Feb

2018

28 Feb

2020

26 Feb

2021

01 Mar

2021

01 Mar

2022

28 Jan

2022

09 Feb

2022

Options granted ,  , , ,  , ,

Fair value at

measurement date £. £. £. £. £. £. £.

Share price on date of grant £. £. £. £. £. £. £.

Exercise price £. £. £. £. £. £. £.

Vesting period  years  years  year N/A N/A  years  year

Expected dividend yield

and volatility N/A N/A N/A N/A N/A N/A N/A

Risk-free interest rate N/A N/A N/A N/A N/A N/A N/A

Valuation model N/A N/A N/A N/A N/A N/A N/A

Contractual life from . . .. .. .. .. .. ..

Contractual life to . .  .  .  ..  . .  .. . .   ..

Movements in the year

Number of

options

Number of

options

Number of

options

Number of

options

Number of

options

Number of

options

Number of

options

Total number

of options

Outstanding at

1 November 2020 , , – – – – – ,

Granted during the year – – , , – – – ,  

Exercised during the year (, ) (, ) – (,) – – – (,)

Lapsed during the year (,) (,) – – – – – (,)

Outstanding at

31 October 2021 – , , – – – – , 

Granted during the year – – – –  , , ,

Exercised during the year – – (,) – ( ) – – (,)

Lapsed during the year – – (,) – – – – (,)

Outstanding at

31 October 2022 – , – – – , , ,

Exercisable at

31 October 2022 – – – – – – – –

Exercisable at

31 October 2021 – – – – – – – –

£m £m £m £m £m £m £m

Total

£m

Charge to income

for the current year – – – – – . – .

Charge to income

for the prior year – – . . – – – .

The weighted average exercise price of deferred bonus plan share options was £nil (2021: £nil).

Notes to the consolidated

ﬁnancial statements continued

168

Crest Nicholson

Annual Integrated Report 2022

Total share incentive schemes

2022

Number of

options

2021

Number of

options

Movements in the year

Outstanding at beginning of the year ,, ,,

Granted during the year , , ,,

Exercised during the year (,) (,)

Lapsed during the year (,,) (,,)

Outstanding at end of the year ,, ,,

Exercisable at end of the year , ,

£m £m

Charge to income for share incentive schemes . .

The weighted average share price at the date of exercise of share options exercised during the year was £2.77 (2021: £3.59). The options

outstanding had a range of exercise prices of £nil to £3.42 (2021: £nil to £3.42) and a weighted average remaining contractual life of 6.2 years

(2021: 6.4 years). The gain on shares exercised during the year was £0.1m (2021: £0.6m).

18 Trade and other receivables

Trade and other

receivables

before

expected

credit loss

2022

£m

Expected

credit loss

2022

£m

Trade and other

receivables

after expected

credit loss

2022

£m

Trade and other

receivables

before

expected

credit loss

2021

£m

Expected

credit loss

2021

£m

Trade and other

receivables

after expected

credit loss

2021

£m

Non-current

Trade receivables . – .  . –  .

Due from joint ventures . ( .) . . (.  ) .

 . (.) . . (.) .

Current

Trade receivables . (.) . . ( .)  .

Contract assets . ( .)  . . (.) .

Due from joint ventures . – . . – .

Other receivables  . –  . . – .

Prepayments and accrued income . – . . – .

. (.) .  . (.) .

Non-current and current . (.) . . (.) .

Trade receivables and contract assets mainly comprise contractual amounts due from housing associations, bulk sale purchasers and land

sales to otherhousebuilders. Other receivables mainly comprise two development agreements where the Group is entitled to recovery

ofbuild costs incurred under the agreement. In the prior year these agreements were presented in inventories and accruals, with balances

of £67.2m and £31.2m respectively. Current trade receivables of £21.2m have been collected as of 1 January 2023 (2021: £11.6m have been

collected as of 1 January 2022). The remaining balance is due according to contractual terms, and no material amounts are past due. At the

consolidated statement of ﬁnancial position datethe dierence between the fair value of amounts due from joint ventures and nominal

valueis £0.4m (2021: £19.4m).

Amounts due from joint ventures comprises funding provided on three (2021: four) joint venture developments which are being project

managed by the Group and are repayable according to contractual arrangements. Amounts due from joint ventures are stated net of losses

of£0.2m (2021: £7.4m). See note 14 for additional details on the Group’s interests in joint ventures.

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18 Trade and other receivables continued

Amounts due from joint ventures are stated after a loss allowance of £0.1m (2021: £11.9m) in respect of expected credit losses. This estimate

isbased on a discounted cash ﬂow analysis of the relevant joint ventures using available cash ﬂow projections for the remainder of the

project. £2.3m (2021: £1.0m) provision was made during the year, £14.1m (2021: £nil) was utilised and £nil (2021: £nil) provision was released

during the year. The actual credit loss depends on achieved sales values and actual build costs.

Current trade receivables and contract assets are stated after a loss allowance of £0.4m (2021: £0.4m) in respect of expected credit losses,

assessed on an estimate of default rates. £nil (2021: £nil) provision was made during the year, £nil (2021: £nil) was utilised and £nil (2021: £nil)

provision was released during the year.

Movements in total loss allowance for expected credit losses

2022

£m

2021

£m

At beginning of the year . . 

Charged in the year on joint venture balances (note 14) . .

Utilised in the year on joint venture balances (note 14) (.) –

At end of the year . .

Maturity of non-current receivables

2022

£m

2021

£m

Due between one and two years . .

Due between two and ﬁve years . .

Due after ﬁve years – .

. .

19 Inventories

2022

£m

2021

£m

Work-in-progress . .

Completed buildings including show homes  . .

Part exchange inventories .  .

. ,.

Included within inventories is a fair value adjustment of £2.0m (2021: £2.5m) which arose on the acquisition of CN Finance plc in 2009

and will continue to unwind to cost of sales in future years as the units against which the original fair value provision was recognised are

soldorotherwise divested. The amount of fair value provision unwound in cost of sales in the year was £0.5m (2021: £8.8m). Total inventories

of£705.3m (2021: £603.5m) were recognised as cost of sales in the year.

During the year £9.6m additional NRV was charged, mainly on three legacy developments already held at zero margin. Two of the

developments were completed in the year.

Total inventories are stated after an NRV provision of £12.6m (2021: £20.7m), which it is currently forecast that over a third willbe used

in the next ﬁnancial year.

Notes to the consolidated

ﬁnancial statements continued

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Movements in the NRV provision in the current and prior year are shown below:

2022

£m

2021

£m

At beginning of the year . .

Pre-exceptional NRV charged in the year . .

Pre-exceptional NRV used in the year ( .  ) (.)

Exceptional NRV credited in the year (note 4) – (.)

Exceptional NRV used in the year (.) (.)

Total movement in NRV in the year ( .) (.)

At end of the year . .

20 Movement in net cash

2022

£m

Movement

£m

2021

£m

Cash and cash equivalents . . .

Bank loans and senior loan notes (.) . ( .)

Net cash . . .

21 Interest-bearing loans and borrowings

2022

£m

2021

£m

Non-current

Senior loan notes . .

Revolving credit and senior loan notes issue costs (.) ( .)

. .

There were undrawn amounts of £250.0m (2021: £250.0m) under the revolving credit facility at the consolidated statement of ﬁnancial

position date. The Group was undrawn throughout the ﬁnancial year (2021: undrawn) under the revolving credit facility. See note 25 for

additional disclosures.

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22 Trade and other payables

2022

£m

2021

£m

Non-current

Land payables on contractual terms . .

Other payables . .

Contract liabilities . –

Accruals and deferred income . .

. .

Current

Land payables on contractual terms . .

Other trade payables . .

Contract liabilities . .

Due to joint ventures . .

Taxes and social security costs . .

Other payables . . 

Accruals and deferred income . .

. .

Land payables are recognised from the date of unconditional exchange of contracts, and represent amounts due to land vendors for

development sites acquired. All land payables are due according to contractual terms. Where land is purchased on deferred settlement

terms then the land and the land payable are discounted to their fair value using the eective interest method in accordance with IFRS

9. The dierence between the fair value and the nominal value is amortised over the deferment period, with the ﬁnancing element being

charged as an interest expense through the consolidated income statement. At 31 October 2022 the dierence between the fair value

andnominal value of land payables is £2.4m (2021: £3.5m).

Contract liabilities represent payments on account, received from customers, in excess of billable work-in-progress on aordable and

othersales in bulk on contracts in which revenue is recognised over time. Based on historical trends, the Directors expect a signiﬁcant

proportion of the contract liabilities total to be recognised as revenue in the next reporting period.

Amounts due to joint ventures are interest free and repayable on demand. See note 14 for additional details on the Group’s interests

injoint ventures.

Other trade payables mainly comprise amounts due to suppliers and subcontractor retentions. Suppliers are settled according to agreed

payment terms and subcontractor retentions are released once the retention condition has been satisﬁed.

Accruals are mainly work-in-progress related where work has been performed but not yet invoiced.

23 Provisions

Combustible

materials

£m

Joint

ventures

£m

Other

provisions

£m

Total

£m

At 1 November 2020 . – . .

Provided in the year . –  . .

Utilised in the year (.) – – (.)

At 31 October 2021 . – .  .

Provided in the year . – . .

Imputed interest . – – .

Utilised in the year (.) – – (.)

Released in the year – – (.) (.)

Funding commitment recognised – . – .

Reclassiﬁcation – – . .

At 31 October 2022 . . . .

At 31 October 2022

Non-current . – . .

Current . . . .

. . . .

At 31 October 2021

Non-current . – – .

Current . – . .

. – . .

Notes to the consolidated

ﬁnancial statements continued

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Combustible materials

Following the ﬁre at Grenfell Tower in 2017, the Government announced a public inquiry surrounding the circumstances leading up

toandsurrounding the ﬁre, including a review of ﬁre-related building regulations, notably those relating to external walls, and issued

anewregulatory framework for building owners.

On joining the Group in 2019, the new Executive Leadership Team (ELT) quickly established a dedicated internal team, headed by a Special

Projects Director, to implement the Group’s response to ﬁre safety matters. Against a changing regulatory backdrop, the Group has found

that the interpretation of Government and industry guidance often varies between professional advisors who are engaged to identify

andimplement remediation required.

In order to oversee and govern the Group’s response to ﬁre safety matters, the ELT meets regularly, chaired by the Chief Executive with

attendance from the Group Finance Director, Group Operations Director and Special Projects Director. In 2019 the team conducted a full

review into all legacy buildings it believed may be at risk based on guidance at that time, any relevant regulations, and considered any

notiﬁcation of claims. Accordingly, the Group recognised a combustible materials provision. With ongoing regulatory changes, this provision

was subsequently increased in ﬁnancial years 2020 and 2021 to reﬂect the Group’s interpretation of the legacy portfolio following those

changes to the Government regulatory framework, along with any new notiﬁcations received if it was considered that they represented

anexpected liability.

In addition, as time has passed the Group has also been able to apply the beneﬁt of experience to develop a more accurate assessment

andforecast of its potential liability. As such the Group now has a detailed risk register of all legacy buildings in scope, which it regularly

reviews. The team considers the application of the latest guidelines against each aected building, advice from its technical or legal advisors

along with relevant updates or notiﬁcations from a variety of stakeholders. Such sources can include residents, management companies,

freeholders, subcontractors, architects, mortgage lenders, building control bodies and independent ﬁre engineers.

The risk register considers the progress of any identiﬁed remediation works and adjusts the provision to reﬂect the Group’s best estimate

of any future remediation works. As such the consolidated full year ﬁnancial statements are prepared on the Group’s current best estimate

of these future costs and this may evolve in the future based on the result of ongoing inspections, further advice, the progress and cost to

complete of in-progress remediation works and whether Government legislation and regulation becomes more or less stringent in this area.

See note 26 for disclosures relating to further potential liabilities and recoveries relating to the combustible materials provision.

On 19 April 2022 the Group signed the Government’s Building Safety Pledge which commits the Group to remediate life-critical ﬁre safety

issues to PAS9980 standards on buildings over 11 metres in which the Group was involved going back 30 years. As a result of this the

number of buildings in scope for which the Group has an obligation to remediate signiﬁcantly increased. The combustible materials provision

reﬂects the estimated costs to complete the remediation of life-critical ﬁre safety issues on identiﬁed buildings. The Directors have used

a combination of Buildings Safety Fund (BSF) costed information, other external information and internal assessments as a basis for

the provision.

Accordingly, the Group recorded a cost of sales net combustible materials charge of £102.5m in the year. This charge comprises £79.0m

speciﬁcally for buildings where BSF funding had been applied for, which the Group have now agreed to cover under the Building Safety

Pledge, and £23.5m for movements in previous cost estimates, extending the liability period to 30 years, build cost inﬂation and discounting.

The further charge is in addition to the £18.4m net amount charged in 2019, £0.6m charged in 2020 and £28.8m charged in 2021.

Forecast build cost inﬂation over the duration of remediation has been allowed for within the charge. The charge is stated after a related

discount of £5.1m, which unwinds to the consolidated income statement as ﬁnance expense over the life of the cash expenditure.

The provision of £140.8m represents the Group’s best estimate of costs at 31 October 2022. The Group will continue to assess the

magnitudeand utilisation of this provision in future reporting periods. The Group recognises that required remediation works could be

subjectto further inﬂationary pressures and cash outﬂows (sensitivity disclosures in note 1).

The Group spent £5.3m in the year across several buildings requiring further investigative costs, including balcony and cladding related

works. The Group expects to have completed any required remediation within a ﬁve-year period, using £70.3m of the remaining provision

within one year, and the balance within one to ﬁve years. The timing of the expenditure is based on the Directors best estimates of the

timingof remediating buildings and repaying the BSF incurred costs. Actual timing may dier due to delays in agreeing scope of works,

obtaining licences, tendering works contracts and the BSF payment schedule diering to our forecast.

The Group is continuing to review the recoverability of costs incurred from third parties where it has a contractual right of recourse.

In theprior year £2.4m was recovered from third parties, which was recorded as an exceptional credit in the consolidated income statement.

See note 4 for income statement disclosure.

Joint ventures

Joint ventures represents the Group’s legal or constructive obligation to fund losses on joint ventures. The loss is a result of the combustible

materials charge as described in note 4.

Other provisions

Other provisions comprise dilapidation provisions on Group oces and dilapidation provisions on commercial properties where the Group

previously held the head lease. In the year the Group reclassiﬁed the brought forward balance of dilapidations on Group oces which were

previously oset against right of use assets.

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24 Share capital

issued

Number

Nominal

value

Pence

capital

premium

account

Ordinary shares as at 1 November 2020,

31 October 2021 and 31 October 2022 ,,  ,, ,,

Ordinary shares are issued and fully paid. Authorised ordinary shares of ﬁve pence each are 342,560,719 (2021: 342,560,719).

For details of outstanding share options at 31 October 2022 see note 17.

Own shares held

The Group and Company holds shares within the Crest Nicholson Employee Share Ownership Trust (the Trust) for participants of certain

share-based payment schemes. These are held within retained earnings. During the year 440,000 shares were purchased by the Trust

for£1.1m (2021: 400,000 shares were purchased by the Trust for £1.6m) and the Trust transferred 41,372 (2021: 195,485) shares to employees

and Directors to satisfy options as detailed in note 17. The number of shares held within the Trust (Treasury shares), and on which dividends

have been waived, at 31 October 2022 was 788,140 (2021: 389,512). These shares are held within the ﬁnancial statements in equity at a

costof £2.5m (2021: £1.5m). The market value of these shares at 31 October 2022 was £1.6m (2021: £1.4m).

25 Financial risk management

The Group’s ﬁnancial instruments comprise cash, bank loans, senior loan notes, trade and other receivables, ﬁnancial assets at fair value

through proﬁt and loss and trade payables. The main objective of the Group’s policy towards ﬁnancial instruments is to maximise returns

onthe Group’s cash balances, manage the Group’s working capital requirements and ﬁnance the Group’s ongoing operations.

Capital management

The Group’s policies seek to match long-term assets with long-term ﬁnance and ensure that there is sucient working capital to meet

theGroup’s commitments as they fall due, comply with the loan covenants and continue to sustain trading.

The Group’s capital comprises shareholders’ funds and net borrowings. A ﬁve-year summary of this can be found in the unaudited historical

summary on page 190, in addition to its return on average capital employed.

The Group seeks to manage its capital through control of expenditure, dividend payments and through its banking facilities. The revolving

credit facility and senior loan notes impose certain minimum capital requirements on the Group. These requirements are integrated

into the Group’s internal forecasting process and are regularly reviewed. The Group has, and is forecasting, to operate within these

capital requirements.

There were undrawn amounts of £250.0m (2021: £250.0m) under the revolving credit facility at the consolidated statement of ﬁnancial

position date. The revolving credit facility carries interest at SONIA plus 1.85% and ends in 2026.

On 15 November 2021 the Group signed an amendment to the revolving credit facility to change the interest rate calculation from LIBOR

toSONIA. This was necessary due to the cessation of LIBOR rate calculations. The amendment was done on a no gain/loss basis to either

the lender or borrower. All other key terms and conditions remain unchanged.

On 12 October 2022 the Group signed an amendment to the revolving credit facility. This amendment extended the facility to run through

toOctober 2026 and changed the facility into a Sustainability Linked Revolving Credit Facility.

Under this amended facility the margin applicable can vary by plus or minus 0.05% depending on the Group’s progress against four targets.

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.

Progress against these targets is measured once per year and the resulting margin increase/decrease is applied to the facility until the

nextmeasurement date. The ﬁrst measurement date is on the Group’s results for ﬁnancial year ending 31 October 2023, due January 2024.

Financial risk

As virtually all of the operations of the Group are in sterling, there is no direct currency risk, and thus the Group’s main ﬁnancial risks are

credit risk, liquidity risk and market interest rate risk. The Board is responsible for managing these risks and the policies adopted are as

setout below:

Credit risk

Credit risk is the risk of ﬁnancial loss to the Group if a customer or other counterparty to a ﬁnancial instrument fails to meet its

contractualobligations, and arises principally from the Group’s cash deposits, as most receivables are secured on land and buildings.

The Group has cash deposits of £373.6m (2021: £350.7m) which are held by the providers of its banking facilities. These are primarily

provided by HSBC Bank Plc, Barclays Bank Plc, Lloyds Bank Plc and Natwest Group Plc, being four of the UK’s leading ﬁnancial institutions.

The security and suitability of these banks is monitored by the treasury function on a regular basis. The Group has bank facilities of

£250.0mexpiring in October 2026, with £250.0m remaining available for drawdown under such facilities at 31 October 2022.

Financial assets at fair value through proﬁt and loss, as described in note 15, of £4.6m (2021: £5.3m) are receivables on extended terms

granted as part of a sales transaction and are secured by way of a legal charge on the relevant property and therefore credit risk is

considered low.

Notes to the consolidated

ﬁnancial statements continued

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The carrying value of trade and other receivables is mainly contractual amounts due from housing associations, bulk sale purchasers, land

sales to other housebuilders and a development agreement where the Group is entitled to recovery of costs incurred under the agreement,

and equates to the Group’s exposure to credit risk which is set out in note 18. Amounts due from joint ventures of £27.1m (2021: £56.0m)

is funding provided on three (2021: four) joint venture developments which are being project managed by the Group and are subject to

contractual arrangements. The Group has assessed the expected credit loss impact on the carrying value of trade and other receivables

asset out in note 18. Within trade receivables the other largest single amount outstanding at 31 October 2022 is £11.5m (2021: £3.8m)

whichis within agreed terms.

The Group considers the credit quality of ﬁnancial assets that are neither past due nor impaired as good. In managing risk the Group

assesses the credit risk of its counterparties before entering into a transaction. No credit limits were exceeded during the reporting year,

andthe Directors do not expect any material losses from non-performance of any counterparties, including in respect of receivables not

yetdue. No material ﬁnancial assets are past due, or are considered to be impaired as at the consolidated statement of ﬁnancial position

date (2021: none).

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its ﬁnancial obligations as they fall due. Cash ﬂow forecasts are produced

tomonitor the expected cash ﬂow requirements of the Group against the available facilities. The principal risks within these cash ﬂows

relateto achieving the level of sales volume and prices in line with current forecasts.

The following are the contractual maturities of the ﬁnancial liabilities of the Group at 31 October 2022:

2022

Carrying

value

£m

Contractual

cash ﬂows

£m

Within

1 year

£m

1–2 years

£m

2–3 years

£m

More than

3 years

£m

Senior loan notes . . . . . .

Financial liabilities carrying interest .   .  . – – –

Financial liabilities carrying no interest .  .   . . . .

At 31 October 2022 . . . . . .

2021

Carrying

value

£m

Contractual

cash ﬂows

£m

Within

1 year

£m

1–2 years

£m

2–3 years

£m

More than

3 years

£m

Senior loan notes . . . . . .

Financial liabilities carrying interest .  . .  . – –

Financial liabilities carrying no interest . . . . . .

At 31 October 2021 . . . . . .

Other ﬁnancial liabilities carrying interest are land acquisitions using promissory notes. The timing and amount of future cash ﬂows given

inthe table above is based on the Directors’ best estimate of the likely outcome.

Market interest rate risk

Market interest rate risk reﬂects the Group’s exposure to ﬂuctuations to interest rates in the market. The risk arises because the Group’s

revolving credit facility was subject to ﬂoating interest rates based on LIBOR up until 15 November 2021 and then SONIA thereafter.

The Group accepts a degree of interest rate risk, and monitors rate changes to ensure they are within acceptable limits and in line with

banking covenants. The Group has partially mitigated this risk by placing £100m of senior loan notes which are at ﬁxed interest rates. For the

year ended 31 October 2022 it is estimated that an increase of 1.0% in interest rates applying for the full year would decrease the Group’s proﬁt

before tax and equity by £nil (2021: £nil). The Group currently does not have any interest carrying liabilities with ﬂoating interest rates.

The interest rate proﬁle of the ﬁnancial liabilities of the Group was:

2022

£m

2021

£m

Sterling bank borrowings, loan notes and long-term creditors

Financial liabilities carrying interest . .

Financial liabilities carrying no interest . .

. .

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25 Financial risk management continued

For ﬁnancial liabilities that have no interest payable but for which imputed interest is charged, consisting of land payables, the weighted

average period to maturity is 14 months (2021: 24 months).

2022

£m

2021

£m

The maturity of the ﬁnancial liabilities is:

Repayable within one year . .

Repayable between one and two years  . .

Repayable between two and ﬁve years . .

Repayable after ﬁve years . .

. .

Fair values

Financial assets

The Group’s ﬁnancial assets comprise cash and cash equivalents, ﬁnancial assets at fair value through proﬁt and loss and trade and other

receivables. The carrying value of cash and cash equivalents and trade and other receivables is a reasonable approximation of fair value

which would be measured under a level 3 hierarchy. At 31 October 2022 ﬁnancial assets consisted of sterling cash deposits of £373.6m

(2021: £350.7m), both with solicitors and on current account, £4.6m (2021: £5.3m) of ﬁnancial assets at fair value through proﬁt and loss,

£88.7m (2021: £33.2m) of trade and other receivables, and £27.1m (2021: £56.0m) of amounts due from joint ventures. Financial assets at

fairvalue through proﬁt and loss are carried at fair value and categorised as level 3 (inputs not based on observable market data) within

thehierarchical classiﬁcation of IFRS 13: Revised.

Financial liabilities

The Group’s ﬁnancial liabilities comprise the revolving credit facility, loan notes, trade payables, loans from joint ventures, lease liabilities

and accruals, the carrying amounts of which are deemed to be a reasonable approximation to their fair value. The fair values of the revolving

credit facility, other loans and loan notes are calculated based on the present value of future principal and interest cash ﬂows, discounted

atthe market rate of interest at the consolidated statement of ﬁnancial position date.

The fair values of the facilities determined on this basis are:

2022

Nominal

interest rate

Face

value

£m

Carrying

value

£m

Fair

value

£m Maturity

Senior loan notes .%–.% . . . –

Total non-current interest-bearing loans . . .

2021

Nominal

interest rate

Face

value

£m

Carrying

value

£m

Fair

value

£m Maturity

Senior loan notes .%–.% . . . –

Total non-current interest-bearing loans . . .

Notes to the consolidated

ﬁnancial statements continued

176

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Financial assets and liabilities by category

2022

£m

2021

£m

Financial assets

Sterling cash deposits . .

Trade receivables . . 

Amounts due from joint ventures . .

Other receivables . .

Total ﬁnancial assets at amortised cost . .

Financial assets at fair value through proﬁt and loss . .

Total ﬁnancial assets . .

2022

£m

2021

£m

Financial liabilities

Senior loan notes . .

Land payables on contractual terms carrying interest . .

Land payables on contractual terms carrying no interest .  .

Amounts due to joint ventures . .

Lease liabilities . .

Other trade payables . .

Other payables . . 

Accruals .  .

Total ﬁnancial liabilities at amortised cost . .

26 Contingencies and commitments

There are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinary

course of business. It is impractical to quantify the ﬁnancial eect of performance bonds and other arrangements. The Directors consider

thepossibility of a cash outﬂow in settlement of performance bonds and other arrangements to be remote and therefore this does not

represent a contingent liability for the Group.

In the ordinary course of business, the Group enters into certain land purchase contracts with vendors on a conditional exchange basis.

The conditions must be satisﬁed for the Group to recognise the land asset and corresponding liabilities within the consolidated statement

ofﬁnancial position. No land payable in respect of conditional land acquisitions has been recognised.

The Group provides for all known material legal actions, where having taken appropriate legal advice as to the likelihood of success of

the actions, it is considered probable that an outﬂow of economic resource will be required, and the amount can be reliably measured.

No material contingent liability in respect of such claims has been recognised since there are no known claims of this nature.

In 2019, the Group created a combustible materials provision, which was subsequently increased in ﬁnancial years 2020 and 2021.

This provision is subject to the Directors’ estimates on costs and timing, and the identiﬁcation of legacy developments where the Group

mayhave an obligation to remediate or upgrade to meet new Government guidance where it is responsible to do so. This provision has

beendicult to reliably estimate due to the changing nature of Government regulation in this area, and where the Group is no longer the

freehold owner and has no visibility over remediation requirements. As such the Group has historically not disclosed a range of possible

future costs. As a consequence of signing the Government’s Building Safety Pledge on 19 April 2022, the Group has now become

responsible for the remediation of a larger number of buildings, constructed over a longer historic time period. Accordingly, whilst the Group

believes that most signiﬁcant liabilities will have been identiﬁed through the process of building owners assessing buildings and applying

forBSF funding, contingent liabilities exist where additional buildings have not yet been identiﬁed which require remediation. Due to the

enduring challenges of developing a reliable estimate of these possible costs, the Group continues to not disclose an expected range.

The Group is reviewing the recoverability of costs incurred from third parties where it has a contractual right of recourse. As reﬂected in

theprior year ﬁnancial statements the Group has a track record of successfully obtaining such recoveries, however no contingent assets

have been recognised in these consolidated ﬁnancial statements for such items.

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Financial

Statements

27 Net cash and land creditors

2022

£m

2021

£m

Cash and cash equivalents . .

Non-current interest-bearing loans and borrowings ( .) ( .)

Net cash . .

Land payables on contractual terms carrying interest (.) (.)

Land payables on contractual terms carrying no interest (.) ( .)

Net cash and land creditors . .

28 Related party transactions

Transactions between fellow subsidiaries, which are related parties, are eliminated on consolidation, as well as transactions between

theCompany and its subsidiaries during the current and prior year.

Transactions between the Group and key management personnel mainly comprise remuneration which is given in note 6.

Detailed disclosure for Board members is given within the Directors’ Remuneration Report on pages 100–122. There were no other

transactions between theGroup and key management personnel in the year.

Transactions between the Group and the Crest Nicholson Group Pension and Life Assurance Scheme is given in note 17.

The Company’s Directors and Non-Executive Directors have associations other than with the Company. From time to time the Group

maytrade with organisations with which a Director or Non-Executive Director has an association. Where this occurs, itisonnormal

commercial terms and without the direct involvement of the Director or Non-Executive Director.

The Group had the following transactions/balances with its joint ventures in the year/at year end:

2022

£m

2021

£m

Interest income on joint venture funding . .

Project management fees received . .

Amounts due from joint ventures, net of expected credit losses . .

Amounts due to joint ventures . .

Funding to joint ventures ( .  ) (.)

Repayment of funding from joint ventures . . 

Dividends received from joint ventures . –

Notes to the consolidated

ﬁnancial statements continued

178

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Annual Integrated Report 2022

29 Group undertakings

In accordance with s409 Companies Act 2006, the following is a list of all the Group’s undertakings at 31 October 2022.

Subsidiary undertakings

At 31 October 2022 the Group had an interest in the below subsidiary undertakings, which are included in the consolidated ﬁnancial

statements. All subsidiaries were incorporated in England and Wales.

Entity name

Registered

oce

Active/

dormant

Year end

date

Voting rights

and shareholding

(direct or indirect)

Bath Riverside Estate Management Company Limited  Dormant  October %

Bath Riverside Liberty Management Company Limited  Dormant  October %

Castle Bidco Home Loans Limited  Active  October %

Brightwells Residential 1 Company Limited  Dormant  October %

Bristol Parkway North Limited  Dormant  October %

Building 7 Harbourside Management Company Limited  Active  December .%

Buildings 3A, 3B & 4 Harbourside Management Company Limited  Dormant  December .%

CN Finance plc

 Active  October %

Clevedon Developments Limited  Dormant  October %

Clevedon Investment Limited  Active  October %

CN Nominees Limited  Dormant  October %

CN Properties Limited  Dormant  October %

CN Secretarial Limited  Dormant  October %

CN Shelf 1 LLP  Dormant  June %

CN Shelf 2 LLP  Dormant  June %

CN Shelf 3 LLP  Dormant  June %

Crest (Claybury) Limited  Dormant  October %

Crest Developments Limited  Dormant  October %

Crest Estates Limited  Dormant  October %

Crest Homes (Eastern) Limited  Dormant  October %

Crest Homes (Midlands) Limited  Dormant  October %

Crest Homes (Nominees) Limited  Dormant  October %

Crest Homes (Nominees No. 2) Limited  Active  October %

Crest Homes (Northern) Limited  Dormant  October %

Crest Homes (South East) Limited  Dormant  October %

Crest Homes (South West) Limited  Dormant  October %

Crest Homes (South) Limited  Dormant  October %

Crest Homes (Wessex) Limited  Dormant  October %

Crest Homes (Westerham) Limited  Dormant  October %

Crest Homes Limited  Dormant  October %

Crest Manhattan Limited  Dormant  October %

Crest Nicholson (Bath) Holdings Limited  Dormant  October %

Crest Nicholson (Chiltern) Limited  Dormant  October %

Crest Nicholson (Eastern) Limited  Dormant  October %

Crest Nicholson (Epsom) Limited  Dormant  October %

Crest Nicholson (Henley-on-Thames) Limited  Active  October %

Crest Nicholson (Highlands Farm) Limited  Dormant  October %

Crest Nicholson (Londinium) Limited  Dormant  October %

Crest Nicholson (Midlands) Limited  Dormant  October %

Crest Nicholson (Peckham) Limited  Active  October %

Crest Nicholson (South East) Limited  Dormant  October %

Crest Nicholson (South West) Limited  Dormant  October %

Crest Nicholson (South) Limited  Dormant  October %

Crest Nicholson (Stotfold) Limited  Active  October %

1 1: Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN.

2: Unit 2 & 3 Beech Court, Wokingham Road, Hurst, Reading RG10 0RU.

2 CN Finance plc (formerly Castle Bidco plc) is the only direct holding of Crest Nicholson Holdings plc.

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Financial

Statements

29 Group undertakings continued

Entity name

Registered

oce

Active/

dormant

Year end

date

Voting rights

and shareholding

(direct or indirect)

Crest Nicholson Developments (Chertsey) Limited  Active  October %

Crest Nicholson Operations Limited  Active  October %

Crest Nicholson Pension Trustee Limited  Dormant  January %

Crest Nicholson plc  Active  October %

Crest Nicholson Projects Limited  Dormant  October %

Crest Nicholson Properties Limited  Dormant  October %

Crest Nicholson Regeneration Limited  Dormant  October %

Crest Nicholson Residential (London) Limited  Dormant  October %

Crest Nicholson Residential (Midlands) Limited  Dormant  October %

Crest Nicholson Residential (South East) Limited  Dormant  October %

Crest Nicholson Residential (South) Limited  Dormant  October %

Crest Nicholson Residential Limited  Dormant  October %

Crest Partnership Homes Limited  Dormant  October %

Crest Strategic Projects Limited  Dormant  October %

Eastern Perspective Management Company Limited  Dormant  October %

Essex Brewery (Walthamstow) LLP  Dormant  October %

Harbourside Leisure Management Company Limited  Active  December .%

Landscape Estates Limited  Dormant  October %

Mertonplace Limited  Dormant  October %

Nicholson Estates (Century House) Limited  Dormant  October %

Park Central Management (Central Plaza) Limited  Dormant  October %

Ellis Mews (Park Central) Management Limited  Active  October %

Park Central Management (Zone 11) Limited  Dormant  October %

Park Central Management (Zone 12) Limited  Dormant  October %

Park Central Management (Zone 1A North) Limited  Dormant  October %

Park Central Management (Zone 1A South) Limited  Dormant  October %

Park Central Management (Zone 1B) Limited  Dormant  October %

Park Central Management (Zone 3/1) Limited  Dormant  October %

Park Central Management (Zone 3/2) Limited  Dormant  October %

Park Central Management (Zone 3/3) Limited  Dormant  October %

Park Central Management (Zone 3/4) Limited  Dormant  October %

Park Central Management (Zone 4/41 & 42) Limited  Dormant  October %

Park Central Management (Zone 4/43/44) Limited  Dormant  October %

Park Central Management (Zone 5/53) Limited  Dormant  October %

Park Central Management (Zone 5/54) Limited  Dormant  October %

Park Central Management (Zone 5/55) Limited  Dormant  October %

Park Central Management (Zone 6/61-64) Limited  Dormant  October %

Park Central Management (Zone 7/9) Limited  Dormant  October %

Park Central Management (Zone 8) Limited  Active  October %

Park Central Management (Zone 9/91) Limited  Dormant  January %

Park West Management Services Limited  Active  March .%

1 1: Registered oce: Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN.

Notes to the consolidated

ﬁnancial statements continued

180

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Annual Integrated Report 2022

Subsidiary audit exemption

The following subsidiaries have taken advantage of an exemption from audit under section 479A of the Companies Act 2006. The parent

ofthe subsidiaries, Crest Nicholson plc, has provided a statutory guarantee for any outstanding liabilities of these subsidiaries. All subsidiary

undertakings have been included in the consolidated ﬁnancial statements of Crest Nicholson Holdings plc as at 31 October 2022.

Clevedon Investment Limited (00454327) Crest Homes (Nominees No. 2) Limited (02213319)

Crest Nicholson (Henley-on-Thames) Limited (03828831) Crest Nicholson (Peckham) Limited (07296143)

Crest Nicholson (Stotfold) Limited (08774274) Crest Nicholson (Bath) Holdings Limited (05235961)

Crest Nicholson Developments (Chertsey) Limited (04707982)

Joint venture undertakings

At 31 October 2022 the Group had an interest in the following joint venture undertakings which are equity accounted within the consolidated

ﬁnancial statements. The principal activity of all undertakings is that of residential development. All joint ventures were incorporated in

England and Wales.

Entity name

Registered

oce

Active/

dormant

Year end

date

Voting rights

and shareholding

(direct or indirect)

Material joint ventures

Crest A2D (Walton Court) LLP  Active  March %

Crest Sovereign (Brooklands) LLP  Active  October %

Elmsbrook (Crest A2D) LLP  Active  March %

Other joint ventures not material to the Group

Crest/Vistry (Epsom) LLP  Active  October %

Crest Nicholson Bioregional Quintain LLP  Active  October %

English Land Banking Company Limited  Active  October %

Haydon Development Company Limited  Active  April .%

North Swindon Development Company Limited  Active  December .%

1 1: Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN.

2: 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire SN3 3LL.

3: Sovereign House, Basing View, Basingstoke RG21 4FA.

4: The Point, 37 North Wharf Road, London W2 1BD.

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Financial

Statements

Joint operations

The Group is party to a joint unincorporated arrangement with Linden Homes Limited, the purpose of which was to acquire, and develop,

asite in Hemel Hempstead, Hertfordshire. The two parties are jointly responsible for the control and management of the site’s development,

with each party funding 50% of the cost of the land acquisition and development of the site, in return for 50% of the returns. As such this

arrangement was designated as a joint operation.

The Group is party to a joint unincorporated arrangement with CGNU Life Assurance Limited, the purpose of which is to acquire, and develop,

a site in Chertsey, Surrey. The two parties are jointly responsible for the control and management of the site’s development, with each party

funding 50% of the cost of the land acquisition and development of the site, in return for 50% of the returns. As such this arrangement has

been designated as a joint operation.

The Group is party to a joint arrangement with Passion Property Group Limited, the purpose of which was to develop a site in London.

The development was completed in 2014 and there are no material balances in the Group ﬁnancial statements relating to this joint

arrangement as at 31 October 2022. The two parties were jointly responsible for the control and management of the site’s development,

witheach party having prescribed funding obligations and returns. As such this arrangement has been designated as a joint operation.

In line with the Group’s accounting policies, the Group has recognised its share of the jointly controlled assets and liabilities, and income

and expenditure, in relation to these joint arrangements on a line-by-line basis in the consolidated statement of ﬁnancial position and

consolidated income statement as there is no legal entity in place and the arrangements as structured such that the Group has a direct

interest in the underlying assets and liabilities of each arrangement.

Crest Nicholson Employee Share Ownership Trust

The Group operates the Crest Nicholson Employee Share Ownership Trust (the Trust), which is used to satisfy awards granted under the

Group’s share incentive schemes, shares are allotted to the Trust or the Trust is funded to acquire shares in the open market. The Trust falls

within the scope of IFRS 10 Consolidated Financial Statements, and is consolidated within the Group ﬁnancialstatements, as the Group is

considered to have control over the Trust.

Notes to the consolidated

ﬁnancial statements continued

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Annual Integrated Report 2022

Company statement

of ﬁnancial position

Note

2022

£m

2021

£m

ASSETS

Non-current assets

Investments  . .

Current assets

Trade and other receivables  . .

TOTAL ASSETS . .

NET ASSETS . .

SHAREHOLDERS’ EQUITY

Share capital  . .

Share premium account  . .

Retained earnings:

At 1 November  . .

Proﬁt for the year . . 

Other changes in retained earnings (.) (.)

At 31 October .  .

TOTAL SHAREHOLDERS’ EQUITY . .

The Company recorded a proﬁt for the ﬁnancial year of £10.5m (2021: £11.3m).

The notes on pages 185–187 form part of these ﬁnancial statements.

The ﬁnancial statements on pages 183–187 were approved by the Board of Directors on 17 January 2023.

On behalf of the Board

Peter Truscott Duncan Cooper

Director Director

As at 31 October 2022

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Financial

Statements

Company statement

of changes in equity

Note

capital

£m

premium

account

£m

Retained

earnings

£m

Total

equity

£m

Balance at 1 November 2020 . . . .

Proﬁt for the ﬁnancial year and total comprehensive income – – . .

Transactions with shareholders

Dividends paid – – (.) (.)

Exercise of share options through employee beneﬁt trust  – – (.) (.)

Net proceeds from the issue of shares and exercise of share

options – – . .

Balance at 31 October 2021 . .   . .

Proﬁt for the ﬁnancial year and total comprehensive income – – . .

Transactions with shareholders

Dividends paid – – (.) (.)

Exercise of share options through employee beneﬁt trust  – – (.) ( .)

Balance at 31 October 2022 . . . .

For the year ended 31 October 2022

184

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Notes to the Company

ﬁnancial statements

1 Accounting policies

Basis of preparation

Crest Nicholson Holdings plc (the Company) is a public company limited by shares, incorporated, listed and domiciled in England and Wales.

The address of the registered oce is Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN. The Company ﬁnancial statements have been

prepared and approved by the Directors in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101),

inaccordance with the Companies Act 2006 as applicable to companies using FRS 101, and have been prepared on the historical cost basis.

The preparation of ﬁnancial statements in conformity with FRS 101 requires the Directors to make assumptions and judgements that aect

the application of policies and reported amounts within the ﬁnancial statements. Assumptions and judgements are based on experience

andother factors that the Directors consider reasonable under the circumstances. Actual results may dier from these estimates.

The ﬁnancial statements are presented in pounds sterling and amounts stated are denominated in millions (£m), unless otherwise stated.

The accounting policies have been applied consistently in dealing with items which are considered material.

These ﬁnancial statements present information about the Company as an individual undertaking and not about its group. Under section 408

of the Companies Act 2006 the Company is exempt from the requirement to present its own proﬁt and loss account.

As outlined in FRS 101 paragraph 8(a) the Company is exempt from the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based

Payments. This exemption has been taken in the preparation of these ﬁnancial statements.

As outlined in FRS 101 paragraph 8(d-e) the Company is exempt from the requirements of IFRS 7 Financial Instruments: Disclosures, and from

the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement. These exemptions have been taken in the preparation of these

ﬁnancial statements.

As outlined in FRS 101 paragraph 8(h) the Company is exempt from the requirement to prepare a cash ﬂow statement on the grounds that

a parent undertaking includes the Company in its own published consolidated ﬁnancial statements. This exemption has been taken in the

preparation of these ﬁnancial statements.

As outlined in FRS 101 paragraph 8(i) the Company is exempt from the requirement to provide information about the impact of IFRSs

thathave been issued but are not yet eective. This exemption has been taken in the preparation of these ﬁnancial statements.

Under FRS 101 paragraph 8(j) the Company is exempt from the requirement to disclose related party transactions with its subsidiary

undertakings on the grounds that they are wholly owned subsidiary undertakings of Crest Nicholson Holdings plc. This exemption has

beentaken in the preparation of these ﬁnancial statements.

Going concern

The Directors reviewed detailed cash ﬂows and ﬁnancial forecasts for the next year and summary cash ﬂows and ﬁnancial forecasts for

thefollowing two years. Throughout this review period the Company is forecast to be able to meet its liabilities as they fall due, as a result

of the performance of the underlying group. Therefore, 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. The Group’s

going concern assessment can be found in note 1 of the consolidated ﬁnancial statements.

Adoption of new and revised standards

There were no new standards, amendments or interpretations that were adopted by the Company and eective for the ﬁrst time for the

ﬁnancial year beginning 1 November 2021 that had a material impact on the Company.

The principal accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in these

ﬁnancial statements.

Share-based payments

The Company issues equity-settled share-based payments to certain employees of its subsidiaries. Equity-settled share-based payments

are measured at fair value at the grant date, and charged to the income statement on a straight-line basis over the vesting period, based

on the estimate of shares that will vest. The cost of equity-settled share-based payments granted to employees of subsidiary companies

isborne by the employing company.

185

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Strategic

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Governance and

Directors’ Report

Financial

Statements

1 Accounting policies continued

Taxation

Income tax comprises current tax and deferred tax. Income tax is recognised in the Company’s income statement except to the extent

thatitrelates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income.

Current tax is the expected tax payable on taxable proﬁt for the year and any adjustment to tax payable in respect of previous years.

Taxable proﬁt is proﬁt before tax per the Company’s income statement after adjusting for income and expenditure that is not subject to tax,

and for items that are subject to tax in other accounting periods. The Company’s liability for current tax is calculated using tax rates that

have been enacted or substantively enacted by the statement of ﬁnancial position date. Where uncertain tax liabilities exist, the liability

recognised is assessed as the amount that is probable to be payable.

Deferred tax is provided in full on temporary dierences between the carrying amounts of assets and liabilities in the ﬁnancial statements

andthe corresponding tax bases used in the computation of taxable proﬁt. Deferred tax assets are recognised to the extent that it is

probable that taxable proﬁts will be available against which deductible temporary dierences can be utilised. Deferred tax is calculated

using tax rates that have been substantively enacted by the statement of ﬁnancial position date.

Dividends

Final and interim dividend distributions to the Company’s shareholders are recorded in the Company’s ﬁnancial statements in the earlier

ofthe period in which they are approved by the Company’s shareholders, or paid.

Investments

Investments relate to Company contributions to the Crest Nicholson Employee Share Ownership Trust (the Trust or ESOP). The Trust

will use the contribution to acquire Company ordinary shares in the market in order to satisfy share options under the Company’s share

incentive schemes.

Financial assets

Financial assets are initially recognised at fair value and subsequently classiﬁed into one of the following measurement categories:

— measured at amortised cost

— measured subsequently at fair value through proﬁt or loss (FVTPL)

— measured subsequently at fair value through other comprehensive income (FVOCI).

The classiﬁcation of ﬁnancial assets depends on the Company’s business model for managing the asset and the contractual terms of

the cash ﬂows. Assets that are held for the collection of contractual cash ﬂows that represent solely payments of principal and interest

are measured at amortised cost, with any interest income recognised in the income statement using the eective interest rate method.

Financial assets that do not meet the criteria to be measured at amortised cost are classiﬁed by the Company as measured at FVTPL.

Fair value gains and losses on ﬁnancial assets measured at FVTPL are recognised in the income statement and presented within

administrative expenses. The Company currently has no ﬁnancial assets measured at FVOCI.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, using the eective interest

method, less provision for impairment. A provision for impairment of trade receivables is established based on an expected credit loss

model applying the simpliﬁed approach, which uses a lifetime expected loss allowance for all trade receivables. The amount of the loss

isrecognised in the income statement.

Financial liabilities

Financial liabilities are initially recognised at fair value and subsequently classiﬁed into one of the following measurement categories:

— measured at amortised cost

— measured subsequently at FVTPL.

Non-derivative ﬁnancial liabilities are measured at FVTPL when they are considered held for trading or designated as such on initial

recognition. The Company has no non-derivative ﬁnancial liabilities measured at FVTPL.

Own shares held by ESOP

Transactions of the Company sponsored ESOP are included in both the Group ﬁnancial statements and the Company’s own ﬁnancial

statements. The purchase of shares in the Company by the Trust are charged directly to equity.

Notes to the Company

ﬁnancial statements continued

186

Crest Nicholson

Annual Integrated Report 2022

Audit fee

Auditor’s remuneration for audit of these ﬁnancial statements of £27,500 (2021: £25,000) was met by Crest Nicholson plc. No disclosure

ofother non-audit services has been made as this is included within note 5 of the consolidated ﬁnancial statements.

Critical accounting estimates and judgements

The preparation of the Company ﬁnancial statements under FRS 101 requires the Directors to make estimates and assumptions that aect

the application of policies and reported amounts of assets and liabilities, income and expenses and related disclosures.

In applying the Company’s accounting policies, the Directors have made no individual judgements that have a signiﬁcant impact on the

ﬁnancial statements.

Estimates and associated assumptions aecting the ﬁnancial statements are based on historical experience and various other factors

thatare believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis.

Changes in accounting estimates may be necessary if there are changes in the circumstances on which the estimate was based or as a result

of new information. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision aects only

that year, or in the year of revision and future years if the revision aects both current and future years. The Directors do not consider there

are any signiﬁcant sources of estimation uncertainty that have a risk of causing a material adjustment to the carrying value of assets and

liabilities of the Company.

2 Directors and employees

The Company had no employees during either year. Details of Directors’ emoluments, which were paid by another Group company,

aresetout in the Directors’ Remuneration Report on pages 100–122 of the Annual Integrated Report 2022.

3 Dividends

Details of the dividends recognised as distributions to equity shareholders in the year and those proposed after the statement of ﬁnancial

position date are shown in note 9 of the consolidated ﬁnancial statements.

4 Investments

2022

£m

2021

£m

Investments in shares of subsidiary undertaking at cost at beginning of the year . .

Additions . .

Disposals (.) (.)

Investments in shares of subsidiary undertaking at cost at end of the year . .

Additions and disposals in the year relate to Company contributions/utilisation to/from the Trust.

The Directors believe that the carrying value of the investments is supported by their underlying assets.

5 Trade and other receivables

2022

£m

2021

£m

Amounts due from Group undertakings . .

Amounts due from Group undertakings are unsecured, repayable on demand and carry an interest rate of 5.0% (2021: 5.0%).

Amounts due from Group undertakings are stated after an allowance of £nil has been made (2021: £nil) in respect of expected credit losses.

£nil (2021: £nil) provision was made during the year, £nil (2021: £nil) was utilised, and £nil (2021: £nil) provision was released during the year.

6 Share capital

The Company share capital is disclosed in note 24 of the consolidated ﬁnancial statements.

7 Contingencies and commitments

There are performance bonds and other arrangements, including those in respect of joint venture partners, undertaken in the ordinary

course of business. It is impractical to quantify the ﬁnancial eect of performance bonds and other arrangements. The Directors consider

thepossibility of a cash outﬂow in settlement of performance bonds and other arrangements to be remote and therefore this does not

represent a contingent liability for the Company.

In addition, the Company is required from time to time to act as guarantor for the performance by subsidiary undertakings of contracts

entered into in the normal course of their business and typically provide that the Company will ensure that the obligations of the subsidiary

arecarried out or met in the unlikely event that any subsidiary default occurs. The Company considers the likelihood of an outﬂow of cash

under these arrangements to be remote and therefore this does not represent a contingent liability for the Company.

8 Group undertakings

A list of all the Group’s undertakings at 31 October 2022 is given in note 29 of the consolidated ﬁnancial statements.

187

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Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Alternative performance

measures (unaudited)

The Group uses a number of alternative performance measures (APM) which are not deﬁned within IFRS. The Directors use the APMs,

alongwith IFRS measures, to assess the operational performance of the Group as detailed in the Strategic Report on pages 1–65

oftheAnnual Integrated Report 2022, and above. Deﬁnitions and reconciliations of the ﬁnancial APMs used compared to IFRS measures,

areincluded below:

Sales

The Group uses sales as a core management measure to reﬂect the full extent of its business operations and responsibilities. Sales is a

combination of statutory revenue as per the consolidated income statement and the Group’s share of revenue earned by joint ventures,

asdetailed in the below table:

2022

£m

2021

£m

Revenue . .

Group’s share of joint venture revenue (note 14) . .

Sales . .

Return on capital employed (ROCE)

The Group uses ROCE as a core management measure to reﬂect the proﬁtability and eciency with which capital is employed. ROCE is

calculated as adjusted operating proﬁt before joint ventures divided by average capital employed (capital employed = equity plus net

borrowing or less net cash), as presented below. The Group has long-term performance measures linked to ROCE. ROCE achieved

bytheGroup in the year increased to 22.4% (2021: increased to 17.2%).

2022 2021

Adjusted operating proﬁt £m . .

Average of opening and closing capital employed £m  . .

ROCE % . .

Capital employed 2022 2021 2020

Equity shareholders’ funds £m  . . .

Net cash (note 20) £m (.) (.) (.)

Closing capital employed £m . .  .

Land creditors as a percentage of net assets

The Group uses land creditors as a percentage of net assets as a core management measure to ensure that the Group is maintaining

arobustﬁnancial position when entering into future land commitments. Land creditors as a percentage of net assets is calculated

aslandcreditors divided by net assets, as presented below. Land creditors as a percentage of net assets has reduced in the year

to22.5%(2021:reduced to 24.7%).

2022 2021

Land creditors £m . .

Net assets £m  . .

Land creditors as a percentage of net assets % . .

Net cash

Net cash is cash and cash-equivalents plus non-current and current interest-bearing loans and borrowings. Net cash Illustrates the

Group’s overall liquidity position and general ﬁnancial resilience. Net cash has improved in the year to £276.5m from £252.8m in 2021.

2022 2021

Cash and cash equivalents £m . .

Non-current interest-bearing loans and borrowings £m ( .) ( .)

Net cash £m . .

188

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Adjusted performance metrics

Adjusted performance metrics as shown below comprise statutory metrics adjusted for the exceptional items as presented in note 4

of theconsolidated ﬁnancial statements. The exceptional items have a material impact to reported performance and arise from recent,

unforeseen events. As such, the Directors consider these adjusted performance metrics reﬂect a more accurate view of its core operations

andbusiness performance. EBIT margin for share award performance conditions is equivalent to operating proﬁt margin.

Year ended 31 October 2022 Statutory

Exceptional

items Adjusted

Gross proﬁt £m . . .

Gross proﬁt margin % . .  .

Operating proﬁt £m . . .

Operating proﬁt margin % . .  .

Net ﬁnance expense £m (.) . ( .)

Share of post-tax proﬁt/(loss) of joint ventures using the equity method £m . . .

Proﬁt before tax £m . . .

Income tax expense £m (.) (.) (.)

Proﬁt after tax £m . . .

Basic earnings per share Pence . . .

Diluted earnings per share Pence . . .

Year ended 31 October 2021 Statutory

Exceptional

items Adjusted

Gross proﬁt £m . . .

Gross proﬁt margin % . . .

Operating proﬁt £m . . .

Operating proﬁt margin % . . .

Net ﬁnance expense £m (.) (.) ( .)

Proﬁt before tax £m . . . 

Income tax expense £m (.) (.) (.)

Proﬁt after tax £m . . . 

Basic earnings per share Pence . . .

Diluted earnings per share Pence .  . .

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Governance and

Directors’ Report

Financial

Statements

Historical summary

(unaudited)

Note 2022

2021

2020

2019

2018

Consolidated income statement

Revenue £m . .  .  ,. ,.

Gross proﬁt £m . . . . .

Gross proﬁt margin % . . . . .

Administrative expenses £m ( .) ( .) (.) (.) (.)

Net impairment losses on ﬁnancial assets £m (.) (.) (.) (.) -

Operating proﬁt before joint ventures £m . .  . . .

Operating proﬁt before joint ventures margin % . . . . .

Share of post-tax proﬁt/(loss) of joint ventures £m . . (.) (.) (.)

Operating proﬁt after joint ventures £m .  . . . .

Operating proﬁt after joint ventures margin % . . . .  .

Net ﬁnance expense £m ( .) ( .) (.) (. ) (.)

Proﬁt before taxation £m .  .  . . .

Income tax expense £m (.) (.) (.) (.) ( .)

Proﬁt after taxation attributable to equity

shareholders £m . .  . . .

Basic earnings per share Pence . . . . .

Consolidated statement of ﬁnancial position

Equity shareholders’ funds  £m  . . . . .

Net cash  £m (.) (.) (.) (.  ) (.)

Capital employed closing £m . .   . .  .

Gearing  % (.) (.) (.) (.) (.)

Land creditors £m . . . . .

Net (cash)/debt and land creditors  £m (  .) (.) . . .

Return on average capital employed  % . .  . . .

Return on average equity  % . . . .  .

Housing

Home completions  Units , , , , ,

Average selling price – open market  £     

Short-term land  Units , , , , ,

Strategic land  Units , , ,  , ,

Total short-term and strategic land Units , , , ,  ,

Land pipeline gross development value  £m  , ,    ,    , , 

1 Consolidated income statement statistics, return on average capital employed and return on average equity are presented before exceptional items as presented in note 4 of the

2022 consolidated ﬁnancial statements.

2 Consolidated income statement statistics, return on average capital employed and return on average equity are presented before exceptional items relating to combustible materials

provision £0.6m, inventory impairment £43.7m, restructuring costs £7.5m and impairment losses on ﬁnancial assets £7.6m. 2020 equity shareholders’ funds, capital employed closing,

gearing and return on average equity have been restated to reﬂect the change in accounting policy on land options.

3 Consolidated income statement statistics, return on average capital employed and return on average equity are presented before £18.4m exceptional item relating to combustible

materials provision. Not restated to reﬂect the change in accounting policy on land options from 1 November 2020.

4 Restated to reﬂect the adoption of IFRS 15 with eect from 1 November 2018. Not restated to reﬂect the change in accounting policy on land options from 1 November 2020.

Note

1 Equity shareholders’ funds = Group total equity (share capital plus share premium plus retained earnings).

2 Net (cash)/borrowings = Cash and cash equivalents plus non-current and current interest-bearing loans and borrowings.

3 Gearing = Net (cash)/borrowings divided by capital employed closing.

4 Net (cash)/debt and land creditors = land creditors less net cash or add net borrowings.

5 Return on capital employed = adjusted operating proﬁt before joint ventures divided by average capital employed (capital employed = equity shareholders’

funds plus net borrowing or less net cash).

6 Return on average equity = adjusted proﬁt after taxation attributable to equity shareholders divided by average equity shareholders’ funds.

7 Units completed = Open market and housing association homes recognised in the year. In 2022 and 2021 units completed includes joint ventures units

atfull unit count and is stated on an equivalent unit basis. This equivalent unit basis allocates a proportion of the unit count for a deal to the land sale

element where the deal contains a land sale. 2017 to 2020 units completed includes the Group’s share of joint venture units and no equivalent unit

allocation to land sale elements.

8 Average selling price – open market = Revenue recognised in the year on open market homes (including the Group’s share of revenue recognised in the

yearon open market homes by joint ventures), divided by open market home completions (adjusted to reﬂect the Group’s share of joint venture units).

9 Short-term land = Land controlled by the Group with a minimum resolution to grant planning permission.

10 Strategic land = Longer-term land controlled by the Group without planning permission.

11 Land pipeline gross development value = Forecast development revenue of the land pipeline.

190

Crest Nicholson

Annual Integrated Report 2022

Shareholder services

Registrars

Enquiries concerning shares or

shareholdings, such as the loss of a

share certiﬁcate, consolidation of

sharecertiﬁcates, amalgamation of

holdingsor dividend payments, should

bemade to the Company’s registrars:

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

Shareholder helpline: 0371 384 2183

International shareholder helpline:

+44 (0)371 384 2183

Lines are open 8.30 a.m. to 5.30 p.m.,

Monday to Friday (excluding public

holidaysin England and Wales).

In any correspondence with the registrars,

please refer to Crest Nicholson Holdings plc

and state clearly the registered name and

address of the shareholder. Please notify

the registrars promptly of any change

of address.

Electronic communications

Shareholders can elect to receive

shareholder documents electronically

by registering with Shareview at

www.shareview.co.uk.

This will save on printing and distribution

costs. When you register, you will be

sent anemail notiﬁcation to say when

shareholder documents are available on

ourwebsite and you will be provided with

a link to that information. When registering,

you will need your shareholder reference

number which can be found on your

sharecertiﬁcate or proxy form.

Please contact EQ if you require any

assistance or further information.

Share dealing services

EQ provides a share dealing service that

enables shares to be bought or sold by

UK shareholders by telephone or over

the internet.

For telephone share dealing please

call 0345 603 7037 between 8.30 a.m.

and 4.30 p.m. (lines are open until 6.00 p.m.

for enquiries) and for internet share dealing

please visit: www.shareview.co.uk/dealing.

Share fraud

Share or investment scams are often run

from ‘boiler rooms’ where fraudsters cold

call investors oering them worthless,

overpriced or even non-existent shares,

or oer to buy their shares in a company

at a higher price than the market values.

Shareholders are advised to be very

wary ofany unsolicited advice, oers to

buy shares at a discount, or oers of free

reportsabout a company. Even seasoned

investors have been caught out by

such fraudsters. The FCA has some

helpful information.

Report a scam

If you are contacted by a cold caller,

you should inform the General Counsel

and Company Secretary by email

atinfo@crestnicholson.com, as well

as theFCA by using their share fraud

reporting form at www.fca.org.uk/scams,

or bycalling their Consumer Helpline on

0800 111 6768. If you have already paid

money to a share fraudster you should

contact Action Fraud on 0300 123 2040

orwww.actionfraud.police.uk.

Shareholder proﬁle by category as at 31 October 2022

Category

Number of

shareholders

Percentage

of total

shareholders

by number

Ordinary

(millions)

Percentage

of issued

share capital

Private individuals  .% ,, .%

Nominee companies  . % ,,    . %

Limited and public limited companies  .%  ,  , .%

Other corporate bodies  .% ,, .%

Pension funds, insurance companies and banks  .% , .%

 .% ,, .%

Shareholder proﬁle by size as at 31 October 2022

Size of shareholding (shares)

Number of

shareholders

Percentage

of total

shareholders

by number

Ordinary

(millions)

Percentage

of issued

share capital

1–499  .% , .%

500–999  .% , .%

1,000–4,999  .% , .%

5,000–9,999  .% , .%

10,000–49,999  .% ,, .%

50,000–99,999  .% ,, .%

100,000–499,999  .% ,, . %

500,000–999,999  .% ,, .%

1,000,000+  .%  .%

191

Crest Nicholson

Annual Integrated Report 2022

Strategic

Report

Governance and

Directors’ Report

Financial

Statements

Group directory

For our Group directory please visit our

website: www.crestnicholson.com/contact

Our head oce and registered oce

isbased at:

Crest House

Pyrcroft Road

Chertsey

Surrey

KT16 9GN

Company number: 06800600

General Counsel and Company Secretary:

Kevin Maguire

Email: info@crestnicholson.com

Telephone: 01932 580 555

Annual General Meeting

The Board currently intends to hold the

AGM on 23 March 2023. The arrangements

for the Company’s 2023 AGM and details

of theresolutions to be proposed, together

with explanatory notes, will be set out in

theNotice of Annual General Meeting.

The Notice of Annual General Meeting

is included in a separate document

and is available on our website:

www.crestnicholson.com/investors/

shareholder-centre.

Investor relations

For investor relations matters

please contact Jenny Matthews,

Head of Investor Relations

investor.relations@crestnicholson.com

www.crestnicholson.com/investors

Company secretariat

For shareholding notiﬁcations required

under the FCA Disclosure Guidance

and Transparency Rules please email:

dtr-notiﬁcations@crestnicholson.com

Public relations

Financial enquiries

Tulchan Communications LLP

Telephone: 020 7353 4200

crestnicholson@tulchangroup.com

Corporate enquiries

Red Consultancy

Telephone: 020 7025 6607

CrestNicholsonTeam@

redconsultancy.com

Auditors

PricewaterhouseCoopers LLP

1 Embankment Place, London WC2N 6RH

Solicitors

Norton Rose Fulbright LLP

3 More London Riverside, London SE1 2AQ

Corporate brokers

Barclays Bank PLC

5 The North Colonnade, London E14 4BB

HSBC PLC

8 Canada Square, London E14 5HQ

192

Crest Nicholson

Annual Integrated Report 2022

This report has been printed sustainably in the UK by Pureprint, a CarbonNeutral®

company, andcertiﬁed to ISO 14001 environmental management system.

It has been digitally printed without the use of ﬁlm separations, plates and associated

processing chemicals, and 100% of all the dry waste associated with this production

hasbeen recycled.

This publication is printed on uncoated stock, made from 100% recycled ﬁbre, and some

ﬂecks and variations in colour will therefore be visible. It has been manufactured at a mill

that has ISO 14001 environmental standard accreditation. The paper is Carbon Balanced

with World Land Trust, an international conservation charity, who oset carbon emissions

through the purchase and preservation of high conservation value land.

Through protecting standing forests under threat of clearance, carbon is locked-in

that would otherwise be released. These protected forests are then able to continue

absorbing carbon from the atmosphere, referred to as REDD (Reduced Emissions

fromDeforestation and forest Degradation).

Additional to the carbon beneﬁts is the ﬂora and fauna this land preserves,

including several species identiﬁed at risk ofextinction on the IUCN Red List of

Threatened Species.

This report is 100% recyclable.

If you no longer wish to retain this copy of the Annual Integrated Report, please do pass

it on to someone or recycle it.

CBP00019082504183028

Crest House

Pyrcroft Road

Chertsey

Surrey

KT16 9GN

Tel: 01932 580 555

www.crestnicholson.com

Crest Nicholson Holdings plc

Registered number 6800600