Crest Nicholson Holdings Annual Report (2006)

B U I L D I N G H O M E S C R E A T I N G C O M M U N I T I E S

Annual Report 2006

CONTENTSFinancial highlightsAnnual review 1Corporate social responsibility 9Directors and advisers 15Corporate governance 19Remuneration report 24Directors' report 35Statement of directors' responsibilities 39

Independent auditors' report 41Consolidated income statement 43Consolidated statement of recognised income and expense 43Consolidated balance sheet 44Consolidated cash flow statement 45Notes to the consolidated financial statements 46Company balance sheet 72Notes to the company financial statements 73Five year record 78Shareholder information 79Group directory 80

REPORT

ACCOUNTS

2006 2005

Turnover £690.7m - 1% £699.0m

Operating profit £99.2m £98.9m

Pre-tax profit £80.1m + 2% £78.9m

Earnings per share 51.2p + 6% 48.2p

Dividends per share 14.2p + 10% 12.9p

Net assets attributable to equity shareholders 265p + 13% 235p

CREST NICHOLSON IS A RESIDENTIAL AND MIXED-USE DEVELOPMENTCOMPANY WITH AN EMPHASIS ON CREATING SUSTAINABLE COMMUNITIES

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RESULTS

We are delighted to report an excellent year of progress forCrest Nicholson PLC both in the financial performanceachieved and in the foundations laid for future growth andperformance improvements.

Operating profit reached a new record high of £99.2m(2005: £98.9m) on turnover of £690.7m (2005: £699m). Profit before tax rose to £80.1m (2005: £78.9m) and earningsper share increased by 6% to 51.2p (2005: 48.2p).

We are proposing a dividend of 9.7p per share. This will give a total for the year of 14.2p, up 10.1% (2005: 12.9p) and is areflection of our confidence in the future prospects of thecompany. We plan to pay the dividend on 10th April toshareholders on the register on 9th March.

Annual review

HOUSINGThe company operates through six regional

business units (four in the South East, one in

the South West and one in the Midlands) and

one central regeneration business unit.

Total housing completions in 2006 were c. 22%

higher than in 2005 at 2,946 units (2005: 2,417).

Open market housing completions of 2,035 were

slightly ahead of the 2,000 we predicted at the

interim results and the 2005 comparative of

1,960. As expected, we have doubled affordable

unit completions to 911 (2005: 457).

As predicted, the average selling price was

£199k, down from £225k in 2005, largely due to

this increased proportion of affordable units.

The average selling price of open market

completions was £227k (2005: £248k). The

average selling price of affordable unit

completions was £135k (2005: £126k).

For 2007, we are on track to increase both open

market and affordable housing completions by

c.15%. The main improvement stems from the

regeneration business unit which is well set to

grow unit volumes strongly in 2007 and 2008.

The investment made in regeneration expertise

in previous years has improved our ability to

source additional land and underpins our future

growth.

The average selling price in 2007 is expected to

be around £200k. The volume gains will

principally benefit the second half because of

the pattern of apartment completions.

Forward sales at the financial year end were

£400.6m (2005: £389.6m). At 22nd January, 53%

of target 2007 housing turnover had been

secured (2005: 50%).

In 2006, we experienced a sound housing

market which has continued since our year end.

However, affordability ratios are stretched and

recent interest rate rises, including the 0.25%

increase this month, are likely to moderate 2007

volumes and prices.

For the longer term, house prices remain

underpinned by a continuing shortage of supply

in our areas of operation.

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Annual Report and Accounts 2006

MIXED USE COMMERCIALAs expected, commercial property sales from

our mixed use schemes were lower in 2006 at

£51.1m (2005: £92.3m). Commercial property

sales in 2007 are expected to exceed 2006,

supported by a full year contribution from

Camberley.

In 2006, we experienced a strong appetite from

institutional investors for tenanted commercial

property but a weaker commercial lettings

market than in 2005.

LAND SALESAs expected, land sales in 2006 were lower than

in 2005 at £54.3m (2005: £62.7m).

Crest’s unit volumes show good growth in 2007

and 2008 and the planning system is showing no

signs of easing. We therefore plan to sell

significantly less land in 2007 than in 2006.

MARGINSOperating margin improved to 14.4% (2005:

14.1%) including a £2.9m capital profit on the sale

and leaseback of our Chertsey office. If the

Chertsey office sales value of £10.2m had been

recorded as turnover, the operating margin would

have been 14.1%, in line with the prior year.

Our investment in regeneration expertise over the

last few years has diluted operating margin but, in

2007 and beyond, the returns from our regeneration

business are set to increase significantly.

LAND BANKOur land bank can be summarised in terms of

units and gross development value as follows:

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John Matthews,Chairman

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Stephen Stone,Chief Executive

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The Atrium, Camberley, Surrey

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2006 2005Units GDV £m Units GDV £m

Short term housing 16,322 3,075 16,237 2,992Short term commercial 491 471Total short term 16,322 3,566 16,237 3,463Strategic land 12,926 2,204 12,181 2,039

Total under contract 29,248 5,770 28,418 5,502Terms agreed/solicitors instructed 2,956 583 3,552 710Total Land Bank 32,204 6,353 31,970 6,212


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‘360 degree’ buildings at Harbourside, Bristol


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2006 was a successful year for land buying in

which we added 4,694 plots to the short term

housing portfolio,1,748 more than were

completed in 2006, leaving us well placed to

deliver volume gains in 2007 and 2008. At the

2006 level of turnover the short term housing

portfolio represents over 5 years supply.

Our short term commercial portfolio consists

principally of further phases of our Bristol

Harbourside development, Camberley and

Chertsey North.

We have added to our strategic land portfolio in

2006 and we have made significant progress

with our holdings at Huntsgrove, Gloucester and

Holmer Lane, Hereford. We also expect

extensions to our strategic sites at Stowmarket

and Red Lodge. Planning applications have now

been submitted for a total of 2,211 units in our

strategic land bank.

Projects where purchase terms have been

agreed and solicitors have been instructed

include Woolston Riverside in Southampton

where we have been nominated as lead developer

as well as a number of traditional development

projects in our regional business units.

Since year end, the total number of plots under

control has increased by 1,097 plots from 32,204

to 33,301 due to further successes in getting

agreed land purchases into solicitors hands.

DESIGN AND BUSINESS IMPROVEMENTINITIATIVESGood design, increasing environmental

standards and modern methods of construction

are all essential ingredients in working

partnerships with local and central government

to secure new land.

Crest's reputation for design innovation is well

established. Our recent success in the ODPM

Design for Manufacture competition with the

'SixtyK' submission demonstrated our ability to

produce groundbreaking designs to increasingly

demanding standards. This success has led to

securing three sites totalling 445 plots.

Crest’s ability to meet government aspirations

for sustainable development is a key factor in

land sourced from the public sector which

accounts for 2,200 of the plots now in solicitors

hands. Producing more new homes is a key

objective for Government and doing so in an

environmentally responsible manner is essential.

Crest recognises and welcomes the increasing

importance of environmental concerns and has

developed the necessary expertise to meet the

higher standards required for more sustainable

development. We believe this will give us a

competitive advantage in the land market in

the future.

The Business Improvement Initiative is on track to

produce £10m of cost savings per annum by 2008.

The savings identified are being used both to secure

additional land by improving competitiveness in the

land market and to improve margins. The Business

Improvement process is now embedded in our

organisation and culture and, through it, we expect

continuously to seek better design, lower costs,

better practices and greater added value.

FINANCIAL POSITIONThe group’s capital employed of £453.1m has

increased by £8.1m and the return on average

capital employed is 22.1% compared to 22.7%

in 2005.

The group operates a defined contribution

pension scheme for new employees and the

defined benefit scheme is closed to new entrants.

The deficit on the defined benefit scheme has

increased in 2006 by £9.7m net of tax (2005:

£3.3m) from £24.7m to £34.4m due principally to

the effects of longevity assumptions.

Shareholders funds increased by £35.2m or 13.4% to

£298.5m. The net assets attributable to the ordinary

shares are equivalent to 265p per share compared

with 235p at October 2005, an increase of 13%.

At October 2006, the group has total borrowing

facilities available of £357.4m (2005: £364m). Of

these, £97.4m at year end exchange rates relate

to US private placement notes of which £18.4m

has been repaid in December 2006.

Improved working capital controls have

contributed to a £27.1m reduction in net

borrowings from £181.7m at October 2005 to

£154.6m at October 2006. Gearing was reduced

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On 2nd November 2005, the 5.5% Cumulative

Redeemable Preference Shares of £38m were

repaid at par. The repayment of the preference

shares has converted non tax deductible

preference dividends into tax deductible interest

charges. While this reduces profit before tax by

around £2m, earnings per share are enhanced.

RISKS AND UNCERTAINTIESIn the course of 2006, the group has performed

a detailed review of the risks inherent in the

business and of the ways in which group

systems manage and mitigate those risks.

The risks facing the group lie principally in land

buying. The key risk elements are:

• Securing, on appropriate commercial terms,

sufficient plots and sites for short term

development, whether through open market

purchase or through conversion from the

strategic land bank

• Securing commercially viable planning

consents on a timely basis to feed into

production

• Recruiting, training and retaining employees

with the requisite skills to secure

development opportunities and deliver them

cost effectively

OUTLOOKWhile interest rate increases could moderate

house price inflation in 2007, the fundamentals

of the housing market remain good with low

unemployment and a continuing shortage of

supply in our main areas of operation in

southern England and the Midlands.

Given a steady housing market, we can look

forward with confidence. The length and

strength of our land bank, the progress of the

regeneration business, and the steps we are

taking to improve the business leave us well

positioned to deliver strong growth over the next

few years.

John Matthews

Chairman

Stephen Stone

Chief Executive

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Aerial view of WoolstonRiverside in Southampton,Hampshire


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The marina at Port Marine, Portishead,Somerset

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Corporate social responsibility

By refining and developing the proposals that

were submitted for this site and successfully

responding to the core challenges of

environmental sustainability, the company was

awarded a further two development sites

on which to demonstrate its social and

environmental credentials.

The innovation and methods of construction that

emerged from these competition submissions

resulted in the development of new procedures

to help support the spread of best practice

across the company. In this way, Crest

Nicholson continues to address global

environmental pressures, improve the quality

of its homes and help to meet the demands

of a broader section of society.

RISKS AND OPPORTUNITIES The company established control measures

to address corporate risks and opportunities

over a range of activities including planning,

design, build and marketing. These included:

• A climate change check-list for planners

and designers

• A renewable energy technology

selection guide

• A waste management policy procedure

for build-waste segregation and recycling

• An emergency preparedness and spill

response procedure for build sites

• A survey of customer comfort levels relating

to the built and natural environment

SUSTAINABLE DEVELOPMENT In order to meet the challenges of climate

change and the demand for affordable homes,

Crest Nicholson is adopting new processes

and procedures. For example Crest Nicholson

customers, local communities and the

Crest Nicholson has continued to respond to social and environmental developmentchallenges. During 2006 the companycommenced work on its first development of climate-change proofed, affordable andsustainable homes. The site at Renny Lodge,Newport Pagnell was acquired as a result of Crest Nicholson’s success in the ODPM‘Design for Manufacture’ competition.

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environment will all benefit from the use

of precision factory-built house components

that will enable a rapid build of affordable

and sustainable homes. The improvements

incorporate:

• Reduced ‘greenhouse’ gas emissions due

to significantly increased energy efficiency

• Improved energy efficiency due to increased

air-tightness and the use of solid insulation

• Viability for local renewable energy due to the

design and efficiency of a panel system

• Insulation and bonding materials with zero

ozone depleting substances

• Timber with 100% chain-of-custody

certification and 60% recycled content

• Reduced on-site construction time and waste

due to precision factory manufacture

• Roof, wall cladding and ground floor thermal

mass for summer cooling and comfort levels

• A mechanical air ventilation system for fresh

air circulation and heat exchange

• A central light lantern feature for increased

natural daylight and solar gain or shading

Additional environmental specifications

for the new range of homes helped develop

Crest Nicholson’s ‘Homes for life’ range,

that embrace the principles of ‘Lifetime Homes’

for flexible living spaces and the principles

of ‘Secured by Design’ for increased security.

SUSTAINABLE MARKETPLACES The company implemented a group-wide waste

segregation and recycling management system

to reduce waste and increase the re-use

of materials through one nationwide skip

contractor. In Crest Nicholson offices, all paper

was switched to 70% – 100% recycled content.

Sales and Marketing started to embrace the

changes in the Crest Nicholson product -

including improvements in home energy

efficiency, domestic waste recycling, water

conserving appliances and a customers

Sustainable Lifestyle guide. Going forward the

company will develop and market its expertise

and reputation in building homes for the future,

which will respond to the accelerating demands

of climate change.

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The ODPM ‘Design for Manufacture’ winningdesign at Renny Lodge,Newport Pagnell,Bedfordshire

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New England Quarter,Brighton which is beingjointly developed withBioRegional Quintain

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Net employment creation showed a 6% reduction due to continued management restructuring, to

reduce a higher than average industry sector overhead. Restructuring also increased permanent

staff turnover by 7%. There was a 33% improvement in the average hours of training per employee.

The annual injury incident rate (AIIR) was down by a significant 27% against a sector average

reduction of only 12%. The company maintained its AIIR below the construction industry average

for just over 3 months of the year compared to 2005 (5 months). The company is committed to

continual improvement in occupational health and safety management and training.

Key Performance Indicator 2003 2004 2005 2006

Net employment creation 5% 5% 0% -6%

Permanent staff turnover 21% 21% 17% 24%

Average hours of training per employee No data 15 hrs 15 hrs 20 hrs

Annual Injury Incident Rate No data 1,266 1,294 946


Total housing completions 1,936 2,524 2,417 2,946

Social housing completions 308 712 457 911

Social housing as a percentage of total homes 16% 28% 19% 31%

Average house sale price £239,000 £210,000 £225,000 £199,000

Customer satisfaction – overall index 74.1% 75.4% 74.8% 77.3%

Customer satisfaction – before sales service 7.4 7.4 7.5 7.8

Customer satisfaction – after sales and defects 7.3 7.4 7.1 7.4

2003 - 2004 based on built completions; 2005 - 2006 based on legal completions

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SOCIAL AND ENVIRONMENTAL PERFORMANCE SUMMARYIn many areas Crest Nicholson has maintained and often exceeded its corporate social responsibility

key performance targets. However, there are still major challenges and areas for improvement,

as listed in the tables below.

EMPLOYEES

COMMUNITY

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Gloucester Docks,Gloucestershire


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The demand for homes was met with a

production increase of 22% - including a

doubling of social housing. The average selling

price reduced as the number of affordable and

social housing completions increased. Overall

customer satisfaction reached a five year high.

After-sales service including the quality of build

reached previous highs. These figures will be

adjusted in the following quarter after customer

interviews are completed.

The high percentage of Crest Nicholson homes

built on previously used land was maintained

and exceeded the UK Government’s target of

60%. Average home energy efficiency remained

in the high range and is expected to increase

with homes built using modern methods of

construction. Build skip waste volume reduced

for the fourth consecutive year, this time by

16.3% due to increased waste segregation and

recycling. The total number of EcoHome

assessments increased to 1,019 units

(2005: 645 units), representing 31% of homes

built. There was an increase in ‘Very Good’ and

‘Excellent’ EcoHome ratings due to the use of

modern methods of construction. There was a

single environmental prosecution arising from a

breach of a noise limitation on one site resulting

in a fine. As a consequence, more robust

‘Emergency Preparedness and Response’ Site

Best Practice procedures were implemented.

ENVIRONMENT


Homes built on previously used land 75% 73% 84% 84%*

Average home energy efficiency 79% 83% 79% 82%

Estimated build waste – cubic metres per home built 26.2 19.8 19.6 16.4

Percentage of units certified as EcoHomes 0% 8% 26% 31%

Environmental prosecutions 1 - - 1

* estimated – awaiting validation


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SECRETARYN I Hughes

AUDITORSKPMG Audit Plc

SOLICITORSLinklaters

BROKERSDresdner Kleinwort Wasserstein Limited

MERCHANT BANKERSUBS Warburg

BANKERSThe Royal Bank of Scotland Group

Lloyds TSB Bank Plc

HSBC Bank PLC

Barclays Bank PLC

Allied Irish Banks, p.l.c.

Bank of Scotland

National Bank of Egypt International Limited

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J W Matthews

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S Stone

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P Callcutt

4

D P Darby

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R S Lidgate

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R T Scholes

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L J Wigglesworth

Directors and advisers1. J W MATTHEWS CHAIRMAN AND CHAIRMAN OF THE NOMINATION COMMITTEE Age 62

John Matthews, a chartered accountant,

was appointed Chairman in 1996. He is

chairman of Regus Group Plc and a non-

executive director of Rotork Plc, SDL Plc and

Diploma Plc. He has previously been a managing

director of County NatWest and deputy

chairman/deputy chief executive of Beazer Plc.

2. S STONECHIEF EXECUTIVE Age 53

Stephen Stone joined the group in 1995 and was

appointed to the Board in 1999, becoming Chief

Executive on 1st November 2005. He is a

chartered architect with over 30 years

experience in the construction and house

building industry.

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3. P CALLCUTT EXECUTIVE DIRECTOR Age 57

Paul Callcutt joined the group in 1982. He was

appointed to the Board in 2000 and is group

Land Director. He is a solicitor who practised

in property and planning law prior to taking

up a commercial role with Crest Nicholson.

4. D P DARBYFINANCE DIRECTORAge 56

Peter Darby, a chartered accountant,

was appointed to the Board in August 2003.

He had previously served with the group for

9 years in a range of finance and general

management roles, rejoining the group in 2001.

He was formerly group finance director of

The Berkeley Group Plc and divisional finance

director of Wimpey Homes.

5. R S LIDGATEINDEPENDENT NON-EXECUTIVEDIRECTOR AND CHAIRMAN OF THEREMUNERATION COMMITTEE Age 61

Stephen Lidgate was appointed to the Board

in April 2003. He is past president of the House

Builders Federation and a board member of the

Construction Industry Training Board. He was

formerly chairman of John Laing Homes Plc

and W L Homes LLC in the USA and a director

of John Laing Plc. He has been involved

in housebuilding for over thirty-five years and is

a fellow of the Chartered Institute of Marketing.

6. R T SCHOLESINDEPENDENT NON-EXECUTIVEDIRECTOR AND CHAIRMAN OF THEAUDIT COMMITTEE Age 61

Richard Scholes was appointed to the Board

in July 2003. He is a non-executive director

and chairman of the audit committee of

Bodycote International plc, Chaucer Holdings

PLC and Marshalls PLC. He is also a non-

executive director of Keller Group PLC and

is a chartered accountant.

7. L J WIGGLESWORTHSENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR Age 47

Lloyd Wigglesworth was appointed to the Board

in 2000. He is a director of Woolworths Group

plc, where he is managing director of

Entertainment UK. He was formerly a director

of WHSmith PLC.

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COMPLIANCEThe company recognises the importance of and

is committed to attaining the highest standards

of corporate governance. It is a requirement of

the Listing Rules of the UK Listing Authority that

listed companies disclose in their annual report

and accounts how they have applied the

principles set out in Section 1 of the Combined

Code on Corporate Governance published

in June 2006 (the “Combined Code”) and

whether or not they have complied with its

detailed provisions throughout the financial year.

During the financial year ending 31st October

2006 the company complied fully with the

principles and provisions set out in Section 1

of the Combined Code except, that until 31st

March 2006 when Mr J Callcutt resigned as

Deputy Chairman, the company did not comply

with provision A.3.2 of the Combined Code in that

less than half the Board, excluding the Chairman,

were independent Non-Executive Directors.

Section 1 of the Combined Code contains

fourteen main principles of good governance

which are divided into four main categories.

These categories and the means by which

the company has complied with them are

explained opposite.

DIRECTORSThe Board of Directors is the body responsible

for corporate governance and for establishing

the policies and strategies of the company.

The Board consists of the Chairman, three

Executive Directors and three Non-Executive

Directors. Biographies of the Directors are set

out on pages 15 and 16.

It is the opinion of the Board that all of the three

Non-Executive Directors are considered to be

independent of management and have no business

or other relationship which could interfere

materially with the exercise of their judgement.

Each of the Executive Director’s service

contracts contains a notice period of a

maximum of one year. The maximum notice

period under each Non-Executive Director’s

letter of appointment is also one year.

The Chairman and the Non-Executive Directors

each have a letter of appointment expiring

as follows:

Mr J W Matthews On 6 months’ notice

(Chairman)

Mr R S Lidgate 30th April 2009

Mr R T Scholes 30th June 2009

Mr L J Wigglesworth On 3 months’ notice

(Senior Independent Director)

Corporate governance

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It is a requirement of the company’s Articles of

Association that each Director should offer himself

for re-election every three years. The Articles

similarly stipulate that any Director appointed by

the Board is also required to offer himself for

re-election by the shareholders at the first Annual

General Meeting after such appointment.

All members of the Board are equally accountable

under the law for the proper stewardship of the

company’s affairs. The Non-Executive Directors

are, however, independent of management and

free from any material business or other

relationship with the company, enabling them

to bring an independent judgement to bear on

issues brought before the Board. There is a clear

division of responsibility between the Chairman,

Mr J W Matthews, and the full time Chief

Executive, Mr S Stone, to whom the Board has

delegated responsibility for running the company.

The Board meets regularly on a formal basis

and has an agreed schedule of matters reserved

to it for collective decision. These include

strategic policies, corporate performance

reviews and overall financial and organisational

control. In addition, the Board meets outside

of its agreed schedule as and when required.

It is supplied in a timely manner with

information in a form and of a quality that is

appropriate to enable it to discharge its duties.

The Board evaluated its performance in 2006

by the completion of an evaluation questionnaire

the results of which were discussed.

The Chairman formally appraised the Chief

Executive in the year.

The Non-Executive Directors meet separately

with the Chairman during the course of the year.

The Non-Executive Directors also meet (without

the Chairman) at least annually to appraise the

Chairman’s performance.

A formal procedure exists to allow Directors

to take independent professional advice and the

company will meet such reasonable expenses

that arise in taking such advice. All Directors

have access to the company Secretary for his

advice and services, and training is available

for new and existing Directors, as and when

required. Each member of the Board also has

the benefit of appropriate insurance cover and

the indemnity in Article 34 of the company’s

Articles of Association in respect of legal actions

brought against him.

BOARD COMMITTEESThe Board has established the following

Committees, the members of which are set out

below. Details of all the Directors’ experience

and qualifications are set out on pages 15 and 16

and their remuneration on pages 24 to 34.

AUDIT COMMITTEEMr R T Scholes (Chairman)

Mr R S Lidgate

Mr L J Wigglesworth

The Audit Committee meets four times each

year and provides a link between the Board and

the company’s internal and external auditors on

matters coming within the scope of the group

audit. The Chairman of the Audit Committee

is a chartered accountant. The main duties

of the Audit Committee are as follows:

• To review all Preliminary and Interim

statements before they are presented

to the Board

• To review internal control procedures and risk

management systems

• To review the internal audit function

• To oversee the company's relations with the

external auditor and to approve the terms

of engagement and the remuneration to be

paid to the external auditor in respect of audit

services provided

• To recommend to the Board a policy in

respect of the provision of non-audit services

provided by the external auditors to ensure

their independence and objectivity is not

impaired

During the year the Committee carried out its

duties as noted above. Particular attention was

paid to the implementation of International

Financial Reporting Standards and other

accounting standards and policies in the review

of the financial statements. Under internal

control procedures and risk management

systems both financial and non-financial

controls were assessed, improvements were

identified and are being implemented.

The internal auditor's reports and the internal

audit programme were reviewed together with

management's response to the internal

auditor's findings and recommendations.

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The Committee recommended to the Board

a continuation of the policy regarding the

provision of non-audit services. The Board

approved the recommendation, which is not

to use the external auditors for non-audit

services with the exception of tax advice and

matters where the fee will not exceed £50,000

in aggregate per annum unless specifically

approved by the Committee.

Details of the fees paid to the external auditors

for audit and non-audit services are set out

in Note 3 on page 49.

The Committee does not become involved in the

day to day running of the business, which remains

the responsibility of the Executive Directors.

The terms of reference of the Committee are

published on the company’s web site

www.crestnicholson.com

REMUNERATION COMMITTEEMr R S Lidgate (Chairman)

Mr R T Scholes

Mr L J Wigglesworth

The Remuneration Committee meets at least

three times each year, to establish and review,

in consultation with the Chief Executive,

the remuneration and terms of employment

of the Chairman, Executive Directors and certain

senior executives. The fees for the Non-

Executive Directors are decided by a Committee

of the Board comprising the Chairman,

Chief Executive and Finance Director.

The terms of reference of the Committee

are published on the company’s web site


NOMINATION COMMITTEEMr J W Matthews (Chairman)

Mr S Stone

Mr R S Lidgate

Mr R T Scholes

Mr L J Wigglesworth

The Nomination Committee meets at least every

six months and as necessary to assess the

suitability of persons for appointment as

Directors and, when appropriate, nominates

new candidates for the approval of the Board.

Prior to their appointment, all Non-Executive

Directors are advised of the time commitment

considered necessary to enable them to fulfil

their responsibilities. There is a formal

induction process for new appointees.

The terms of reference of the Committee are

published on the company’s web site


EXECUTIVE COMMITTEEMr S Stone (Chairman)

Mr P Callcutt

Mr D P Darby

Mr N I Hughes (Company Secretary)

Mr N C Tinker (Appointed 28th March 2006)

Mr S Usher

The Committee meets regularly throughout the

year and acts in an advisory capacity in the

creation and implementation of policy, trading

strategies and the taking of major decisions.

BUSINESS IMPROVEMENTCOMMITTEEMr S Stone (Chairman)

Mr P Callcutt

Mr D P Darby


Mr N C Tinker (Appointed 28th March 2006)

Mr S Usher

The Committee meets regularly throughout

the year and its objective is to achieve the

continuous improvement of the group’s business

processes.

COMMITTEE FOR SOCIALRESPONSIBILITY

Mr J Callcutt (Chairman, resigned

31st March 2006)

Mr S Stone (Appointed 23rd January 2006,

Chairman from 1st April 2006)

Mr R S Lidgate

Mr L J Wigglesworth (Resigned 23rd January 2006)


Mr P Donnelly (Environmental Manager)

22C O R P O R AT E G O V E R N A N C ER

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The Committee for Social Responsibility is

charged with managing the company's ethical,

social and environmental policies so as to

achieve a balance between its commercial

objectives and its obligations to society at large.

ATTENDANCE AT BOARD ANDCOMMITTEE MEETINGSThe following table shows the number of

meetings of the Board and each of the Audit,

Remuneration and Nomination Committees held

during the year ended 31st October 2006 and the

attendance record of individual Directors.

CHAIRMANThe Chairman has significant commitments

other than as Chairman of the company

and these are disclosed in his biography on

page 15. The Board is confident that these

commitments do not hinder the ability of the

Chairman to discharge his duties to the

company effectively.

DIRECTORS’ REMUNERATIONThe Remuneration Report on pages 24 to 34

provides details of the Directors’ remuneration.

ACCOUNTABILITY AND AUDITA review of the group’s performance and financial

position is included in the Annual Review. The

Board uses this and the Directors’ Report to

present a balanced and understandable

assessment of the company’s position and

prospects. The statement of Directors’

responsibilities is shown on page 39 and the

going concern statement is shown on page 35.

As indicated above, the company has an

established Audit Committee to whom the external

auditors, KPMG Audit Plc, and the group’s Internal

Auditor, report. The external auditors operate

procedures to safeguard against the possibility

that the auditors’ objectivity and independence

could be compromised. This includes the use

of independent reviewing partners and annual

independence confirmations by all staff.

The auditors report to the Audit Committee on

matters including independence and non-audit

fees on an annual basis. In addition, the role

of audit partner is rotated on a periodic basis.

As regards internal control, the Board

acknowledges its responsibility for the systems

set up within the group for this purpose and for

reviewing their effectiveness. They are designed

to provide reasonable but not absolute

assurance against material misstatement

or loss. It is the responsibility of the Executive

Directors and senior management to implement

and maintain the group’s internal control and

risk management systems. The company

complies with the Combined Code’s principles

on internal control reporting and throughout the

year has operated the procedures necessary

to implement the guidance on internal control

contained in the Turnbull Report published

in September 1999.

The group has the following established

framework of internal controls:

FINANCIAL REPORTINGThere is a comprehensive budgeting system

with an annual budget and associated three year

plan approved by the Directors.

Board Audit Remuneration NominationCommittee Committee Committee

Number of meetings 7 4 9 4

Mr J W Matthews 7 N/A N/A 3

Mr J Callcutt (resigned 31st March 2006) 3 N/A N/A N/A

Mr P Callcutt 7 N/A N/A N/A

Mr D P Darby 7 N/A N/A N/A

Mr S Stone 7 N/A N/A 4

Mr R S Lidgate 7 4 9 3

Mr R T Scholes 7 4 9 4

Mr L J Wigglesworth 7 4 9 4


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Actual results are reported against budget and

revised forecasts of profit, cash flow and

balance sheets are regularly prepared and

reviewed. The company reports to shareholders

on a half yearly basis.

OPERATING UNIT CONTROLSControls and procedures, including information

systems controls, are detailed in policy and

procedure manuals which are subject to periodic

review. The Authority Manual (which was revised

and updated in the year) details the general

principles of and specifies the limits arising from

the delegation of authority within the group. Day

to day control is exercised by the members of

the Executive Committee (see above).

RISK IDENTIFICATIONThe group has a Risk Review Committee (a sub-

committee of the Executive Committee) which

meets periodically to assess and review the

risks facing the business on an on-going basis

and to ensure that reasonable levels of control

are implemented to address those risks. At the

request of the Risk Review Committee, a

detailed reassessment of group-wide risk and

related controls was undertaken and completed

in the year by senior management. The results

of this process have been reported to the Risk

Review Committee and have been used to drive

a risk focused programme of work, designed to

improve business processes and increase

internal control effectiveness.

INVESTMENT APPRAISALThe group has clearly defined systems for the

authorisation and control of projects, which are

set out in a Land Manual. The key element is

the Project Committee (a sub-committee of the

Executive Committee) which is responsible for

the authorisation of all major projects.

CENTRALISED FUNCTIONSA number of the group’s key functions are

controlled centrally. These include finance,

treasury, banking, litigation, taxation, pensions,

insurance, information technology, human

resources, health and safety, public relations

and company secretarial.

INTERNAL AUDITThe company maintains an internal audit unit

which reports to the Audit Committee. It is

charged with carrying out examinations and

investigations which assist in providing the Audit

Committee with reasonable assurance of:

• compliance with established policies and

procedures

• the reliability and integrity of information

• the safeguarding of assets and the

economical and efficient use of resources

RELATIONS WITH SHAREHOLDERSAND THE MARKETThe company encourages active dialogue with its

private and institutional shareholders, both current

and prospective. The Chief Executive and Finance

Director make presentations to analysts following

the Preliminary and Interim Announcements.

Meetings are also held with major institutional

shareholders. A wide range of relevant issues are

discussed at investor and analyst meetings

including strategy, performance, management and

corporate governance. Shareholders are also kept

up to date with company affairs through the Annual

and Interim Reports and the company’s website.

Save in exceptional circumstances, all members of

the Board attend the Annual General Meeting

which is used to communicate with private

investors. Their participation is welcomed and

encouraged through a question and answer

session during the meeting.

Both the Chairman and the Senior Non-Executive

Director are available to meet shareholders if

requested. Non-Executive Directors are kept

informed of the views of shareholders and

reports are provided to them on investor and

analyst meetings. The company’s financial public

relations consultants provide briefings to the

Board on analyst opinion and compile

independent feedback from analyst meetings.

The company’s brokers provide briefings to the

Board on institutional shareholder opinion and

compile independent feedback from meetings

with institutional shareholders.

Approved by the Board of Directors and signed

on its behalf

N I HUGHESCompany Secretary

25th January 2007

24R E M U N E R AT I O N R E P O R TR

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UNAUDITED INFORMATIONREMUNERATION COMMITTEEThe membership of the Remuneration

Committee (“the Committee”) is set out in the

Corporate Governance Report. The principal

terms of reference of the Committee are as

follows:

• To determine the remuneration of the

Chairman, Deputy Chairman, the Executive

Directors, Company Secretary and operating

unit managing directors

• To agree the group performance thresholds

and individual specific performance targets

applicable to the bonus schemes

• To determine, after the end of the financial

year, the amounts payable to the Executive

Directors and senior executives under the

bonus schemes

• To agree to whom options and/or awards

should be granted or awarded under the

company's Executive Share Option Scheme

and/or Long Term Incentive Plan

The Committee makes its determinations in

consultation with the Chief Executive and has

access to professional advice inside and outside

the company. During the year the Committee

has taken advice from external consultants

Inbucon Consulting and CJW Remuneration

Consultants, both of whom were appointed by

the Committee. None of the external

consultants has provided any other services to

the group.

REMUNERATION POLICYThe company’s policy on remuneration is to

provide an appropriate package having regard to

factors such as overall responsibilities,

individual and group performance as well as

market rates.

The Committee takes independent professional

advice where appropriate and has regard to

information on compensation and salary levels

in companies in its peer group and industry

generally.

This report has been prepared in accordancewith the requirements of Schedule 7A to theCompanies Act 1985, the Listing Rules andthe Combined Code on Corporate Governancepublished in June 2006 (the 'Combined Code').

Remuneration report

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The objectives of the remuneration policy are to:

• ensure that the individual rewards and

incentives fairly relate to the performance of

the individual, the company and the interests

of shareholders

• maintain a package which enables the

company to attract, retain and motivate

executives of the appropriate calibre and

experience to further the success of the

company

• maintain a remuneration package at or about

the median level of a consolidation of data

compiled from companies in its peer group

and all industry reports

• ensure that, in accordance with the Combined

Code, a significant proportion of Executive

Directors’ remuneration is performance related

SALARIESExecutive Directors’ salaries are determined

after a review of the performance of the

individual with effect from 1st January in each

year. As noted above, it is the policy of the

Committee to pay at or about the median level.

The base pay awards are set out below:

£ per annum % increase

S Stone 443,000 3.7%

(Chief Executive)

P Callcutt 269,000 3.5%

D P Darby 269,000 3.5%

The increases are supported by median level

salary data provided by Inbucon Consulting.

Fees for the Chairman and Deputy Chairman

are determined by the Remuneration Committee

and for the Non-Executive Directors by a

Committee of the Board comprising the

Chairman, Chief Executive and Finance Director.

The Remuneration Committee reviewed the

remuneration of the Chairman from 1st May

2006. The Chairman’s fee was increased by

£7,500 per annum. The Committee of the Board

reviewed the Non-Executive Directors’

remuneration from 1st May 2006. The fees were

increased by £2,000 per annum. No Director is

included in any proceedings of a Committee at

which his own remuneration is discussed.

The remuneration awards are set out below:

£ per annum

J W Matthews (Chairman) 132,500

R S Lidgate 37,000

R T Scholes 37,000

L J Wigglesworth 37,000

BONUS SCHEMESThe company operates an annual bonus

scheme. Annual bonuses for Executive

Directors, which are non pensionable (and

capped at 100% of base pay), are subject to the

attainment of challenging performance targets.

The 2006 annual bonuses were determined by

reference to a scale of group profit thresholds

and will be paid in cash in March 2007.

The basic annual bonus arrangements for 2007

will follow those of the previous year. The

Committee also retains the right to award

discretionary bonuses based on individual

performance. It is intended, subject to

shareholder approval, to introduce an additional

deferred element to the 2007 bonus

arrangements whereby a further bonus can be

earned in respect of exceptional performance.

The deferred bonus, if applicable, would be paid

in the form of ordinary shares in the company

and would not normally vest before January 2009.

Full details will be circulated to shareholders

together with the relevant ordinary resolution.

SHARE OPTION SCHEMESThe company operates two types of share option

scheme:

1. EXECUTIVE SHARE OPTIONSTwo Executive share option schemes have been

approved by shareholders in 1994 and 2004

respectively. The 1994 scheme is now time

expired and any new grants can only be made

under the 2004 scheme. There are options

subsisting under the 1994 scheme and these

will remain exercisable subject to the 1994

scheme rules and to the satisfaction of any

relevant performance conditions. The last

options under the 1994 scheme were granted on


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3rd February 2004 subject to the condition that

they may not normally be exercised unless, in

respect of a minimum of any three consecutive

financial years commencing on or after 1st

November 2003, the increase in earnings per

share has exceeded inflation (as measured by the

RPI) by an average of at least 5% per annum.

The Committee believes that executive share

options still have an important role to play in

motivating senior executives within the group.

It is therefore intended to grant options under

the 2004 Scheme in February 2007, subject to

the condition that options will normally only be

exercisable if, in the fixed period of three

consecutive financial years commencing on 1st

November 2006, the increase in earnings per

share has exceeded inflation (as measured by

the RPI) by an average of at least 5% per

annum. If the condition is not met after the

three years, options will lapse and there will be

no re-testing of the condition. A similar

condition was imposed in respect of options

granted under the 2004 scheme in 2005 and

2006 but related to fixed three year periods

commencing on 1st November 2004 and 1st

November 2005 respectively. The 2004 scheme

provides for grants of up to one year’s base

salary per annum (measured by reference to an

option price equal to the full market value of the

shares at the time of grant) and it is intended to

grant options to Executive Directors of 100% of

base salary with lower grant levels for less

senior positions. The 2004 scheme has been

designed to comply with best practice and, to

this end, extensive consultations were carried

out with the main institutional shareholder

committees prior to its adoption.

Details of options granted to Directors are

shown on page 32.

2. SAVINGS RELATED SHAREOPTIONS ( 'SAYE')The current SAYE scheme was approved by

shareholders in 1998 and replaced the previous

1989 SAYE scheme. The involvement of

employees in the group's performance is

encouraged through participation in the SAYE

scheme. All employees, including Executive

Directors, are eligible to participate subject to a

service qualification of 6 months and to

invitation periods as specified in the scheme

rules. Current legislation restricts the maximum

aggregate amount that can be saved each

month to £250 per month. The number of

shares over which options can be granted is

restricted to the anticipated savings at the end

of a three or five year savings period (including a

tax-free bonus). Options are normally granted at

an option price representing 80% of the market

value shortly before grant and, being an all-

employee share option scheme, there are no

performance conditions.

SHARE INCENTIVE PLANThe Share Incentive Plan was approved by

shareholders in 2003. All employees, including

Executive Directors, are eligible to participate

after continuous employment of twelve months.

Current legislation limits the maximum amount

which can be saved to £1,500 per tax year (£125

per month). Deductions are made from

employees’ monthly gross pay, before deduction

of tax and National Insurance, and shares are

bought at the market price. Employees also

receive matching shares from the company on a

ratio of one share for every two bought by the

employee. Subject to the rules, the shares

normally need to be held in trust for five years in

order for employees to enjoy the full benefits of

the plan. There are no performance conditions.

About 40% of eligible employees participate in the

Share Incentive Plan and/or the SAYE Scheme.

LONG TERM INCENTIVE PLANThe Crest Nicholson Long Term Incentive Plan

was approved by shareholders in 1999. The

Committee keeps the plan under review and,

consistent with this policy, a change to the plan

rules reducing the four year performance period

to three years was put to, and approved by,

shareholders at the 2004 AGM. The Committee

will continue to review the plan from time to

time but is currently satisfied that the plan

conforms to accepted levels of best practice and

is consistent with a balanced remuneration

policy that will attract and retain the calibre of

executive required by the group.

Awards under the plan, which take the form of

conditional rights to acquire a defined number of

shares in the company, were made on 2nd

March 2006. The awards will not normally vest


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for a period of three years and only then if

defined performance criteria are met and the

participant remains in employment with the

company. There are exceptions where the

Committee may exercise its discretion to release

a proportion of the shares subject to an award in

certain defined circumstances including death,

retirement or leaving due to ill health, injury, etc.

subject to the performance of the company.

The performance criteria requires that, for full

vesting to occur, the Total Shareholder Return

(“TSR”) of the company when compared to the

TSR of companies in a defined peer group,

currently consisting of 10 comparable

construction companies as set out below, places

the company at or above the 75th percentile. If

the company is ranked below the 50th percentile

no shares vest, with 40% of the shares vesting at

the 50th percentile and pro rata vesting if the

company is ranked in between the 50th and 75th

percentiles. In addition there is an underlying

performance criterion which requires the

company's earnings per share to grow by at

least inflation plus 2% per annum over the three

year performance period. The median vesting

level (40%) has been considered by the

Committee in the context of a current maximum

award level of 50% of base pay (see below) and

assurances given to institutional shareholders

that this will be reconsidered if awards are

increased at some future stage to a level above

50% of base pay.

The companies comprising the defined peer

group are the following:

Barratt Developments PLC

Crest Nicholson PLC

Taylor Woodrow plc

Bellway plc

The Berkeley Group plc

Persimmon plc

Bovis Homes Group PLC

Redrow plc

George Wimpey Plc

Wilson Bowden plc

Although the plan rules provide for annual

awards of up to 100% of base pay, it is intended

to award long term share incentives to Executive

Directors at 50% of base pay in February 2007,

with lower level awards for less senior positions

in accordance with the policy noted above.

Non-Executive Directors are not eligible to

participate in any of the company's employee

share plans.

PENSION SCHEMEThe company operates an Inland Revenue

approved contributory defined benefit occupational

pension scheme for its eligible employees with a

normal pension age of 65. Executive Directors are

also included in the scheme but have a normal

pension age of 60. The company pays

contributions to fund additional benefits provided

to Executive Directors and a former company

Secretary. Spouses' and children's pensions on

death in service are also payable together with life

assurance cover. Executive Directors, senior

executives and employees contribute 7% of salary.

The accrued pension increases to which each

Director has become entitled during the year are

set out on page 31.

The defined benefit scheme was closed to new

entrants with effect from 1st October 2001.

From that date eligible new entrants are able to

join an Inland Revenue approved contracted-in

defined contribution occupational pension

scheme. Employees contribute between 3% and

5% of salary to this scheme. Life assurance

cover is also provided. The defined benefit

scheme will be subject to a Triennial Valuation

on 1st February 2007.

Following the changes to pension legislation in

April 2006, a ‘shadow’ pension cap was

introduced and is applied to the accruing

pension benefit of those affected by the cap

under the previous legislation.

SERVICE CONTRACTSThe Executive Directors have one year rolling

service agreements and it is the company’s

intention to continue with this policy. Mr P

Callcutt’s and Mr D P Darby’s agreements are

dated 25th January 2005. Mr S Stone’s terms of

appointment have been agreed. His pensionable

base pay is limited to £322,000, subject to

annual increase. It will be increased to £331,145

with effect from 1st February 2007. In the event

of a change of control, he will be entitled to a

sum representing one year’s salary and benefits

if his employment is terminated within three

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effective. Mr D P Darby’s pensionable base pay

is limited to £172,700 with effect from 1st

February 2007. In addition he will receive a

supplement of £28,890 per annum.

The Chairman has a six month notice period.

The expiry dates of the Non-Executive Directors’

letters of appointment are noted in the

Corporate Governance Report. In the event of

early termination of appointment within 3

months of a change of control, Non-Executive

Directors will be entitled to compensation

equivalent to 12 months of the annual fee if

more than 12 months of the appointment is

unexpired. The compensation reduces to the

balance of the unexpired period in the last year

of appointment.

PERFORMANCE GRAPHThe graph below shows the total shareholder

return over the last five years against the FTSE 250

share index. The FTSE 250 index has been selected

for comparison as the company is a constituent of

that index as are the company’s key competitors.

The graph shows the theoretical growth in the

value of a shareholding over the specified

period, assuming that dividends are re-invested

to purchase additional units of equity.

TOTAL SHAREHOLDER RETURN

AUDITED INFORMATIONDirectors' remuneration

The remuneration of the individual Directors was:

Salary Performance related Benefits 2006 2005/fees annual bonus in kind Total Total Note£000 £000 £000 £000 £000

CHAIRMANJ W Matthews 129 - - 129 110

DEPUTY CHAIRMANJ Callcutt 100 - - 100 477 (i)

CHIEF EXECUTIVES Stone 427 279 14 720 372 (ii)

EXECUTIVE DIRECTORSP Callcutt 255 170 21 446 275D P Darby 256 170 22 448 283

NON-EXECUTIVE DIRECTORSR S Lidgate 36 - - 36 34R T Scholes 36 - - 36 34L J Wigglesworth 36 - - 36 34

1,275 619 57 1,951 1,619

-

50

100

150

200

250

300

350

400

450

500

Crest Nicholson

FTSE 250

2001 2002 2003 2004 2005 2006

Salary / fees include fees paid to the Chairman, Deputy Chairman and the Non-Executive Directors totalling £337,000

(2005: £212,000).

Aggregate gains at the point of exercise of share options were £255,757 (2005: £24,000).

Benefits in kind principally include car benefits and medical expenses insurance.

(i) The comparative relates to previous position held of Chief Executive.

(ii) The comparative relates to previous position held of Chief Operating Officer.


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DIRECTORS' INTERESTS – PENSION BENEFITSThe company provides pension entitlements to Directors that are defined benefit in nature. Details of the entitlements of

those who served as Directors during the year are as follows:

Accrued Increase in Increase in Transfer Transfer Transfer Change inbenefit at accrued benefit accrued benefit value of value of value of transfer valueyear end in year in year increase in benefit at benefit at in year

benefit start of year end of year(1) (2) (1) and (3) (3)

£000 £000 £000 £000 £000 £000 £000

P Callcutt 106 15 18 227 1,331 1,768 419D P Darby 19 4 5 61 204 307 96S Stone 70 14 16 156 605 893 264

(1) Excluding inflation(2) Including inflation(3) Excluding Directors’ contributions

DIRECTORS’ INTERESTS - SHARESThe interests of the Directors in the shares of the company were as follows:

Since 31st October 2006 Mr P Callcutt has increased his holding in the ordinary shares of the company by 7,822 shares

following the exercise of SAYE options. Mr P Callcutt, Mr D P Darby and Mr S Stone have each increased their holdings in

the ordinary shares of the company by 90 shares as a result of participation in the Share Incentive Plan. All the other

interests of the Directors in the share capital of the company are unchanged at the date of these accounts.

NON-BENEFICIALIn common with all employees and former employees of the Crest Nicholson Group, the Executive Directors have a non-

beneficial interest, as potential beneficiaries, in the 118 ordinary shares in the company held by the trustees of The Crest

Nicholson Employee Share Ownership Trust.

At 31st October 2006 At 31st October 2005Ordinary Deferred LTIP Share Ordinary Deferred LTIP ShareShares Shares Shares Options Shares Shares Shares Options

BENEFICIALJ W Matthews 212,182 - - - 212,182 - - -J Callcutt - - - - 164,005 63,106 259,289 78,714P Callcutt 112,238 11,566 127,437 193,668 111,781 29,781 130,836 136,978D P Darby 11,765 - 86,374 93,828 11,308 - 59,178 39,435R S Lidgate 4,000 - - - 4,000 - - -R T Scholes - - - - - - - -S Stone 277,538 16,522 188,085 134,712 235,527 69,333 187,742 45,319L J Wigglesworth 6,175 - - - 6,175 - - -


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NOTES

(i) These options were granted subject to the additional condition that they may not normally be exercised unless, in respect of a minimum of any threeconsecutive financial years commencing on or after 1st November 1996, the increase in the earnings per share has exceeded inflation (as measured by theRPI) by an average of at least 5% per annum. This condition was satisfied by the earnings per share achieved in the three years ended 31st October 1999.

(ii) These options were granted subject to the same additional condition as the options granted under note (i) with the exception that the three consecutivefinancial years commence on or after 1st November 1997. This condition was satisfied by the earnings per share achieved in the three years ended 31stOctober 2000.

(iii) These options were granted subject to the same additional condition as the options granted under note (i) with the exception that the three consecutivefinancial years commence on or after 1st November 1998. This condition was satisfied by the earnings per share achieved in the three years ended 31stOctober 2001.

(iv) These options were granted subject to the same additional condition as the options granted under note (i) with the exception that the three consecutivefinancial years commence on or after 1st November 1999. This condition was satisfied by the earnings per share achieved in the three years ended 31stOctober 2002.

(v) These options were granted subject to the same additional condition as the options granted under note (i) with the exception that the increase in earnings pershare is measured over one fixed period of three consecutive financial years commencing on 1st November 2004.

(vi) These options were granted subject to the same additional condition as the options granted under note (i) with the exception that the increase in earnings pershare is measured over one fixed period of three consecutive financial years commencing on 1st November 2005.

(vii) J Callcutt exercised 75,000 Executive Share Options on 7th February 2006 and the shares were sold at a price of 455p each, at a gain of £244,875. He alsoexercised an option of 3,714 shares on 21st November 2005 when the market price was 398p. Mr Callcutt retained all the shares and the notional gain at thepoint of exercise was £10,882.

(viii) All the above options may be exercised earlier in certain circumstances such as leaving due to injury, disability or redundancy etc.

(ix) The middle market price of an ordinary share on 1st November 2005 was 399p and at the close of business on 31st October 2006 was 569p. During the yearthe middle market price ranged between 398p and 570.5p.

(x) No payment is made for the grant of any option and no performance related options are granted at a discount to market price.

At Granted ExercisedNote 31.10.05 Note (viii)

J CALLCUTTPerformance Related Options1994 Executive Scheme (iii) 75,000 - (75,000)Savings Related Options1998 Scheme 3,714 - (3,714)

78,714 - -

P CALLCUTTPerformance Related Options1994 Executive Scheme (i) 50,000 - -

(ii) 20,000 - -(iii) 20,000 - -(iv) 9,000 - -

2004 Executive Scheme (v) 30,156 - -(vi) - 54,393 -

Savings Related Options1998 Scheme 6,529 - -

1,293 - -- 2,297 -

136,978 - -

D P DARBYPerformance Related Options2004 Executive Scheme (v) 30,874 - -

(vi) - 54,393 -Savings Related Options1998 Scheme 8,561 - -

39,435 - -

S STONE Performance Related Options2004 Executive Scheme (v) 42,036 - -

(vi) - 89,393 -Savings Related Options1998 Scheme 2,664 - -

619 - -45,319 - -

At Date of Option Exercise 31.10.06 Grant price Period

- 3.2.99 129p 2002-2009

- 7.8.00 105p 2005-2006-

50,000 10.2.97 91p 2000-200720,000 6.2.98 112p 2001-200820,000 3.2.99 129p 2002-20099,000 28.1.00 138p 2003-2010

30,156 10.2.05 383p 2008-201554,393 2.3.06 478p 2009-2016

6,529 14.8.01 170p 2006-20071,293 30.7.03 186p 2006-20072,297 1.8.06 407p 2009-2010

193,668

30,874 10.2.05 383p 2008-201554,393 2.3.06 478p 2009-2016

8,561 30.7.03 186p 2008-200993,828

42,036 10.2.05 383p 2008-201589,393 2.3.06 478p 2009-2016

2,664 27.7.04 283p 2007-2008619 26.7.05 306p 2008-2009

134,712

DIRECTORS' INTERESTS - SHARE OPTIONSThe options over the company's ordinary shares set out in the above table are as follows:


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DIRECTORS' INTERESTS - LONG TERM INCENTIVE PLAN

Date of Award Price on Awards at Awarded Vested Lapsed Awards atAward 31.10.05 31.10.06

J CALLCUTT 7.3.02 243.5p 66,478 - (26,591) (39,887) -6.2.03 204.5p 87,041 - (65,280) (21,761) -

10.2.04 348p 53,160 - - (53,160) -10.2.05 383p 52,610 - - (52,610) -

259,289 - (91,871) (167,418) -

P CALLCUTT 7.3.02 243.5p 30,595 - (12,238) (18,357) -6.2.03 204.5p 42,787 - - - 42,787

10.2.04 348p 27,298 - - - 27,29810.2.05 383p 30,156 - - - 30,1562.3.06 478p - 27,196 - - 27,196

130,836 27,196 (12,238) (18,357) 127,437

D P DARBY 10.2.04 348p 28,304 - - - 28,30410.2.05 383p 30,874 - - - 30,8742.3.06 478p - 27,196 - - 27,196

59,178 27,196 - - 86,374

S STONE 7.3.02 243.5p 44,353 - (17,741) (26,612) -6.2.03 204.5p 61,124 - - - 61,124

10.2.04 348p 40,229 - - - 40,22910.2.05 383p 42,036 - - - 42,0362.3.06 478p - 44,696 - - 44,696

187,742 44,696 (17,741) (26,612) 188,085

NOTES

(i) The conditional rights to shares awarded on 7th March 2002 vested on 25th January 2006 when the middle market price was 473p per share.

(ii) The conditional rights to shares awarded to Mr J Callcutt on 6th February 2003 vested on 25th January 2006 when the middle market price was 473pper share.

(iii) The conditional rights to shares awarded on 2nd March 2006 will not normally vest for a period of 3 years and only then if defined performance criteriaare met. All awards prior to 10th February 2005 are subject to the same conditions except that they will not normally vest for a period of 4 years.


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DIRECTORS' INTERESTS - DEFERRED SHARES

Date of Award Price on Awards at Vested Awards atAward 31.10.05 31.10.06

J CALLCUTT 6.2.03 204.5p 39,578 (39,578) -10.2.04 348p 23,528 (23,528) -

63,106 (63,106) -

P CALLCUTT 6.2.03 204.5p 18,215 (18,215) -10.2.04 348p 11,566 - 11,566

29,781 (18,215) 11,566

S STONE 6.2.03 204.5p 52,811 (52,811) -10.2.04 348p 16,522 - 16,522

69,333 (52,811) 16,522

NOTES

(i) The rights to shares awarded on 6th February 2003 vested in full on 6th February 2006 when the middle market price was 461p per share.

(ii) The rights to shares awarded to Mr J Callcutt on 10th February 2004 vested in full on 6th February 2006 when the middle market price was 461p pershare.

(iii) The deferred shares were awarded under a bonus scheme that has been discontinued. The shares will normally vest three years after the date of award(or earlier in certain circumstances). The rights to the shares will be forfeited if the executive leaves voluntarily prior to the three year vesting date.

By Order of the Board

R S LIDGATEChairman, Remuneration Committee

25th January 2007

35 D I R E C T O R S ' R E P O R TR

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Directors' report

PRINCIPAL ACTIVITIES AND BUSINESS REVIEWThe principal activities of the group are residential

housing and property development. The Annual

Review on pages 1 to 8 deals with the development

of the group's business and its activities during the

year. Additional Key Performance indicators

relevant to the business are included in the

Corporate Social Responsibility report on pages 9

to 14 and in the Five Year record on page 78.

GOING CONCERN ASSUMPTIONThe Directors have considered, as part of their

annual budget process, the adequacy of the

group’s banking and other facilities in relation to

its profit and cash flow projections.

The Directors have reasonable expectations that

the group has adequate resources to continue

trading for the foreseeable future. For this

reason they continue to adopt the going concern

basis in preparing the financial statements.

RESULTS AND DIVIDENDThe profit for the financial year after taxation

was £57.6m (2005: £53.9m).

The Directors propose that a dividend of 9.7p

per share be paid to holders of ordinary shares

which together with the interim dividend of 4.5p

makes a total for the year of 14.2p.

SHARE CAPITALDetails of shares issued during the year are set

out in Note 19 to the accounts.

Information regarding substantial shareholdings

in the company is contained in the Shareholder

Information section on page 79.

DONATIONSDuring the year the group made contributions to

charities of £46,000 (2005: £48,000). There were

no political donations made in either year.

EMPLOYMENT POLICIESArrangements exist to keep all employees

informed on matters of concern to them through

a variety of media including conferences,

newsletters and meetings.

The Directors present their annual report withthe consolidated accounts of the company and itssubsidiaries for the year to 31st October 2006.

1

36D I R E C T O R S ' R E P O R TR

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It is the policy of the group that disabled

persons shall be considered for employment,

training, career development and promotion on

the basis of their aptitudes and abilities, in

common with all employees. The services of any

existing employee who becomes disabled are

retained wherever possible.

TRAININGThe group recognises that its reputation is very

dependent on the quality, effectiveness and skill

base of its employees. There is a commitment at

Board level to ensure that its employees and

management are properly inducted into the

company and given necessary training to fulfil

their roles. With ever increasing customer

demands, particular emphasis is placed on

customer service and build quality skills training.

DIRECTORSThe Directors of the company at the date of this

report are shown on pages 15 and 16.

A statement of the Directors' share interests is

set out in the Remuneration Report on pages 24

to 34.

ENVIRONMENTAL POLICYIt is the company's policy to assess

environmental issues which may be applicable to

its business, customers and the general public

and to take such measures consistent with being

a responsible property development group.

CREDITOR PAYMENT POLICYThe group's policy concerning the payment of its

trade creditors is as follows:

• to agree the terms of payment at the start

of business with the supplier

• to ensure that suppliers are aware of the

terms of payment

• to pay in accordance with its contractual

and other legal obligations

• not to alter payment terms without prior

agreement of the supplier

The company does not have trade creditors.

Creditor days for the company’s subsidiary

undertakings are shown in the financial

statements of those undertakings.

DISCLOSURE OF INFORMATION TO AUDITORSThe directors who held office at the date of

approval of this directors’ report confirm that, so

far as they are each aware, there is no relevant

audit information of which the company’s

auditors are unaware; and each director has

taken all the steps that he ought to have taken

as a director to make himself aware of any

relevant audit information and to establish that

the company’s auditors are aware of that

information.

By Order of the Board

N I HUGHESCompany Secretary

25th January 2007

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1

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Company law requires the directors to prepare

group and parent company financial statements

for each financial year. Under that law they are

required to prepare the group financial

statements in accordance with IFRSs as adopted

by the EU and applicable law and have elected

to prepare the parent company financial

statements in accordance with UK Accounting

Standards and applicable law (UK Generally

Accepted Accounting Practice).

The group financial statements are required by

law and IFRSs as adopted by the EU to present

fairly the financial position and the performance

of the group; the Companies Act 1985 provides

in relation to such financial statements that

references in the relevant part of that Act to

financial statements giving a true and fair view

are references to their achieving a fair

presentation.

The parent company financial statements are

required by law to give a true and fair view of the

state of affairs of the parent company.

In preparing each of the group and parent

company financial statements, the directors are

required to:

• select suitable accounting policies and then

apply them consistently;

• make judgments and estimates that are

reasonable and prudent;

• for the group financial statements, state

whether they have been prepared in

accordance with IFRSs as adopted by the EU;

• for the parent company financial statements,

state whether applicable UK Accounting

Standards have been followed, subject to any

material departures disclosed and explained

in the parent company financial statements; and

• prepare the financial statements on the going

concern basis unless it is inappropriate to

presume that the group and the parent

company will continue in business.

The directors are responsible for preparingthe Annual Report and the group and parentcompany financial statements in accordancewith applicable law and regulations.

1

Directors' responsibilities

40S TAT E M E N T O F D I R E C T O R S ' R E S P O N S I B I L I T I E S R

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The directors are responsible for keeping proper

accounting records that disclose with

reasonable accuracy at any time the financial

position of the parent company and enable them

to ensure that its financial statements comply

with the Companies Act 1985. They have general

responsibility for taking such steps as are

reasonably open to them to safeguard the

assets of the group and to prevent and detect

fraud and other irregularities.

Under applicable law and regulations, the

directors are also responsible for preparing

a Directors' Report, Directors' Remuneration

Report and Corporate Governance Statement

that comply with that law and those regulations.

The directors are responsible for the

maintenance and integrity of the corporate and

financial information included on the company's

website. Legislation in the UK governing the

preparation and dissemination of financial

statements may differ from legislation in

other jurisdictions.

2

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This Page

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Bolnore Village, Haywards Heath, West Sussex

41 I N D E P E N D E N T A U D I T O R S ' R E P O R T T O T H E M E M B E R S O F C R E S T N I C H O L S O N P L CA

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These financial statements have been prepared

under the accounting policies set out therein.

We have also audited the information in the

Directors' Remuneration Report that is

described as having been audited.

This report is made solely to the company's

members, as a body, in accordance with section

235 of the Companies Act 1985. Our audit work

has been undertaken so that we might state to

the company's members those matters we are

required to state to them in an auditor's report

and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume

responsibility to anyone other than the company

and the company's members as a body, for our

audit work, for this report, or for the opinions

we have formed.

RESPECTIVE RESPONSIBILITIES OFDIRECTORS AND AUDITORSThe directors' responsibilities for preparing the

Annual Report and the group financial

statements in accordance with applicable law

and International Financial Reporting Standards

(IFRSs) as adopted by the EU, and for preparing

the parent company financial statements and the

Directors' Remuneration Report in accordance

with applicable law and UK Accounting

Standards (UK Generally Accepted Accounting

Practice) are set out in the Statement of

Directors' Responsibilities on page 39.

Our responsibility is to audit the financial

statements and the part of the Directors'

Remuneration Report to be audited in

accordance with relevant legal and regulatory

requirements and International Standards on

Auditing (UK and Ireland).

We report to you our opinion as to whether the

financial statements give a true and fair view

and whether the financial statements and the

part of the Directors' Remuneration Report to

We have audited the group and parentcompany financial statements (the ''financialstatements'') of Crest Nicholson PLC for theyear ended 31st October 2006 which comprisethe Consolidated Income Statement, theConsolidated and company Balance Sheets,the Consolidated Cash Flow Statement, theConsolidated Statement of RecognisedIncome and Expense and the related notes.

1

Independent auditors' report

42I N D E P E N D E N T A U D I T O R S ' R E P O R T T O T H E M E M B E R S O F C R E S T N I C H O L S O N P L CA

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be audited have been properly prepared in

accordance with the Companies Act 1985 and,

as regards the group financial statements,

Article 4 of the IAS Regulation. We also report to

you whether in our opinion the information given

in the Directors' Report is consistent with the

financial statements. The information given in

the Directors’ Report includes that specific

information presented in the Annual Review that

is cross-referred from the Business Review

section of the Directors’ Report.

In addition we report to you if, in our opinion, the

company has not kept proper accounting

records, if we have not received all the

information and explanations we require for our

audit, or if information specified by law

regarding directors' remuneration and other

transactions is not disclosed.

We review whether the Corporate Governance

Statement reflects the company's compliance

with the nine provisions of the 2003 Combined

Code specified for our review by the Listing

Rules of the Financial Services Authority, and

we report if it does not. We are not required to

consider whether the board's statements on

internal control cover all risks and controls, or

form an opinion on the effectiveness of the

group's corporate governance procedures or its

risk and control procedures.

We read the other information contained in the

Annual Report and consider whether it is

consistent with the audited financial statements.

We consider the implications for our report if we

become aware of any apparent misstatements

or material inconsistencies with the financial

statements. Our responsibilities do not extend to

any other information.

BASIS OF AUDIT OPINIONWe conducted our audit in accordance with

International Standards on Auditing (UK and

Ireland) issued by the Auditing Practices Board.

An audit includes examination, on a test basis,

of evidence relevant to the amounts and

disclosures in the financial statements and the

part of the Directors' Remuneration Report to

be audited. It also includes an assessment of

the significant estimates and judgments made

by the directors in the preparation of the

financial statements, and of whether the

accounting policies are appropriate to the

group's and company's circumstances,

consistently applied and adequately disclosed.

We planned and performed our audit so as to

obtain all the information and explanations

which we considered necessary in order to

provide us with sufficient evidence to give

reasonable assurance that the financial

statements and the part of the Directors'

Remuneration Report to be audited are free

from material misstatement, whether caused by

fraud or other irregularity or error. In forming

our opinion we also evaluated the overall

adequacy of the presentation of information in

the financial statements and the part of the

Directors' Remuneration Report to be audited.

OPINIONIn our opinion:

• the group financial statements give a true and

fair view, in accordance with IFRSs as adopted

by the EU, of the state of the group's affairs as

at 31st October 2006 and of its profit for the

year then ended;

• the group financial statements have been

properly prepared in accordance with the

Companies Act 1985 and Article 4 of the IAS

Regulation;

• the parent company financial statements give

a true and fair view, in accordance with UK

Generally Accepted Accounting Practice, of

the state of the parent company's affairs as at

31st October 2006;

• the parent company financial statements and

the part of the Directors' Remuneration

Report to be audited have been properly

prepared in accordance with the Companies

Act 1985; and

• the information given in the Directors' Report

is consistent with the financial statements.

KPMG Audit Plc

Chartered Accountants

Registered Auditor

London

25 January 2007

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Note 2006£m

REVENUE – CONTINUING ACTIVITIES 2 690.7Cost of sales (544.8)

GROSS PROFIT 145.9Administrative expenses (50.8)Share of post tax profits from jointly controlled entities 1.2Other operating income 2.9PROFIT FROM OPERATIONS 3 99.2

Finance income 5 5.9Finance costs 5 (25.0)

PROFIT BEFORE TAXATION 80.1Income tax expense 6 (22.5)

PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY SHAREHOLDERS 57.6

EARNINGS PER SHAREBasic 8 51.2pDiluted 50.8p

2006Note £m

Cash flow hedges: effective portion of changes in fair value, net of tax 0.8Actuarial losses on defined benefit pension schemes, net of tax (10.4)Equity settled share based payments, net of tax 1.4

NET EXPENSE RECOGNISED DIRECTLY IN EQUITY 19 (8.2)

PROFIT FOR THE YEAR 57.6

TOTAL RECOGNISED INCOME ATTRIBUTABLE TO EQUITY SHAREHOLDERS 49.4

2005 £m

699.0(547.5)

151.5(54.0)

1.4-

98.9

5.6(25.6)

78.9(25.0)

53.9

48.2p47.8p

2005 £m

(3.9)(3.3)0.6

(6.6)

53.9

47.3

Consolidated income statementfor year ended 31st October 2006

Consolidated statement of recognised income and expensefor year ended 31st October 2006

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Note 2006£m

ASSETSNON-CURRENT ASSETSProperty, plant and equipment 9 2.6Investments in joint ventures 10 0.1Investment properties 11 3.1Trade and other receivables 13 1.3Deferred tax assets 17 17.7

24.8

CURRENT ASSETSInventories 12 713.7Trade and other receivables 13 73.3Cash and cash equivalents 14 29.3

816.3TOTAL ASSETS 841.1

LIABILITIESNON-CURRENT LIABILITIESInterest bearing loans and borrowings 15 (141.0)Forward currency swaps (21.9)Trade and other payables 16 (12.2)Retirement benefit obligations 22 (49.1)Provisions 18 (1.0)

(225.2)CURRENT LIABILITIESInterest bearing loans and borrowings 15 (42.9)Forward currency swaps (2.4)Trade and other payables 16 (267.3)Current tax liabilities (3.5)Provisions 18 (1.3)

(317.4)TOTAL LIABILITIES (542.6)

NET ASSETS 298.5

SHAREHOLDERS’ EQUITYShare capital 11.3Share premium 58.3Capital redemption reserve 38.0Hedge reserve (1.2)Retained earnings 192.1

TOTAL EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS 19 298.5

2005 £m

2.511.50.70.8

31.847.3

742.042.757.0

841.7889.0

(225.8)(19.2)(48.8)(35.3)(0.9)

(330.0)

(12.9)-

(268.4)(12.7)(1.7)

(295.7)(625.7)

263.3

11.257.7

-(2.0)

196.4

263.3

These financial statements were approved by the board of directors on 25th January 2007 and were signed on its behalf by:

S STONEDP DARBYDirectors

Consolidated balance sheetat 31st October 2006

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Note 2006£m

CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year 19 57.6Adjustments for:Depreciation charge 0.8Finance charge 19.1Share of profit of joint ventures (1.2)Gain on sale of property, plant and equipment (2.9)Equity settled share based payments 1.0Taxation 22.5

OPERATING PROFIT BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS 96.9(Increase) in trade and other receivables (31.1)Decrease/(increase) in inventories 28.3(Decrease) in trade and other payables (38.0)

CASH GENERATED FROM OPERATIONS 56.1Interest paid (19.9)Income tax paid (14.4)

NET CASH FROM OPERATING ACTIVITIES 21.8

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sales of property, plant and equipment 10.2Purchases of property, plant and equipment (8.2)Interest received 1.2Repayment of loans to joint ventures 12.6Increase in investment properties (2.4)Net cash from investing activities 13.4

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from the issue of share capital 0.7(Decrease) /increase in bank and other loans (19.0)Repayment of preference shares (38.0)Dividends paid (14.9)NET CASH FLOW FROM FINANCING ACTIVITIES (71.2)

NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS (36.0)Cash and cash equivalents at beginning of the year 56.9

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 14 20.9

2005 £m

53.9

1.020.0(1.4)

-0.6

25.0

99.1(8.6)

(14.4)(7.7)

68.4(17.0)(24.1)

27.3

-(1.0)0.45.6

(0.7)4.3

0.818.0

-(14.0)

4.8

36.420.5

56.9

Consolidated cash flow statementfor year ended 31st October 2006

46N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T SA

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1. Accounting policies

Crest Nicholson PLC (the “company”) is a company incorporatedin the UK.

The group financial statements consolidate those of the companyand its subsidiaries (together referred to as the “group”) andinclude the group’s interest in associates and jointly controlledentities. The parent company financial statements presentinformation about the company as a separate entity and not aboutits group.

The group financial statements have been prepared and approvedby the directors in accordance with International FinancialReporting Standards as adopted by the EU (“Adopted IFRSs”). The company has elected to prepare its parent company financialstatements in accordance with UK GAAP; these are presented onpages 72 to 77.

The accounting policies set out below have, unless otherwisestated, been applied consistently to all periods presented in thesegroup financial statements and in preparing an opening IFRSbalance sheet at 1st November 2004 for the purposes of thetransition to Adopted IFRSs.

Following a review of Crest Nicholson PLC’s accounting policiesperformed to coincide with the implementation of IFRS, the accounting policy for revenue recognition on housing saleshas been changed. Revenue from housing sales will now be basedon legal completion, in line with the majority of the peer group. The impact of this re-statement on comparative figures is shownseparately within Note 27, which covers the restatements arisingfrom this change and the transition to IFRS.

Judgements made by the directors, in the application of theseaccounting policies that have significant effect on the financialstatements and estimates with a significant risk of materialadjustment in the next year are discussed in note 26.

TRANSITION TO ADOPTED IFRSsThe group is preparing its financial statements in accordance withAdopted IFRSs for the first time and consequently has appliedIFRS 1. An explanation of how the transition to Adopted IFRSs hasaffected the reported financial position, financial performance andcash flows of the group is provided in note 27.

IFRS 1 grants certain exemptions from the full requirements ofIFRSs in the transition period. The following exemption has beentaken in these financial statements:

• The company has taken advantage of the transitional provisionsallowing the application of IFRS 2: Share-based Payment to belimited to grants of share options that took place after 7th November 2002.

MEASUREMENT CONVENTIONThe financial statements are prepared in accordance with thehistorical cost convention, except for certain financial instrumentsand investment properties, which are carried at fair value.

CONSOLIDATION The consolidated accounts include the accounts of CrestNicholson PLC and entities controlled by the company (itssubsidiaries) at each reporting date. Control is achieved where thecompany has the power to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities. Theprofits and losses of subsidiaries acquired or sold during the yearare included as from or up to their effective date of acquisition ordisposal.

On acquisition of a subsidiary, all of the subsidiary’s separable,identifiable assets and liabilities existing at the date of acquisitionare recorded at their fair values reflecting their condition at thatdate. All changes to those assets and liabilities, and the resultinggains and losses, that arise after the group has gained control ofthe subsidiary are charged to the post acquisition incomestatement or statement of recognised income and expense.

JOINT VENTURES A joint venture is an undertaking in which the group has aparticipating interest and which is jointly controlled under acontractual arrangement.

Where the joint venture involves the establishment of a separatelegal entity, the group’s share of results of the joint venture aftertax is included in a single line in the consolidated incomestatement and its share of net assets is shown in the consolidatedbalance sheet as an investment.

Where the joint venture does not involve the establishment of alegal entity, the group recognises its share of the jointly controlledassets and liabilities and income and expenditure on a line by linebasis in the balance sheet and income statement.

REVENUE RECOGNITION Revenue comprises the fair value of the consideration received orreceivable, net of value-added tax, rebates and discounts butexcludes the sale of properties taken in part exchange.

Revenue is recognised once the value of the transaction can bereliably measured and the significant risks and rewards ofownership have been transferred.

Revenue is recognised on house sales at legal completion.Revenue is recognised on land sales and commercial propertysales from the point of unconditional exchange of contracts.Where the conditions for the recognition of revenue are met butthe group still has significant acts to perform under the terms ofthe contract, revenue is recognised as the acts are performed.

TAXATION Income tax comprises current tax and deferred tax. Income tax isrecognised in the income statement except to the extent that itrelates to items recognised directly in equity, in which case it isalso recognised in equity.

Current tax is the expected tax payable on taxable profit for theperiod and any adjustment to tax payable in respect of previousperiods. The group’s liability for current tax is calculated using taxrates that have been enacted or substantively enacted by thebalance sheet date.

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Deferred tax is provided on temporary differences between thecarrying amounts of assets and liabilities in the financialstatements and the corresponding tax bases used in thecomputation of taxable profit. Deferred tax liabilities arerecognised for all taxable temporary differences, except thoseexempted by the relevant accounting standard, and deferred taxassets are recognised to the extent that it is probable that taxableprofits will be available against which deductible temporarydifferences can be utilised.

DIVIDENDS Dividends are recorded in the group's financial statements in theperiod in which they are paid.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is initially recognised at cost.Freehold land is not depreciated. Freehold buildings aredepreciated at 2% on cost less residual value.

Plant, vehicles and equipment are depreciated on cost lessresidual value on a straight line basis at rates varying between10% and 33% determined by the expected life of the assets.

INVESTMENT PROPERTYInvestment properties are recognised initially at cost and at fairvalue at each subsequent balance sheet date. Changes in fairvalue are recognised in the income statement.

LEASES A finance lease is a lease that transfers substantially all the risksand rewards incidental to the ownership of an asset; all otherleases are operating leases.

Assets acquired under finance leases are capitalised and theoutstanding future lease obligations are shown in creditors.Operating lease rentals are charged to the income statement on astraight line basis over the period of the lease.

INVENTORIES Inventories are valued at the lower of cost and net realisablevalue. Land includes land under development, undeveloped landand land option payments. Work in progress comprises directmaterials, labour costs, site overheads, associated professionalfees and other attributable overheads.

Land inventories and the associated land creditors are recognisedin the balance sheet from the date of unconditional exchange ofcontracts. If land is purchased on deferred settlement terms thenthe land and the land creditor are discounted to their fair value.The land creditor is then increased to the settlement value overthe period of financing, with the financing element being chargedas interest expense through the income statement.

CASH AND CASH EQUIVALENTS Cash and cash equivalents are cash balances in hand and in thebank. For the purpose of the cash flow statement, bank overdraftsare considered part of cash and cash equivalents as they form anintegral part of the group’s cash management. Offset arrangements across group businesses are applied toarrive at the net overdraft figure.

RETIREMENT BENEFIT COSTS The group operates a defined benefit pension scheme (closed tonew employees) and also makes payments into a definedcontribution scheme for employees.

In respect of defined benefit schemes, the net obligation iscalculated by estimating the amount of future benefit thatemployees have earned in return for their service in the currentand prior periods, such benefits measured at discounted presentvalue, less the fair value of the scheme assets. The discount rateused to discount the benefits accrued is the yield at the balancesheet date on AA credit rated bonds that have maturity datesapproximating to the terms of the group’s obligations. The calculation is performed by a qualified actuary using theprojected unit method. The operating and financing costs of suchplans are recognised separately in the income statement; servicecosts are spread systematically over the lives of employees andfinancing costs are recognised in the periods in which they arise.

In accordance with IFRS 1, the group has recognised the pensionliability in full as at 1st November 2004.

The group has applied the requirements of IAS 19 (revised) from1st November 2004, recognising expected scheme gains andlosses via the income statement and actuarial gains and lossesrecognised in the period they occur directly in equity through thestatement of recognised income and expense.

Payments to the defined contribution schemes are accounted foron an accruals basis.

FINANCIAL INSTRUMENTS Trade receivablesTrade receivables which do not carry any interest are stated attheir nominal value less impairment losses.

Trade payables Trade payables are generally stated at their nominal amount;finance charges in respect of deferred settlement terms arerecognised where material (see inventories).

Borrowings Interest bearing bank loans and overdrafts are measured initially atfair value, net of direct issue costs. Finance charges are accountedfor on an accruals basis in the income statement using the effectiveinterest method and are added to the carrying amount of theinstrument to the extent that they are not settled in the period inwhich they arise.

Borrowings in foreign currencies are retranslated at the periodend exchange rate with differences recorded in the incomestatement. This is offset by the change in fair value of derivativefinancial instruments which are fair value hedges (see below).


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Derivative financial instruments and hedge accountingThe group uses currency swaps to manage financial risk. Thoseinstruments that meet the hedge accounting criteria are treatedas hedges. The group does not use derivative financialinstruments for speculative purposes.

Derivative financial instruments are recognised at fair value. Thefair value of swaps is the estimated amount that the group wouldreceive or pay to terminate the swap at the balance sheet date,taking into account exchange rates and the currentcreditworthiness of the swap counterparties.

Where the derivative instrument is deemed an effective hedgeover the exposure being hedged, the derivative instrument istreated as a hedge and hedge accounting applied. Under a fairvalue hedge, the change in the fair value of the derivative isrecognised in the income statement and offsets the movement infair value of the hedged item. Under a cash flow hedge, gains andlosses on the effective portion of the change in the fair value ofthe derivative instrument are recognised directly in equity.

Changes in the fair value of derivative financial instruments thatdo not qualify for hedge accounting and any ineffectiveness in thehedge relationship are recognised in the income statement asthey arise.

Hedge accounting is discontinued when the hedging instrumentexpires or is sold, terminated or exercised, or no longer qualifiesfor hedge accounting. At that time, any cumulative gain or loss onthe hedging instrument recognised in reserves is retained inreserves until the forecasted transaction occurs. If a hedgedtransaction is no longer expected to occur, the net cumulativegain or loss recognised in reserves is transferred to net profit orloss for the period.

The group has not adopted amendments to IAS 39 and IFRS 4 inrelation to financial guarantee contracts which will apply forperiods commencing on or after 1st November 2006.

The group has adopted the requirements of IAS 32 and IAS 39from 1st November 2004.

The group does not expect the amendments to have any impacton the financial statements for the period commencing 1stNovember 2006.

SHARE BASED PAYMENTS Charges for employee services received in exchange for share-based payments have been made for all share options issuedunder the group schemes granted after 7th November 2002.

The fair value of such options has been calculated using abinomial option-pricing model, based upon publicly availablemarket data at the point of grant. The fair value is expensed on astraight line basis over the vesting period, based on the group’sestimate of shares that will eventually vest except where forfeitureis due only to share prices not achieving the threshold, with acorresponding credit to equity.

OWN SHARES HELD BY EMPLOYEE SHAREOWNERSHIP TRUST (ESOT) Transactions of the group sponsored ESOT are included in thegroup consolidation. In particular, the Trust’s purchases of sharesin the company are debited to equity through retained earnings.

PROVISIONSA provision is recognised in the balance sheet when the group hasa present legal or constructive obligation as a result of a pastevent and it is probable that an outflow of economic benefits willbe required to settle the obligation. If the effect is material,provisions are determined by discounting the expected future cashflows at a pre-tax rate that reflects current market assessmentsof the time value of money and, where appropriate, the risksspecific to the liability.

IMPACT OF STANDARDS AND INTERPRETATIONS INISSUE BUT NOT YET EFFECTIVEA number of relevant new standards, amendments to standardsand interpretations are not yet effective for the year ended 31st October 2006 and have not been applied in preparing theseconsolidated financial statements:

IFRS 7 Financial Instruments: Disclosures and the Amendment toIAS 1 Presentation of Financial Statements: Capital Disclosures

IFRIC 8 Scope of IFRS 2 Share-based payment

IFRIC 10 Interim Financial Reporting and Impairment

With the exception of the additional financial instrumentsdisclosures required by IFRS 7, the Directors expect that theadoption of these standards and interpretations in future periodswill not have any significant impact on the financial statements ofthe group.

2. Revenue

There is no group revenue in geographical markets outside theUnited Kingdom.

No segmental information has been presented as the Directorsconsider that there is only one business and geographicalsegment.


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2006 2005 £m £m

PROFIT FROM OPERATIONS IS STATED AFTER CHARGING THE ITEMS SET OUT BELOW:

Staff costs (Note 4) 45.3 45.1Net gain on disposal of property, plant and equipment (2.9) -Depreciation 0.8 1.0

OPERATING LEASE RENTALS:Hire of plant and machinery 0.2 0.3Other – including land and buildings 5.3 4.9

AUDITORS' REMUNERATION: £000 £000Audit of these financial statements 35 50Audit of financial statements of subsidiaries pursuant to legislation 110 159Other services pursuant to legislation 20 21Other services relating to taxation 25 46All other services 25 18

During the year, the group purchased a vacant commercial property in Chertsey to provide head office accommodation. The property wassubsequently sold and leased back in an arms length transaction on normal commercial terms. The net gain on the transaction of £2.9m isshown above.

In addition to the Auditors’ remuneration disclosed above, fees of £6,000 (2005: £6,000) were paid to the group’s auditors by the Crest Nicholson Money Purchase pension scheme in respect of the audit of the scheme.

Amounts paid to the company’s auditor in respect of services to the company, other than the audit of the company’s financial statements,have not been disclosed as the information is required instead to be disclosed on a consolidated basis.

3. Profit from operations

2006

AVERAGE NUMBER OF PERSONS EMPLOYED BY THE GROUP NumberDevelopment 776Head office 14

790

STAFF COSTS £mWages and salaries 36.5Share based payments (Note 22) 1.0Social security costs 4.2Other pension costs 3.6

45.3

4. Staff numbers and costs

Key Management comprises the Main Board, as the Directors are considered to have the authority and responsibility for planning, directingand controlling the activities of the group. Details of Directors' remuneration, pension and share based payments are set out in theRemuneration Report on pages 24 to 34.

2005

Number84614

860

£m35.70.64.44.4

45.1


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2006£m

FINANCE INCOMEInterest income 0.3Imputed interest on deferred debtors 0.5Expected return on defined benefit pension plan assets 5.1

5.9FINANCE EXPENSESInterest on bank loans and overdrafts 7.1Interest on loan notes 9.7Imputed interest on deferred land creditors 2.7Interest paid on preference shares classified as debt -Interest on defined benefit pension plan obligations 5.5

25.0

5. Finance income and expense2005 £m

0.40.25.05.6

6.49.72.22.15.2

25.6

2006£m

CURRENT TAX EXPENSEUK corporation tax on profits for the year 23.5Adjustments in respect of accounting policy changes (18.7)Adjustments in respect of prior years (0.9)

3.9DEFERRED TAX EXPENSEOrigination and reversal of temporary differences 18.6

TOTAL TAX IN INCOME STATEMENT 22.5

6. Taxation2005 £m

24.7-

(0.1)24.6

0.4

25.0

The total tax charge for the year is lower (2005 higher) than the standard rate of UK corporation tax of 30% (2005: 30%). The differences areexplained below:

2006£m

Profit before tax 80.1Tax on profit at 30% 24.0

Effects of:Adjustments in respect of prior years (0.9)Expenses not deductible for tax purposes 2.8Effect of capital tax losses utilised (3.4)TOTAL TAX IN INCOME STATEMENT 22.5

2005 £m

78.923.7

(0.1)1.4-

25.0

2006£m

AMOUNTS RECOGNISED AS DISTRIBUTIONS TO EQUITY SHAREHOLDERS IN THE PERIOD:2005 final dividend paid of 8.7p per share (2004: 8.3p) 9.82006 interim dividend paid of 4.5p per share (2005: 4.2p) 5.1

14.9

2006 dividend proposed of 9.7p per share (2005: 8.7p) 10.9

7. Dividends2005 £m

9.34.7

14.0

9.8

After the balance sheet date, dividends of 9.7p per qualifying ordinary share (2005: 8.7p) were proposed by the directors, in respect of whichno provision has been made in accordance with IAS 10.


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8. Earnings per share

Basic earnings per share are calculated on the profit attributable to ordinary shareholders of £57.6m (2005: £53.9m) on a weightedaverage of 112,407,321 (2005: 111,852,392) ordinary shares in issue during the year.

Diluted earnings per share are calculated on the profit attributable to ordinary shareholders of £57.6m (2005: £53.9m) on a weightedaverage of 113,344,118 (2005: 112,700,749) ordinary shares, on the basis that 2,402,821 (2005: 2,282,232) share options had been exercised.

9. Property, plant and equipment

Plant, Vehiclesand Equipment

£m2006

5.51.1

(1.6)5.0

3.00.8

(1.4)2.4

2.6

Land andBuildings

£m2006

COSTBalance at beginning of year -Additions 7.3Disposals (7.3)Balance at end of year -

ACCUMULATED DEPRECIATIONBalance at beginning of year -Charge for year -Disposals -Balance at end of year -

NET BOOK VALUEAt end of year -

Total£m

2006

5.58.4

(8.9)5.0

3.00.8

(1.4)2.4

2.6

Plant, Vehiclesand Equipment

£m2005

5.41.0

(0.9)5.5

2.91.0

(0.9)3.0

2.5

Total£m

2005

5.41.0

(0.9)5.5

2.91.0

(0.9)3.0

2.5

10. Investments in joint ventures

Loans£m

10.3-

(12.6)

(2.3)

Cost ofInvestment

£m

At 31st October 2005 0.5Share of profit for the year -Repayments -

AT 31ST OCTOBER 2006 0.5

Share of PostAcquisition Reserves

£m

0.71.2-

1.9

Total£m

11.51.2

(12.6)

0.1

The group owns 500 ordinary shares of £1 each representing 50% of the issued share capital of Brentford Lock Limited, a company registeredin England, which was set up to redevelop a site in West London. The site is now complete and all units have been sold. At 31st October 2006Brentford Lock Limited had capital employed of £0.0m (2005: £21.5m), consisting of shareholders’ capital of £0.1m (2005: £21.6m) and cash inhand of £0.1m (2005: £0.1m). It had revenues of £33.0m (2005: £25.1m) and made a profit after taxation in the year to 31st October 2006 of£2.5m (2005: £2.3m). At 31st October 2006, £3m was due from Crest Nicholson Operations Limited to Brentford Lock Limited.

No property, plant and equipment was under the course of construction at 31st October 2006 (2005: nil). The net book value of property, plantand equipment at the end of 2004 was £2.5m.


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2006£m

Investment properties 3.1

11. Investment properties2005 £m

0.7

During 2005 and 2006, the group operated an 'Easybuy' scheme, under which 25% of the purchase price of selected properties was fundedthrough a loan from the group, secured on the property. The group retains a 25% interest in the market value of the property. These loansare repayable at 25% of the market value of the property upon sale or transfer of ownership of the property or within 10 years, whicheveris sooner. The purchaser also has an option to repay the loan earlier than would otherwise be required, subject to a market valuation ofthe property.

Investment properties are held at fair value. The Directors believe that there is sufficient relevant expertise within the group to perform the fair valuation exercise.

Sales under the Easybuy scheme were recorded at 75% of the purchase price, with a corresponding proportional transfer from inventory to cost of sales. Costs in respect of the 25% of the purchase price funded by the group's loan were transferred from inventory to investmentproperties, pending repayment of the loans. The Easybuy scheme was discontinued before the end of 2006.

2006£m

Work in progress: land, building and development 664.1Completed buildings including show houses 49.6

713.7

12. Inventories2005 £m

659.682.4

742.0

Included within inventories is £364.3m (2005: £306.7m) expected to be recovered in more than 12 months.Inventories to the value of £524.8m were recognised as expenses in the year (2005: £510.1m).

2006£m

NON-CURRENTTrade receivables 1.3

CURRENTTrade receivables 55.6Recoverable on contracts 0.1Amounts owed by joint venture undertakings -Other receivables 15.1Prepayments and accrued income 2.5

73.3

13. Trade and other receivables2005 £m

0.8

22.63.90.2

13.52.5

42.7

2006£m

Cash and cash equivalents per balance sheet 29.3Bank overdrafts repayable within one year (8.4)Cash and cash equivalents per cash flow statement 20.9

14. Cash and cash equivalents2005 £m

57.0(0.1)56.9


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2006£m

NON-CURRENTPreference shares classified as debt -Revolving credit facility drawings (62.0)Senior secured loan notes (79.0)

(141.0)CURRENTBank overdrafts and loans (24.5)Senior secured loan notes (18.4)

(42.9)

15. Borrowings2005 £m

(38.0)(84.0)

(103.8)(225.8)

(12.9)-

(12.9)

The preference shares were redeemed on 2nd November 2005.

The revolving credit facility drawings and loan notes are secured by floating charges over the assets of certain subsidiary companies.

The revolving credit facility amounts to £255m which is repayable in 2010. Interest is based on rates ruling from time to time in the LondonInter Bank Market.

The senior secured loan notes were issued by way of US dollar and sterling private placements at fixed rates as follows:

Repayable in 2006 US$35.0m 8.07%Repayable in 2008 US$15.0m 8.13%Repayable in 2009 US$23.0m 7.97%Repayable in 2011 US$93.0m 8.12%Repayable in 2011 £10.0m 7.68%

The group entered into currency swap agreements to eliminate all exchange risks arising from these transactions.

All other borrowings are in sterling.

2006£m

NON-CURRENTLand payables on contractual terms 12.2

CURRENTLand payables on contractual terms 100.6Other trade payables 81.9Payments on account 2.1Other taxes and social security costs 1.1Other payables 60.0Accruals 21.6

267.3

16. Trade and other payables2005 £m

48.8

89.763.93.61.4

15.294.6

268.4


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17. Deferred tax assets and liabilitiesRecognised in

income£m

0.2-

(0.3)(9.0)(9.7)0.6

(0.4)(18.6)

Movement in deferred tax during the year 1st November2005£m

Property, plant and equipment -Derivatives 0.9Retirement benefit obligations 10.6Revenue recognition 9.0Change in accounting policy to legal completion 9.7Share based payments -Deferred payments 1.6

31.8

Recognised inequity

£m

-(0.4)4.4--0.5-

4.5

31st October 2006£m

0.20.5

14.7--

1.11.2

17.7

2006£m

NON-CURRENTRental obligations in respect of vacant properties 1.0

CURRENTRental obligations in respect of vacant properties 1.3

18. Provisions2005 £m

0.9

1.7

Recognised inincome

£m

-0.32.2

(3.2)0.3

(0.4)

Movement in deferred tax during the prior year 1st November2004£m

Derivatives (0.8)Retirement benefit obligations 9.2Revenue recognition 6.8Change in accounting policy to legal completion 12.9Deferred payments 1.3

29.4

Recognised inequity

£m

1.71.1---

2.8

31st October 2005£m

0.910.69.09.71.6

31.8


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SHARE CAPITAL 2006£m

AUTHORISED136,000,000 Ordinary shares of 10p each 13.6

ALLOTTED AND FULLY PAID112,796,327 Ordinary shares of 10p each (2005: 112,407,182) 11.3

2005 £m

13.6

11.2

19. Capital and reserves

RECONCILIATION OF MOVEMENT IN CAPITAL AND RESERVESShare Share premium Cash flow Capital redemption Retained Totalcapital reserve hedging reserve reserve earnings Equity

£m £m £m £m £m £m

BALANCE AT 1ST NOVEMBER 2004 11.2 56.9 1.9 - 159.2 229.2Profit for the year - - - - 53.9 53.9Shares issued - 0.8 - - - 0.8Equity-settled share based payment transactions, net of tax - - - - 0.6 0.6Actuarial loss on pension scheme, net of tax - - - - (3.3) (3.3)Cash flow hedges: effective portion of changes in fair value, net of tax - - (3.9) - - (3.9)Dividends - - - - (14.0) (14.0)

BALANCE AT 31ST OCTOBER 2005 11.2 57.7 (2.0) - 196.4 263.3Profit for the year - - - - 57.6 57.6Shares issued 0.1 0.6 - - - 0.7Redemption of preference shares - - - 38.0 (38.0) -Equity-settled share based payment transactions, net of tax - - - - 1.4 1.4Actuarial loss on pension scheme, net of tax - - - - (10.4) (10.4)Cash flow hedges: effective portion of changes in fair value, net of tax - - 0.8 - - 0.8Dividends - - - - (14.9) (14.9)

BALANCE AT 31ST OCTOBER 2006 11.3 58.3 (1.2) 38.0 192.1 298.5

The aggregate current and deferred tax relating to items that are charged or credited to equity is £4.8m (2005:£3.1m).

During the year 138,920 ordinary shares were issued under the exercise provisions of the 1994 Executive share option scheme at pricesbetween 129p and 478p. A further 250,225 shares were issued under the exercise provisions of the company's 1998 SAYE share optionscheme at prices between 100p and 306p.

At 31st October 2006 there were options outstanding to subscribe for ordinary shares as follows:


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At 31st October 2006 the group’s Employee Share Ownership Trust (“ESOT”) held 118 shares (2005: 278,544 shares) with a market value of£671 (2005: £1,097,463) which had not yet vested unconditionally in employees. The shares were purchased in the open market and areheld in trust for employees participating in the group’s Deferred Share Bonus Scheme and Long Term Incentive Plan. Abacus CorporateTrustee Limited, as Trustees for the ESOT, has waived its dividend entitlement.2,000 Crest Nicholson shares were purchased during the year (2005: nil).

CASH FLOW HEDGING RESERVEThe hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instrumentsrelated to hedged transactions that have not yet occurred.

CAPITAL REDEMPTION RESERVEIn accordance with the Companies Act 1985, upon repayment of preference shares on 2nd November 2005, a sum of £38m has beentransferred from retained earnings to capital redemption reserve.

Net debt comprises cash at bank and in hand plus borrowings.

Numberof shares

16,057128,054152,285131,700192,366620,462

70,00020,00049,85038,25028,52030,980180,000297,500451,816650,19622,500

1,839,612

103,91195,831168,066182,283550,091

57,158

SAYE SHARE OPTION SCHEME1998 Scheme

EXECUTIVE SHARE OPTION SCHEMES1994 Scheme

2004 Scheme

LONG TERM INCENTIVE PLAN1999 Scheme

DEFERRED SHARES

PeriodExercisable

2004/20072006/20092007/20102008/20112009/2012

2000/20072001/20082002/20092003/20102005/20112006/20122006/20132007/20142008/20152009/20162009/2016

2007200820082009

2007

OptionPrice

170p186p283p306p407p

91p112p129p138p194p211p202p323p383p478p515p

205p348p383p478p

348p

20. Analysis of net debtCashFlow£m

(27.7)(8.3)

(36.0)38.0(3.3)22.0

--

20.7

OpeningDebt£m

Cash at bank and in hand 57.0Bank overdrafts (0.1)Net cash and cash equivalents 56.9Preference shares (38.0)Other loans (12.8)Revolving credit facility drawings (84.0)Senior secured loan notes at original cost (120.1)Exchange rate differences on US dollar loan notes 16.3

(181.7)

Other Non-cashMovements

£m

-------6.46.4

ClosingDebt£m

29.3(8.4)20.9

-(16.1)(62.0)

(120.1)22.7

(154.6)


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21. Financial instruments

group operations are financed through a combination of shareholders’ funds and net borrowings, comprising bank and loan facilities.The core element of the group’s borrowing requirement is provided by long term fixed interest loan notes. The group has limited its useof financial instruments to derivatives designed to protect the group from fluctuations in interest and exchange rates. The remainingborrowing requirement is funded principally through a revolving credit facility with variable interest rates. This policy has remained inforce during the year ended 31st October 2006.

INTEREST RATE RISK

The interest rate profile of the financial liabilities of the group was:

Fixed rate financial liabilities are stated after cross currency swaps which had the effect of reclassifying $166m (2005: $166m) US dollarborrowings into £87.4m (2005: £93.8m) sterling borrowings. The fixed rate financial liabilities are at a weighted average of 8.04% (2005:8.04%) fixed for an average of 3.6 years (2005: 4.6 years).

The preference shares were redeemed on 2nd November 2005.

The floating rate financial liabilities are subject to interest rates referenced to LIBOR. These rates are for a period between one andtwelve months.

For financial liabilities which have no interest payable but for which imputed interest is charged, consisting of land payables, theweighted average period to maturity is 20 months (2005: 16 months). The discount rate applied is equivalent to the group's currentincremental borrowing rate. There are no other material differences between book value and fair value of the group’s financial assetsand liabilities.

Fixed ratefinancial liabilities

£m

97.4

103.838.0

141.8

Floating ratefinancial liabilities

£m

AT 31ST OCTOBER 2006Bank borrowings, loan notes and long term payables 86.4

AT 31ST OCTOBER 2005Bank borrowings, loan notes and long term payables 96.9Preference shares -

96.9

Total£m

440.6

421.938.0

459.9

Financialliabilities carrying

no interest£m

256.8

221.2-

221.2

The maturity of the financial liabilities is: 2006£m

Repayable within one year 287.4Repayable between one and two years 8.2Repayable between two and five years 145.0Repayable after five years -

440.6

2005 £m

223.362.4

109.764.5

459.9


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The interest rate profile of the group’s interest bearing financial liabilities at 31st October is as follows:

Earlier of contractual repricing and maturity

Effective Total Less than 1-2 years 2-5 years More thaninterest rate 1 year 5 years

Bank overdrafts 6.25% 24.5 24.5 - - -Revolving credit facility 5.53% 62.0 - - 62.0 -US senior loan notes 8.04% 97.4 18.4 - 79.0 -AT 31st OCTOBER 2006 183.9 42.9 - 141.0 -

Earlier of contractual repricing and maturity

Effective Total Less than 1-2 years 2-5 years More thaninterest rate 1 year 5 years

Bank overdrafts 6.00% 12.9 12.9 - - -Revolving credit facility 5.10% 84.0 - - 84.0 -US senior loan notes 8.04% 103.8 - 17.8 21.5 64.5Preference shares 5.50% 38.0 38.0 - - -AT 31st OCTOBER 2005 238.7 50.9 17.8 105.5 64.5

The above profile excludes the effects of imputed interest on land payables as this represents an accounting transaction only and nointerest is actually paid out of the group.

CREDIT RISKThe maximum exposure to credit risk at both 31st October 2006 and 31st October 2005 is represented by the carrying amount of eachfinancial asset in the balance sheet. The group has no substantial exposure to any individual third party.

CURRENCY RISKAll US senior loan notes denominated in US dollars were swapped into sterling on issue. The group has no other significant foreigncurrency dealings. After taking account of currency swaps, the group had no exposure to currency fluctuations as at 31st October 2006(2005: £nil).

FAIR VALUESFinancial assetsThe carrying amount of financial assets equates to their fair value.

Financial liabilitiesThe fair value of the senior loan notes and their related hedging instruments is determined by discounting risk-adjusted expected futurecash flows with application of current market foreign exchange rates.

The carrying amount of the remaining financial liabilities equates to their fair value.

Land purchased on extended payment termsWhen land is purchased on extended payment terms, the group initially records it at its fair value with a land payable recorded for anyoutstanding monies based on its fair value assessment. Fair value is determined by using the effective interest method. The differencebetween the nominal value and the initial fair value is amortised over the period of the extended credit term and charged to financecosts, increasing the value of the land payable such that at the date of maturity the land payable equals the payment required.

Financial assetsFinancial assets of the group at 31st October 2006 consisted of sterling cash deposits of £29.3m (2005: £57.0m) placed overnight, withsolicitors and on current account.

Undrawn borrowing facilitiesThe group had undrawn committed borrowing facilities of £189.6m at 31st October 2006 (2005: £176.1m). The repayment terms of thefacilities are set out in Note 15. In addition there were undrawn guarantee and bonding facilities of £45.8m (2005: £39.6m).


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22. Employee benefits

RETIREMENT BENEFIT OBLIGATIONSDefined contribution schemeThe group operates a defined contribution scheme for new employees. The assets of the scheme are held separately from those of thegroup in an independently administered fund. The service cost of this scheme for the year was £0.6m (2005: £0.6m). At the balance sheetdate there were no outstanding or prepaid contributions (2005: £nil).

Defined benefit schemeThe group operates a contributory defined benefit pension scheme which is closed to new entrants. The assets of the scheme are heldseparately from those of the group, being invested in managed funds.

The most recent funding valuation of the scheme was carried out as at 1st February 2004 by a professionally qualified actuary using theattained age method.

The assets of the defined benefit scheme have been calculated at fair value and the liabilities, at each balance sheet date under IAS 19(Revised), using the projected unit method and based on the following financial assumptions:

31st October 31st October 2006 2005 %pa %pa

Discount rate 5.00% 5.00%Salary escalation 4.00% 3.90%Price inflation 3.20% 2.90%Pension increases on benefit increasing in line with 5% or RPI if lower 2.80% 2.60%Expected return on invested assets 7.00% 7.00%Expected return on insurance annuity contracts 5.00% 5.00%

The expected return on assets reflects the weighted average return on the categories of scheme assets shown below.

Mortality assumptions are as follows:

• Mortality before retirement: PMA 92 medium cohort (year of birth) and PFA 92 medium cohort (year of birth); (2005: AM80 AF80)• Mortality after retirement: PMA 92 medium cohort (year of birth) and PFA 92 medium cohort (year of birth); (2005: PMA92 [C=2020] and

PFA92 [C=2020])

The major categories of scheme assets as a percentage of the total fair value of scheme assets are as follows:

2006%

Equities 69.1%Bonds 11.3%Property 3.2%Cash 3.0%Secured annuities 13.4%Total 100.0%

2005 %

66.4%11.9%4.7%2.9%

14.1%100.0%

The amounts recognised in income are as follows:

2006£m

Current service cost 2.3Interest cost 5.5Expected return on scheme assets (5.1)Total 2.7Actuarial loss 14.8Total charge recognised in the SORIE in the year, gross of tax 14.8Total defined benefit scheme costs recognised in the year 17.5

2005 £m

3.05.2

(5.0)3.24.84.88.0

The cumulative charge to the SORIE since the adoption of IAS 19 (Revised) is £19.6m (2005: £4.8m).


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2006£m

Expected return on scheme assets 5.1Actuarial gain on scheme assets 5.2Actual return on scheme assets 10.3

2005 £m

5.04.69.6

The amounts included in the balance sheet arising from the group’s obligation in respect of its defined benefit scheme is as follows:

2006£m

Present value of defined benefit obligations 133.0Fair value of scheme assets (83.9)Defined benefit liability recognised in the balance sheet 49.1

2005 £m

111.7(76.4)35.3

A deferred tax asset totalling £14.7m (2005: £10.6m) has been recognised on the balance sheet in relation to the net pension obligation.

Movements in the liability recognised on the balance sheet were as follows:

2006£m

At 1st November 35.3Total expense (as shown above) 17.5company contributions paid in the year (3.7)At 31st October 49.1

2005 £m

30.48.0

(3.1)35.3

Changes in the present value of the defined benefit obligation were as follows:

2006£m

At 1st November 111.7Current service cost 2.3Interest cost 5.5Employee contributions 0.8Actuarial losses 20.0Benefits and expenses paid (7.3)At 31st October 133.0

2005 £m

96.13.05.20.69.4

(2.6)111.7

Changes in the fair value of scheme assets were as follows:

2006£m

At 1st November 76.4Expected return on scheme assets 5.1Actuarial gain on scheme assets 5.2Employer contributions 3.7Employee contributions 0.8Benefits and expenses paid (7.3)At 31st October 83.9

2005 £m

65.75.04.63.10.6

(2.6)76.4


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2006£m

Present value of defined benefit obligation 133.0Fair value of scheme assets (83.9)Deficit in the scheme 49.1

Experience adjustments on scheme liabilities 6.6Percentage of scheme liabilities 5.0%Experience adjustments on scheme assets 5.2Percentage of scheme assets 6.2%

2005 £m

111.7(76.4)35.3

9.48.4%4.66.0%

The expected employer contributions to the defined benefit scheme during 2007 are £3.8m.

SHARE BASED PAYMENTSThe group operates a number of share option plans, which are summarised below and described in more detail on pages 27-28 . In accordance with IFRS 2, only costs relating to options issued after 7th November 2002 and not vested at 1st November 2004 have beencharged to the income statement. (See Note 4).

The group operates a long-term incentive plan (LTIP), which results in share based payment. Vesting of the LTIP options is dependent on certain performance conditions, which are set out on page 29. These conditions have been factored into the option value applied. In addition, the group operates executive share option schemes. Vesting of options under this scheme are also dependent on performancecriteria, as set out on pages 27-28.

The group provides a Save As You Earn (SAYE) scheme open to all employees, subject to HMRC restrictions and a minimum qualifyingperiod of employment. There are no performance conditions governing the exercise of SAYE options. The group also operates a ShareIncentive Plan, the details of which are set out on page 28 and for which there are no performance conditions.

Share options have been valued by an external third party using the binomial option-pricing model, based on publicly available marketdata at the time of grant, which the Directors consider to be the most appropriate method of determining their fair value.

The share options outstanding during each period and under each type of share option were as follows:

SAYE SCHEMES 2006Number of Weighted average

share options exercise price (p)

Outstanding at the beginning of the year 734,247 225.9Granted during the year 194,203 407.0Forfeited during the year (57,763) 252.1Exercised during the year (250,225) 168.2Outstanding at the end of the year 620,462 303.4Exercisable at the end of the year 144,111 184.2

EXECUTIVE SHARE OPTION SCHEMES 2006Number of Weighted average


Outstanding at the beginning of the year 1,442,196 283.6Granted during the year 723,234 479.2Forfeited during the year (186,898) 384.4Exercised during the year (138,920) 168.9Outstanding at the end of the year 1,839,612 358.9Exercisable at the end of the year 427,600 160.8

2005Number of Weighted average


862,018 189.7148,586 306.0

(105,431) 214.0(170,926) 120.2734,247 225.9148,498 153.4



1,342,515 221.1596,926 383.0

(177,500) 285.3(319,745) 205.91,442,196 283.6309,390 128.5

A two year history of experience adjustments is as follows:


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23. Contingent liabilities

There are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinarycourse of business from which it is anticipated that no material liabilities will arise.

Inputs into the binomial option pricing model were as follows:

Grant date Vesting date Share price Exercise Discount rate Assumed Assumedat grant date price (pa) volatility (pa) dividend yield (pa)

SAYE 1998 30th July 2003 1st October 2006 £2.80 £1.86 3.8% 36.2% 3.6%SAYE 1998 30th July 2003 1st October 2008 £2.80 £1.86 4.1% 34.2% 3.6%SAYE 1998 27th July 2004 1st October 2007 £3.44 £2.83 5.1% 29.7% 3.4%SAYE 1998 27th July 2004 1st October 2009 £3.44 £2.83 5.2% 32.2% 3.4%SAYE 1998 26th July 2005 1st October 2008 £4.07 £3.06 4.2% 23.7% 3.0%SAYE 1998 26th July 2005 1st October 2010 £4.07 £3.06 4.2% 30.9% 3.0%SAYE 1998 31th July 2006 1st October 2009 £5.41 £4.07 4.7% 22.3% 2.4%SAYE 1998 31th July 2006 1st October 2011 £5.41 £4.07 4.7% 27.1% 2.4%ESOP 1994 31st January 2003 31st January 2007 £2.01 £2.02 4.0% 34.3% 4.7%ESOP 1994 3rd February 2004 3rd February 2007 £3.33 £3.23 4.7% 34.2% 3.3%ESOP 2004 10th February 2005 10th February 2008 £3.83 £3.83 4.5% 29.5% 3.0%ESOP 2004 2nd March 2006 2nd March 2009 £4.85 £4.78 4.3% 24.1% 2.7%ESOP 2004 12th July 2006 12th July 2009 £5.22 £5.15 4.7% 24.3% 2.5%LTIP 2003 6th February 2003 6th February 2007 £2.11 - 3.8% 34.4% 4.0%LTIP 2004 10th February 2004 10th February 2008 £3.50 - 4.6% 34.1% 3.2%LTIP 2005 10th February 2005 10th February 2008 £3.83 - 4.5% 25.2% 3.0%LTIP 2006 2nd March 2006 2nd March 2009 £4.85 - 4.4% 22.0% 2.7%DSBP 2003 6th February 2003 6th February 2006 £2.11 - 3.7% 36.4% 4.0%DSBP 2003 21st February 2003 21st February 2006 £2.20 - 3.6% 36.2% 3.9%DSBP 2004 10th February 2004 10th February 2007 £3.50 - 4.5% 32.7% 3.2%

The range of exercise prices applicable to options outstanding at the end of the year are disclosed in Note 19 on page 56.

LONG TERM INCENTIVE PLAN (LTIP) 2006Number of Weighted average


Outstanding at the beginning of the year 712,045 300.1Granted during the year 196,927 478.0Forfeited during the year (237,031) 314.7Exercised during the year (121,850) 222.6Outstanding at the end of the year 550,091 374.7Exercisable at the end of the year - -

DEFERRED SHARES 2006Number of Weighted average


Outstanding at the beginning of the year 215,734 260.5Granted during the year - -Forfeited during the year - -Exercised during the year (138,920) 168.9Outstanding at the end of the year 57,158 348.0Exercisable at the end of the year - -



629,563 244.7230,676 383.0

- -(148,194) 194.0712,045 300.1

- -



392,552 250.5- -

(94,784) 267.3(82,034) 204.7215,734 260.5

- -


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24. Operating leases

At 31st October 2006 total outstanding commitments for future minimum lease payments under non-cancellable operating leases were:

25. Related party transactions

The group has entered into related party transactions with joint ventures, which are disclosed in Note 10. The group has provided theservices of a Customer Service manager to a joint venture, which have been recharged at cost.

26. Accounting estimates and judgements

Management considers the key estimates and judgements made in the accounts to be related to the valuation of work in progress and of pension liabilities.

CARRYING VALUE OF LAND AND WORK IN PROGRESSInventories of land, work in progress and completed units are stated in the balance sheet at the lower of cost and net realisable value.Due to the nature of development activity and in particular, the length of the development cycle, the group has to allocate site-widedevelopment costs such as infrastructure between units being built and/or completed in the current year and those for future years. It also has to make estimates of the cost to complete such developments.

There is a degree of inherent uncertainty in making such estimates. The group has established internal controls that are designed toensure an effective assessment is made of inventory carrying values and the costs to complete developments.

PENSIONSManagement has employed the services of an actuary in setting these estimates; however, they recognise the risk that both expectedinvestment returns and ultimate scheme payments may differ substantially from current forecasts.

27. Transition to adopted IFRSs

As stated in Note 1, these are the group’s first consolidated financial statements prepared in accordance with Adopted IFRSs.

The accounting policies set out in Note 1 have been applied in preparing the financial statements for the year ended 31st October 2006,the comparative information presented in these financial statements for the year ended 31st October 2005 and in the preparation of anopening IFRS balance sheet at 1st November 2004 (the group’s date of transition).

In preparing its opening IFRS balance sheet, the group has adjusted amounts reported previously in financial statements prepared inaccordance with its old basis of accounting (UK GAAP). An explanation of how the transition from UK GAAP to Adopted IFRSs hasaffected the group’s financial position, financial performance and cash flows is set out in the following tables and the notes thataccompany the tables.

2006£m

LAND AND BUILDINGSWithin one year 4.2Less: minimum sub-lease income (1.6)Between two and five years 14.8Less: minimum sub-lease income (4.6)After five years 18.6Less: minimum sub-lease income (0.6)

30.8OTHERWithin one year 0.6Between two and five years 1.9

2.5

2005 £m

3.9(1.2)14.0(3.7)14.5(0.8)26.7

0.72.43.1


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RECONCILIATION OF PROFITFOR THE YEAR TO 31ST OCTOBER 2005

Effect of UK GAAP Effect of Restatedtransition to restated for transition to under

UK GAAP Legal completion Legal completion Adopted IFRS Adopted IFRS £m £m £m £m £m

Revenue 701.7 27.0 728.7 (29.7) 699.0Cost of sales (554.6) (16.1) (570.7) 23.2 (547.5)Gross profit 147.1 10.9 158.0 (6.5) 151.5

Operating costs (53.8) - (53.8) (0.2) (54.0)

Share of results from joint ventures 1.6 0.3 1.9 (0.5) 1.4Profit from operations 94.9 11.2 106.1 (7.2) 98.9

Finance costs (15.7) - (15.7) (4.3) (20.0)

Profit before tax 79.2 11.2 90.4 (11.5) 78.9

Income tax expense (24.5) (3.4) (27.9) 2.9 (25.0)Profit for the period 54.7 7.8 62.5 (8.6) 53.9

Earnings per shareBasic 47.0p 7.0p 54.0p (5.8)p 48.2pDiluted 46.7p 6.9p 53.6p (5.8)p 47.8p


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RECONCILIATION OF EQUITYAS AT 31ST OCTOBER 2005


UK GAAP Legal completion Legal completion Adopted IFRS Adopted IFRS£m £m £m £m £m

ASSETS Non-current assets Property, plant and equipment 2.5 - 2.5 - 2.5Investments in joint ventures 41.2 (0.4) 40.8 (29.3) 11.5Deferred tax asset - 9.7 9.7 22.1 31.8

43.7 9.3 53.0 (7.2) 45.8Current assets - - - - -Inventories 640.1 96.7 736.8 5.9 742.7Trade and other receivables 223.2 (115.0) 108.2 (64.7) 43.5Cash and cash equivalents 57.0 - 57.0 - 57.0

920.3 (18.3) 902.0 (58.8) 843.2Total assets 964.0 (9.0) 955.0 (66.0) 889.0

LIABILITIESCurrent liabilitiesBank overdrafts and loans (12.9) - (12.9) - (12.9)Current tax liabilities (12.7) - (12.7) - (12.7)Trade and other payables (270.0) (14.0) (284.0) 15.6 (268.4)

(295.6) (14.0) (309.6) 15.6 (294.0)Non-current liabilities Bank and other loans (204.1) - (204.1) (21.7) (225.8)Forward currency swaps - - - (19.2) (19.2)Trade and other payables (93.7) - (93.7) 44.9 (48.8)Retirement benefit obligations - - - (35.3) (35.3)Provisions (2.6) - (2.6) - (2.6)Deferred tax liabilities (0.6) - (0.6) 0.6 -

(301.0) - (301.0) (30.7) (331.7)Total liabilities (596.6) (14.0) (610.6) (15.1) (625.7)

NET ASSETS 367.4 (23.0) 344.4 (81.1) 263.3

SHAREHOLDERS’ EQUITYShare capital 49.2 - 49.2 (38.0) 11.2Share premium 57.7 - 57.7 - 57.7Hedge reserve - - - (2.0) (2.0)Retained earnings 260.5 (23.0) 237.5 (41.1) 196.4Total shareholders’ equity 367.4 (23.0) 344.4 (81.1) 263.3

In addition to the above, there has been a £0.7m reclassification from inventory to investment property - see Note 11.


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RECONCILIATION OF EQUITYAS AT 1ST NOVEMBER 2004


UK GAAP Legal completion Legal completion Adopted IFRS Adopted IFRS£m £m £m £m £m

ASSETS Non-current assets Property, plant and equipment 2.5 - 2.5 - 2.5Investments in joint ventures 21.2 (0.6) 20.6 (4.6) 16.0Deferred tax asset - 12.9 12.9 17.9 30.8

23.7 12.3 36.0 13.3 49.3Current assetsInventories 771.9 112.8 884.7 (157.1) 727.6Trade and other receivables 239.4 (155.9) 83.5 (48.8) 34.7Cash and cash equivalents 10.9 - 10.9 - 10.9

1,022.2 (43.1) 979.1 (205.9) 773.2Total assets 1,045.9 (30.8) 1,015.1 (192.6) 822.5

LIABILITIESCurrent liabilitiesBank overdrafts and loans (3.2) - (3.2) - (3.2)Current tax liabilities (12.8) - (12.8) - (12.8)Trade and other payables (288.4) - (288.4) 23.7 (264.7)

(304.4) - (304.4) 23.7 (280.7)Non-current liabilities Bank and other loans (186.1) - (186.1) (18.5) (204.6)Forward currency swaps - - - (16.8) (16.8)Trade and other payables (225.3) - (225.3) 166.9 (58.4)Retirement benefit obligations - - - (30.3) (30.3)Provisions (1.1) - (1.1) - (1.1)Deferred tax liabilities (0.6) - (0.6) (0.8) (1.4)

(413.1) - (413.1) 100.5 (312.6)Total liabilities (717.5) - (717.5) 124.2 (593.3)

NET ASSETS 328.4 (30.8) 297.6 (68.4) 229.2

SHAREHOLDERS’ EQUITYShare capital 49.2 - 49.2 (38.0) 11.2Share premium 56.9 - 56.9 - 56.9Hedge reserve - - - 1.9 1.9Retained earnings 222.3 (30.8) 191.5 (32.3) 159.2Total shareholders’ equity 328.4 (30.8) 297.6 (68.4) 229.2

The following tables and accompanying notes explain the composition of the ‘Effect of transition to Adopted IFRS.’


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RECONCILIATION OF PROFIT FOR THE YEAR TO 31ST OCTOBER 2005- EFFECT OF TRANSITION TO ADOPTED IFRS

IAS 18 IAS 2 IAS 10 IAS 19 IAS 31 IAS 32/39 IAS 39 IAS 39 IFRS2 Effect ofRevenue Inventories Dividend Retirement Joint Preference Currency Deferred Share based transition to

Recognition Benefits Ventures shares Swap payments Payments Adopted IFRS£m £m £m £m £m £m £m £m £m £m

Revenue (29.3) - - - - - - (0.4) - (29.7)Cost of sales 26.4 (4.7) - - - - - 1.5 - 23.2Gross profit (2.9) (4.7) - - - - - 1.1 - (6.5)

Operating costs - - - 0.3 - - - - (0.5) (0.2)Share of results from joint ventures - - - - (0.5) - - - - (0.5)

Profit from operations (2.9) (4.7) - 0.3 (0.5) - - 1.1 (0.5) (7.2)

Finance costs - - - (0.2) - (2.1) - (2.0) - (4.3)

Profit before tax (2.9) (4.7) - 0.1 (0.5) (2.1) - (0.9) (0.5) (11.5)

Income tax expense 0.8 1.4 - (0.1) 0.5 - - 0.3 - 2.9

Profit for the period (2.1) (3.3) - - - (2.1) - (0.6) (0.5) (8.6)

Earnings per shareBasic (1.9p) (2.9p) - - - - - (0.6p) (0.4p) (5.8p)Diluted (1.9p) (2.9p) - - - - - (0.6p) (0.4p) (5.8p)


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RECONCILIATION OF EQUITY AS AT 31ST OCTOBER 2005- EFFECT OF TRANSITION TO ADOPTED IFRS

IAS 18 IAS 2 IAS 10 IAS 19 IAS 31 IAS 32/39 IAS 39 IAS 39 Effect of Revenue Inventories Dividend Retirement Joint Preference Currency Deferred Land transition to

Recognition Benefits Ventures shares Swap payments creditors Adopted IFRS£m £m £m £m £m £m £m £m £m £m

ASSETSNon-current assetsInvestments in joint ventures - (0.2) - - (29.1) - - - - (29.3)

Deferred tax asset 3.9 5.1 - 11.2 0.9 1.6 - 22.73.9 4.9 - 11.2 (29.1) - 0.9 1.6 - (6.6)

Current assetsInventories 67.8 (16.9) - - 33.4 - - (8.2) (70.2) 5.9Trade and other receivables (65.7) - - (2.0) 3.6 - - (0.6) - (64.7)

2.1 (16.9) - (2.0) 37.0 - - (8.8) (70.2) (58.8)Total assets 6.0 (12.0) - 9.2 7.9 - 0.9 (7.2) (70.2) (65.4)

LIABILITIESCurrent liabilitiesTrade and other payables (15.1) - 9.8 - (6.3) - - - 27.2 15.6

(15.1) - 9.8 - (6.3) - - - 27.2 15.6Non-current liabilitiesBank and other loans - - - - - (38.0) 16.3 - - (21.7)Forward currency swaps - - - - - - (19.2) - - (19.2)Trade and other payables - - - - (1.6) - - 3.5 43.0 44.9Retirement benefit obligations - - - (35.3) - - - - - (35.3)

- - - (35.3) (1.6) (38.0) (2.9) 3.5 43.0 (31.3)Total liabilities (15.1) - 9.8 (35.3) (7.9) (38.0) (2.9) 3.5 70.2 (15.7)

NET ASSETS (9.1) (12.0) 9.8 (26.1) - (38.0) (2.0) (3.7) - (81.1)

SHAREHOLDERS’ EQUITYShare capital - - - - - (38.0) - - - (38.0)Hedge reserve - - - - - - (2.0) - - (2.0)Retained earnings (9.1) (12.0) 9.8 (26.1) - - - (3.7) - (41.1)Total shareholders’ equity (9.1) (12.0) 9.8 (26.1) - (38.0) (2.0) (3.7) - (81.1)


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RECONCILIATION OF EQUITY AS AT 1ST NOVEMBER 2004- EFFECT OF TRANSITION TO ADOPTED IFRS

IAS 18 IAS 2 IAS 10 IAS 19 IAS 31 IAS 32/39 IAS 39 IAS 39 Effect ofRevenue Inventories Dividend Retirement Joint Preference Currency Deferred Land transition to

Recognition Benefits Ventures shares Swap payments creditors Adopted IFRS£m £m £m £m £m £m £m £m £m £m

ASSETSNon-current assetsInvestments in joint ventures - - - - (4.6) - - - - (4.6)

Deferred tax asset 3.1 3.7 - 9.8 - - - 1.3 - 17.93.1 3.7 - 9.8 (4.6) - - 1.3 - 13.3

Current assetsInventories 44.8 (12.4) - - 22.4 - - (7.8) (204.1) (157.1)Trade and other receivables (46.1) - - (2.3) - - - (0.4) - (48.8)

(1.3) (12.4) - (2.3) 22.4 - - (8.2) (204.1) (205.9)Total assets 1.8 (8.7) - 7.5 17.8 - - (6.9) (204.1) (192.6)

LIABILITIESCurrent liabilitiesTrade and other payables (8.8) - 9.3 - (17.8) - - - 41.0 23.7

(8.8) - 9.3 - (17.8) - - - 41.0 23.7Non-current liabilitiesBank and other loans - - - - - (38.0) 19.5 - - (18.5)Forward currency swaps - - - - - - (16.8) - - (16.8)Trade and other payables - - - - - - - 3.8 163.1 166.9Retirement benefit obligations - - - (30.3) - - - - - (30.3)

Deferred tax liabilities - - - - - - (0.8) - - (0.8)- - - (30.3) - (38.0) 1.9 3.8 163.1 100.5

Total liabilities (8.8) - 9.3 (30.3) (17.8) (38.0) 1.9 3.8 204.1 124.2

NET ASSETS (7.0) (8.7) 9.3 (22.8) - (38.0) (1.9) (3.1) - (68.4)

SHAREHOLDERS’ EQUITYShare capital - - - - - (38.0) - - - (38.0)Hedge reserve - - - - - - 1.9 - - 1.9Retained earnings (7.0) (8.7) 9.3 (22.8) - - - (3.1) - (32.8)Total shareholders’ equity (7.0) (8.7) 9.3 (22.8) - (38.0) 1.9 (3.1) - (68.4)


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Notes

1. LEGAL COMPLETION – UK GAAPCrest Nicholson has hitherto recognised income on housing salesat the later of exchange of contracts and build completion.Although this is acceptable for the purposes of IFRS, one of theprincipal objectives of the new standards is to improvecomparability. The group has, therefore, decided to move itshousing income recognition point from exchanged and buildcomplete to legal completion, which accords with the majority ofits peer group. This also has the operational benefits of bringingcash collection and profit recognition together.

The effect on the opening balance sheet at transition is toincrease inventories by £112.8m, reduce debtors by £155.9m,increase deferred tax assets by £12.9m, reduce investments injoint ventures by £0.6m and hence reduce net assets by £30.8m.For the year ended 31st October 2005, this has resulted in anincrease in turnover of £27.0m and in operating profit of £11.2mwith a related tax charge of £3.4m.

2. REVENUE RECOGNITION ( IAS 18)Under IFRS, similar to UK GAAP, revenue in respect of land salesand sales of commercial property is recognised when thesignificant risks and rewards of ownership have been transferred.However, under IFRS, if the seller is obliged to perform anysignificant acts after the time of sale, revenue is recognised asthese acts are performed. This has resulted in a change in thetiming of revenue recognition.

The effect on the opening balance sheet at transition is toincrease inventories by £44.8m, reduce debtors by £46.1m,increase creditors by £8.8m, increase deferred tax asset by £3.1mand hence reduce net assets by £7.0m. For the year ended 31st October 2005, this has resulted in a decrease in turnover of£29.3m and in operating profit of £2.9m with a related tax credit of £0.8m.

3. INVENTORIES ( IAS 2)IAS 2 requires sales and marketing costs to be written off asincurred and not capitalised in work in progress and expensed inline with sales. The impact on the opening balance sheet hasbeen to reduce shareholders’ funds by £8.7m, work in progress by£12.4m and increase the deferred tax asset by £3.7m. For the yearto 31st October 2005 gross profit is reduced by £4.7m.

4. EVENTS AFTER THE BALANCE SHEET DATE ( IAS10)Under IAS 10 only dividends declared before the balance sheetdate can be shown as a liability. Crest Nicholson’s final dividend isdeclared at the Annual General Meeting. Consequently, there is arequirement to remove the liability for the final dividends for theyears ended 31st October 2004 and 2005. The impact therefore, isto increase the net assets of the opening balance sheet by £9.3mand the net assets as at 31st October 2005 by £9.8m.

5. EMPLOYEE BENEFITS ( IAS 19)The group has taken advantage of the option provided by IAS 19 toaccount for variations in actuarial gains and losses, in respect ofthe defined benefit scheme, in full immediately in the statementof recognised income and expense. The defined contributionscheme is unaffected by IAS 19.

The impact on the opening balance sheet is to reduce net assetsby £22.8m, due to the recognition of a pension deficit of £30.3m, adeferred tax asset of £9.8m and the release of the £2.3mprepayment which arose in prior years. At 31st October 2005 a£26.1m reduction in net assets is recognised, including a grossdeficit of £35.3m and a deferred tax asset of £11.2m. An actuarialloss of £3.3m net of tax is taken to reserves.

6. JOINT VENTURESJointly controlled entities under IFRS are accounted for using theequity method of accounting. The results of jointly controlledentities are shown as a separate item on a post-tax basis.

The group has one joint venture which is not a legal entity. UnderIFRS this will be accounted for as a jointly controlled operation.The results of this joint venture will therefore be presented on aline by line basis in the income statement and balance sheet.

The presentational impact of these changes is set out in the above reconciliations.

7. FINANCIAL INSTRUMENTS ( IAS 32 AND IAS 39)IAS 32 covers the disclosure and presentation of financialinstruments, while IAS 39 covers their recognition andmeasurement.

Preference sharesIAS 32 requires certain preference shares to be classified as aliability as opposed to a component of equity, with the relevantdividend treated as a financing charge as opposed to adistribution. The impact of this change is to reduce shareholders’funds in the opening balance sheet by £38.0m and to increasefinancing charges for the year to 31st October 2005 by £2.1m. Thepreference shares were repurchased in November 2005.

Hedging instrumentsThe group holds £110m of US Private Placement loans (“USPP”)held in dollars. The USPP were entered into to provide long termfinance to the group. To eliminate all forward foreign exchangerisk in relation to the loan capital values, all USPP dollar capitalcash flows were swapped into sterling cash flows on issue. In addition, these swap arrangements hedge the fixed US dollarinterest rate cash flows into fixed UK sterling interest rate cash flows.

Crest Nicholson has designated these derivatives as partly a fairvalue hedge of the foreign exchange variability of the loanprincipal and partly a cashflow hedge of exposure to variability incash flows associated with the highly probable forecast interestflows. These derivatives are held at fair value in the balance sheetunder IAS 39. The USPP loans are accounted for under IFRS on anamortised cost basis and retranslated at the spot exchange rateat each period end.


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The impact of adopting IAS 39 on the opening balance sheet as at1st November 2004 is to revalue the USPP at the year endexchange rate, thereby reducing loans by £19.5m. A fair valueliability of £16.8m is also recognised in respect of the hedgingswaps relating to these loans, giving rise to an unrealised hedgereserve of £1.9m and a related deferred tax liability of £0.8m.

This has no impact on the net profit of the group for the yearended 31st October 2005. The fair value of the USPP as at 31stOctober 2005 results in a reduction of the loan liabilities of£16.3m. The fair value of the derivatives is £19.2m, giving rise to anegative hedge reserve of £2.0m and a related deferred tax assetof £0.9m.

Deferred paymentsIn accordance with IAS 39, the deferred payments arising fromland creditors are to be held at discounted present value, hencerecognising a financing element over the period of the deferredsettlement terms. The land creditor is then increased to thesettlement value over the period of financing, with the financingelement charged as interest expense through the incomestatement.

The value of land held on the balance sheet and thecorresponding land creditor is reduced by the financing element.The reduction in land value in inventories will result in an eventualreduction in cost of sales as the land is traded out. For the yearended 31st October 2005, this has resulted in an increase inoperating profit of £1.1m and the inclusion of notional interest of£2.0m together with a related deferred tax credit of £0.3m.

d) Land creditorsIn addition, the group has changed its policy on the recognition ofland assets and land creditors. These will now be recognised onlyat unconditional exchange of contracts. This change is not anIFRS requirement, but the group has decided to bring thisaccounting policy in line with its peer group.

The effect on the opening balance sheet at transition is to reduceinventories by £204.1m and reduce creditors by a similar amount.

8. SHARE BASED PAYMENTS ( IFRS 2)In accordance with IFRS 2, Crest Nicholson has recognised acharge for the SAYE scheme and employee share options grantedafter 7th November 2002. The fair value has been calculated usinga binomial option-pricing model. A fair value charge continues tobe made for the LTIP scheme. The charge is spread over thevesting period and is adjusted to reflect the actual and expectedlevel of vesting. The operating profit impact for 2005 is a charge of £0.5m.

72C O M PA N Y B A L A N C E S H E E T A S AT 3 1 S T O C T O B E R 2 0 0 6A

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Note 2006

£m

FIXED ASSETSTangible assets 6 2.6Other investments 5 5.4

8.0CURRENT ASSETSDebtors 7 367.5Cash at bank and in hand 26.7

394.2CREDITORS: amounts falling due within one yearBorrowings 8 (21.1)Forward currency swaps (2.4)Creditors 9 (50.5)

(74.0)NET CURRENT ASSETS 320.2TOTAL ASSETS LESS CURRENT LIABILITIES 328.2CREDITORS: amounts falling due after more than one yearBorrowings 8 (141.0)Forward currency swaps (21.9)

(162.9)NET ASSETS 165.3

CAPITAL AND RESERVESShare capital 10 11.3Share premium account 11 58.3Capital redemption reserve 11 38.0Hedge reserve 11 (1.2)Profit and loss account 11 58.9Equity shareholders’ funds 165.3

2005 As restated (note 2)

£m

2.55.47.9

349.465.4

414.8

--

(15.5)(15.5)399.3407.2

(225.8)(19.2)

(245.0)162.2

11.257.7

-(2.0)95.3

162.2

Approved by the Board of Directors on 25th January 2007 and signed on its behalf by:

S STONEDP DARBYDirectors

2006Note £m

Equity settled share based payments, net of tax 0.8Cash flow hedges: effective portion of changes in fair value 0.8NET GAIN/(LOSS) RECOGNISED DIRECTLY IN EQUITY 12 1.6

PROFIT FOR THE YEAR 15.7

TOTAL RECOGNISED INCOME 17.3

2005 £m

0.6(3.9)(3.3)

57.3

54.0

Company balance sheetas at 31st October 2006

Company statement of total recognised gains and lossesfor year ended 31st October 2006

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1. Accounting policies

The following accounting policies have been applied consistentlyin dealing with items which are considered material in relation tothe financial statements, except as noted below.

In these financial statements the following new standards havebeen adopted for the first time:

• FRS 20 ‘Share-based payments’• FRS 21 ‘Events after the balance sheet date’• The presentation requirements of FRS 25 ‘Financial

instruments: presentation and disclosure’• FRS 26 ‘Financial instruments: measurement’• FRS 28 ‘Corresponding amounts’

The accounting policies under these new standards are set outbelow together with an indication of the effects of their adoption.FRS 28 ‘Corresponding amounts’ has had no material effect as itimposes the same requirements for comparatives as hithertorequired by the Companies Act 1985.

The corresponding amounts in these financial statements arerestated in accordance with the new policies.

See Note 2 for further details.

BASIS OF PREPARATIONThe company financial statements have been prepared under thehistorical cost accounting rules and in accordance with applicableUK Accounting Standards.

The accounting policies have been applied consistently in dealingwith items which are considered material.

As permitted by the Companies Act 1985 section 230, thecompany has not presented its own profit and loss account. UnderFRS 1, the company is exempt from the requirement to prepare acash flow statement on the grounds that its consolidated financialstatements, which include the company, are publicly available.

The principal accounting policies adopted are set out below.

GROUP UNDERTAKINGSInvestments are included in the balance sheet at cost less anyprovision for permanent diminution in value.

TAXATION The charge for taxation is based on the profit for the year andtakes into account taxation deferred because of timing differencesbetween the treatment of certain items for taxation andaccounting purposes.

Deferred tax is recognised, without discounting, in respect of alltiming differences between the treatment of certain items fortaxation and accounting purposes which have arisen but notreversed by the balance sheet date, except as otherwise requiredby FRS 19.

DIVIDENDS Dividends are recorded in the group's financial statements in theperiod in which they are paid.

DEPRECIATION Freehold land is not depreciated. Freehold buildings aredepreciated at 2% on cost less residual value.

Plant, vehicles and equipment are depreciated on cost lessresidual value on a straight line basis at rates varying between10% and 33% determined by the expected life of the assets.

LEASES A finance lease is a lease that transfers substantially all the risksand rewards incidental to the ownership of an asset; all otherleases are operating leases.

Assets acquired under finance leases are capitalised and theoutstanding future lease obligations are shown in creditors.Operating lease rentals are charged to the profit and loss accounton a straight line basis over the period of the lease.

FINANCIAL INSTRUMENTS Borrowings Interest bearing bank loans and overdrafts are measured initiallyat fair value, net of direct issue costs. Finance charges areaccounted for on an accruals basis in the profit and loss accountusing the effective interest method and are added to the carryingamount of the instrument to the extent that they are not settled inthe period in which they arise.

Borrowings in foreign currencies are retranslated at the periodend exchange rate with differences recorded in the profit and lossaccount. This is offset by the change in fair value of derivativefinancial instruments which are fair value hedges (see below).

Derivative financial instruments and hedge accountingThe company uses currency swaps to manage financial risk.Those instruments that meet the hedge accounting criteria aretreated as hedges. The company does not use derivative financialinstruments for speculative purposes.

Derivative financial instruments are recognised at fair value. Thefair value of swaps is the estimated amount that the companywould receive or pay to terminate the swap at the balance sheetdate, taking into account exchange rates and the currentcreditworthiness of the swap counterparties.

Where the derivative instrument is deemed an effective hedge overthe exposure being hedged, the derivative instrument is treated asa hedge and hedge accounting applied. Under a fair value hedgethe change in the fair value of the derivative is recognised in theprofit and loss account and offsets the movement in fair value ofthe hedged item. Under a cash flow hedge, gains and losses on theeffective portion of the change in the fair value of the derivativeinstrument are recognised directly in equity.

Changes in the fair value of derivative financial instruments thatdo not qualify for hedge accounting and any ineffectiveness in thehedge relationship are recognised in the profit and loss accountas they arise.

Hedge accounting is discontinued when the hedging instrumentexpires or is sold, terminated or exercised, or no longer qualifiesfor hedge accounting. At that time, any cumulative gain or loss onthe hedging instrument recognised in reserves is retained inreserves until the forecasted transaction occurs. If a hedgedtransaction is no longer expected to occur, the net cumulativegain or loss recognised in reserves is transferred to net profit orloss for the period.

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3. Staff numbers and costs

The average number of persons employed by the company during the year was 7 (2005:8)

4. Dividends

Details of the dividends recognised as distributions to equity shareholders in the period and those proposed after the balance sheet dateare as shown in Note 7 of the Consolidated financial statements.

Where the company enters into financial guarantee contracts toguarantee the indebtedness of other companies within its group,the company considers these to be insurance arrangements, andaccounts for them as such. In this respect, the company treats theguarantee contract as a contingent liability until such time as itbecomes probable that the company will be required to make apayment under the guarantee.

OWN SHARES HELD BY EMPLOYEE SHAREOWNERSHIP TRUST (ESOT) Transactions of the group sponsored ESOT are included initially inthe company financial statements, with a recharge of all sharebased payments being made to Crest Nicholson OperationsLimited. In particular, the Trust’s purchases of shares in thecompany are debited to equity through retained earnings.

2. Prior year adjustments

Following the adoption of FRS 21 ‘Events after the balance sheetdate’, dividends declared after the balance sheet date are nolonger recognised as a liability at the balance sheet date.Comparative figures for 2005 have been restated accordingly.

The adoption of FRS 21 led to an increase of £0.5m in retainedprofit for the year to 31st October 2005 and an increase of £9.8min net assets at 31st October 2005. The effect of the prior yearadjustment on the current year has been an increase of £1.1m inretained profit.

Following the adoption of FRS 25, Redeemable Preference sharesin issue at 31st October 2005 have been reclassified as a liability.The preference shares were repurchased in November 2005.

Following the adoption of FRS 26 ‘Financial Instruments:Measurement’, derivative financial instruments are measured atfair value. Where the derivative instrument is deemed an effectivehedge over the exposure being hedged, the derivative instrumentis treated as a hedge, and hedge accounting applied. Under a fairvalue hedge, the change in the fair value of the derivative isrecognised in the profit and loss account and offsets themovement in fair value of the hedged item. Under a cash flowhedge, gains and losses on the effective portion of the change inthe fair value of the derivative instrument are recognised directlyin equity.

Changes in the fair value of derivative financial instruments thatdo not qualify for hedge accounting and any ineffectiveness in thehedge relationship are recognised in the income statement asthey arise.

The adoption of FRS 26 led to a decrease in net assets at 31stOctober 2005 of £2.0m. There were no changes to retained profitfor the year to 31st October 2005. There have been no changes inretained profit for the current year as a result of the prior yearadjustment.

The company has determined that the share based paymentcharge should be accounted for in the accounts of CrestNicholson Operations Limited rather than Crest Nicholson PLC,as the former employs the majority of the group’s employees.

The impact on the 2005 balance sheet is to increase profit andloss reserve by £1.1m.

2006

STAFF COSTS £mWages and salaries 1.8Social security costs 0.3Other pension costs 0.3

2.4

Details of Directors’ remuneration are disclosed in the Remuneration report on pages 24 to 34.

2005

£m1.60.30.92.8


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5. Fixed asset investments

Shares in subsidiary undertakings - Cost less amounts written off £m

At 31st October 2005 and 31st October 2006 5.4

Shares in subsidiary undertakings are stated net of provisions for impairment in value of £5.0m (2005: £5.0m).

The subsidiary undertakings which are significant to the group and traded during the year are set out below. The group's interest is inrespect of ordinary issued share capital which is wholly owned and all the subsidiary undertakings are incorporated in Great Britain.They are directly owned by the company unless indicated by an asterisk.

SUBSIDIARY NATURE OF BUSINESSCrest Nicholson Operations Limited Residential and commercial property developmentCrest Nicholson Residential (London) Limited Holding companyLandscape Estates Limited * Residential and commercial property development

6. Tangible fixed assets

Details of the company’s tangible fixed assets are as per Note 9 on page 51 of the Consolidated financial statements.

Details of the company borrowings are shown in Note 15 and Note 21 of the consolidated financial statements.

2006£m

AMOUNTS FALLING DUE WITHIN ONE YEARAmounts owed by subsidiary undertakings 363.4Group relief receivable 1.9Other debtors 0.1Deferred tax asset 0.7Prepayments and accrued income 1.4

367.5

7. Debtors2005 £m

338.87.20.40.92.1

349.4

2006£m

AMOUNTS FALLING DUE WITHIN ONE YEARBank overdrafts and loans 2.7Senior secured loan notes 18.4

21.1

AMOUNTS FALLING DUE AFTER MORE THAN ONE YEARPreference shares -Revolving credit facility drawings 62.0Senior secured loan notes 79.0

141.0Repayable:Between one and two years -Between two and five years 141.0Over five years -

141.0

8. Borrowings2005 £m

---

38.084.0

103.8225.8

55.9105.464.5

225.8

76N O T E S T O T H E C O M PA N Y F I N A N C I A L S TAT E M E N T SA

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2006£m

AMOUNTS FALLING DUE WITHIN ONE YEARAmounts owed to subsidiary undertakings 36.7Corporation tax 2.8Other taxes and social security costs 1.0Other creditors 1.7Accruals 8.3

50.5

9. Creditors2005 £m

6.2-

1.01.37.0

15.5

11. Reserves

Hedge reserve£m

-(2.0)(2.0)--0.8--

(1.2)

Capitalredemption reserve

£m

At 31st October 2005 as previously stated -Impact of prior year adjustments (Note 2) -At 31st October 2005 as restated -Share issues -Equity settled share based payments -Movement on hedge reserve -Transfer to capital redemption reserve 38.0Retained profit for the year -

At 31st October 2006 38.0

Share PremiumAccount

£m

57.7-

57.70.6----

58.3

Profit and LossAccount

£m

84.410.995.3

-0.8-

(38.0)0.8

58.9

2006£m

AUTHORISED136,000,000 Ordinary shares of 10p each 13.6

ALLOTTED AND FULLY PAID112,796,327 Ordinary shares of 10p each (2005: 112,407,182) 11.3

Details of share options exercised and outstanding are as per Note 19 of the Consolidated financial statements on pages 55-56.

10. Share capital2005 £m

13.6

11.2


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13. Contingent liabilities

There are performance bonds and other engagements, including those in respect of joint venture partners, undertaken in the ordinarycourse of business from which it is anticipated that no material liabilities will arise.

In addition, the company is required from time to time to act as surety for the performance by subsidiary undertakings of contractsentered into in the normal course of their business.

15. Related parties

As 100% of the company’s voting rights are controlled within the Crest Nicholson group, the company has taken advantage of theexemption contained in FRS 8 and has therefore not disclosed transactions or balances with entities which form part of the group (or investees of the group qualifying as related parties).

2006£m

OPERATING LEASE ANNUAL COMMITMENTS

LAND AND BUILDINGSExpiring within one year -Expiring between two and five years -Expiring after five years 0.7

0.7OTHERExpiring within one year 0.2Expiring between two and five years 0.7

0.9

14. Operating leases2005 £m

0.4-

0.10.5

-1.11.1

2006£m

Profit for the financial year 15.7Dividends (14.9)Retained profit for the year 0.8Proceeds from share issues 0.7Movement in hedge reserve 0.8Equity settled share based payments, net of tax 0.8Net increase in shareholders’ funds 3.1Opening shareholders’ funds (as restated) 162.2Closing shareholders’ funds (as restated) 165.3

RESTATEMENT OF SHAREHOLDERS’ FUNDSOpening reserves as reported 191.3Dividends 9.8Movement in hedge reserve (2.0)Preference shares re-classified as debt (38.0)Equity settled share based payments, net of tax 1.1Opening reserves as restated 162.2

12. Reconciliation of movements in shareholders’ funds

2005 £m

57.3(14.0)43.30.8

(3.9)0.6

40.8121.4162.2

147.79.31.9

(38.0)0.5

121.4

78F I V E Y E A R R E C O R DA

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Five year record2002 2003 2004 2005 2005 2006

UK GAAP UK GAAP UK GAAP UK GAAP Restated to IFRS IFRS£m £m £m £m £m £m

TURNOVERDevelopment - subsidiaries 505.1 538.5 631.2 701.7 699.0 690.7Development - joint ventures 10.4 12.0 12.0 12.6 - -Construction - discontinued 180.9 23.9 - - - -

696.4 574.4 643.2 714.3 699.0 690.7

OPERATING PROFIT (INCLUDING JOINT VENTURES)Development 79.2 87.3 94.9 94.9 98.9 99.2Construction - discontinued (3.4) - - - - -

75.8 87.3 94.9 94.9 98.9 99.2Operating margin - development 15.4% 15.9% 14.8% 13.3% 14.1% 14.4%

PRE-TAX PROFITDevelopment 66.3 74.6 82.1 79.2 78.9 80.1Construction - discontinued (3.3) - - - - -

63.0 74.6 82.1 79.2 78.9 80.1

HOUSINGHouses sold (units) 1,899 1,936 2,524 2,486 2,417 2,946Average selling price £225,100 £239,300 £210,000 £219,600 £225,100 £198,700Land bank - short term (units) 10,760 13,204 15,060 14,945 16,237 16,322Average selling price £197,600 £187,900 £192,200 £184,500 £184,300 £188,400Land bank - strategic (units) 13,735 13,236 13,182 12,181 12,181 12,926

BALANCE SHEETShareholders' funds 247.1 285.8 328.4 367.4 263.3 298.5Net borrowings 131.8 81.9 178.4 160.0 181.7 154.6Capital employed 378.9 367.7 506.8 527.4 445.0 453.1Gearing 53% 29% 54% 44% 69% 52%Return on shareholders' funds (average) 27.3% 28.0% 26.7% 22.8% 32.0% 28.5%Return on capital employed (average) 21.8% 23.4% 21.7% 18.4% 22.7% 22.1%

ORDINARY SHARESEarnings per share 38.8p 45.2p 49.4p 47.0p 48.2p 51.2pDividends per share 9.5p 11.0p 12.3p 12.9p 12.9p 14.2pDividend cover 4.1x 4.1x 4.0x 3.6x 3.7x 3.6xNet tangible assets per share 192p 224p 260p 294p 235p 265p

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Shareholder information

SUBSTANTIAL SHAREHOLDINGS AT 25TH JANUARY 2007The company has been notified, in accordance with s.198 – 208 of the Companies Act 1985, of the following substantial interests in theordinary share capital of the company at the date of this report:

Number of Shares held % of total

Castle Bidco Limited 26,310,243 23.32

HBOS plc 4,378,228 3.88

Legal and General Investment Management Limited 4,271,672 3.79

The Directors are not aware of any other person who is beneficially interested in 3% or more of the issued share capital.

ANALYSIS OF SHARE REGISTER AT 31ST OCTOBER 2006

FINANCIAL CALENDAR DEALING INFORMATIONResults – Interim June FT Share Price Service 0906 843 2276

Results – Full Year January TOPIC and SEAQ Number 50748

Dividend payment dates:

Interim September

Proposed April

REGISTRARS CREST NICHOLSON PLC

Lloyds TSB Registrars Registered Number 1040616The Causeway, Worthing Head Office and Registered OfficeWest Sussex BN99 6DA Crest House, Pyrcroft Road,Telephone 0870 600 3964 Chertsey, Surrey KT16 9GN

Web www.lloydstsb-registrars.co.uk Telephone 01932 580555www.shareview.co.uk Fax 0870 336 3990

Web www.crestnicholson.comE-mail [email protected]

The middle market price of an ordinary share on 1st November 2005 was 399p and at the close of business on 31st October 2006 was569p. During the year the middle market price ranged between 398p and 571p.

% of Total

24.518.737.45.87.51.84.3

100.0

Ordinary Shares NumberSize of holding of holders

1 - 500 677501 - 1,000 5151,001 - 5,000 1,0315,001 - 10,000 16110,001 - 50,000 20750,001 - 100,000 50100,001 upwards 119

2,760

Shares held

173,464426,435

2,443,9051,166,0794,735,1443,709,641

100,141,659112,796,327

% of total

0.10.42.21.04.23.3

88.8100.0

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Group directory

DIVISIONAL DIRECTORSStevan UsherTelephone 0117 923 6600Fax 0117 944 8314

Chris TinkerTelephone 01932 580333Fax 0870 336 3992

CREST NICHOLSON (CHILTERN) LIMITEDTelephone 01442 219921Fax 01442 259840Greg Ketteridge Managing Director

CREST NICHOLSON (EASTERN) LIMITEDTelephone 01277 693230Fax 01277 693281James Moody Managing Director

CREST NICHOLSON (MIDLANDS) LIMITEDTelephone 01827 60888Fax 01827 316486Bill Box Managing Director

CREST NICHOLSON (SOUTH) LIMITEDTelephone 01932 580444Fax 0870 336 3991David Huggett Managing Director

CREST NICHOLSON (SOUTH EAST) LIMITEDTelephone 01959 564282Fax 01959 561116Steve Jones Managing Director

CREST NICHOLSON (SOUTH WEST) LIMITEDTelephone 0117 923 6600Fax 0117 906 6689John Gatehouse Managing Director

CREST NICHOLSON REGENERATION LIMITEDTelephone 01932 580333Fax 0870 336 3992Debbie Aplin Managing Director

CREST PARTNERSHIP HOMES LIMITEDTelephone 01932 580555Fax 0870 336 3970Colin Smith Managing Director

As part of Crest Nicholson's continuing partnership with the Waste and ResourcesAction Programme (WRAP), the group has introduced a new environmental paperprocurement policy. This has increased the usage and specification of recycledpaper stocks. This report is printed on Revive paper which is FSC certified ascontaining 100% post consumer reclaimed waste material.

Printed using vegetable oil based inks.

Crest Nicholson PLC

Head Office and Registered OfficeCrest HousePyrcroft RoadChertseySurrey KT16 9GN

t 01932 580555f 0870 336 3990


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Crest Nicholson Holdings Annual Report (2006)

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