McCarthy and Stone Full Year Trading Update

03 September 2014

Strong growth under new management with increased investment in land and build

McCarthy & Stone (‘the Company’), Britain’s leading retirement housebuilder, announces its full year trading update for the year ended 31 August 2014. The Company will announce its Full Year Results on 3 November, 2014.

Highlights

  • Total revenues up c.25% to £389m (2013: £311m), driven by continued sales progress and higher selling prices
  • Legal completions up 10% to 1,677 homes (2013: 1,527)
  • Average selling price up c.16% to £214k (2013: £184k)
  • Carried forward sales revenues into FY15 of over £95m (2013: £76m)
  • 74 new development sites acquired with c.2,500 plots under control since September 2013; land bank stands at c.8,700 plots, which is over 5 years’ supply
  • Planned increase in investment in land and build to £2bn over the next four years (from £1.5bn in 2013)
  • Strong balance sheet and robust financial position with £49m of net debt at 31 August 2014 (2013: £63m), supporting on-going investment in land and build
  • The Company expects to achieve Full Year Results ahead of management’s previous expectations

Commenting on the results, John White, Chairman said: “McCarthy & Stone continues to make solid progress, with top-line growth supported by strong market demand for specialist retirement housing. We are driving operational improvements within the business in order to grow profitably and generate attractive capital returns. I am delighted to announce we are raising our investment target for land and build to £2 billion over the next four years in order to respond to the significant nationwide need for high-quality, specialist housing for the growing number of over 65s who are looking to downsize.”

Current Trading

McCarthy & Stone continues to trade strongly as reflected in the increase in sales volumes and this has enabled an increased investment in land and build.  The Company is benefiting from improved sales prices, reflecting a more disciplined approach to discounts and incentives, as well as good market demand for specialist retirement housing with visitor levels remaining high throughout the year. Legal completions are up 10% to 1,677 homes and average selling prices have increased by c.16% to £214k, which, coupled with tight cost discipline, means the Company expects to generate robust year-on-year profit growth ahead of expectations.

UK demographics remain strongly in favour of the specialist retirement development market, with the number of people aged over 85 expected to double by 2030, and the number of over 65 year olds expected to increase by 51%. 1 in 4 over 60s are interested in retirement living, yet only 1% of older owner-occupiers currently live in specialist retirement housing, which gives the Company continued confidence in the size of the addressable market (Demos, September 2013).

Operational highlights

During the year, a new and highly experienced leadership team was appointed to the business.  John White, Chairman, was formerly Chairman and Chief Executive of Persimmon PLC and Clive Fenton, CEO, was formerly Group Director of Barratt Developments PLC and CEO of Mount Anvil.

The Group also appointed two Non-Executive Directors, who joined the Board in November 2013: Mike Parsons (founder and former CEO of Barchester Healthcare) and Frank Nelson (former Finance Director of Galliford Try PLC).  In addition, John Tonkiss (former Chief Operating Officer at Unite Group PLC) acts as Business Transformation Director for the Group. 

Following the appointment of the new Board, the Group completed an organisational review and has implemented a number of initiatives to drive operational improvements and support EBITDA progress.  In July, the Company announced it would be opening its first new regional office in 14 years, dedicated to the North London market and the counties of Buckinghamshire, Bedfordshire, Hertfordshire and Essex, in order to better respond to the local market and capitalise on the significant growth potential in this region.

The Group is now targeting further operational improvements, with a view to creating an efficient and scalable business capable of doubling in size to develop more than 3,000 units in the medium term.  A key focus of these improvements is the acceleration of the capital cycle, through improved sales processes and reduced workflow times.

Land & Planning

In parallel, the Group continues to invest significantly in its land bank to support future growth and capture a wider share of the growing retirement market.  The Group acquired 74 new sites during the period (2013: 48 sites) at locations across the UK, equating to c. 2,500 additional units (2013: 1,776) and has plans to increase this further in 2014/15.  The Group now has sufficient sites in stock, under build or with planning consent, to deliver anticipated completions for the next two years. The total land bank of c. 8,700 plots owned and under control provides the business with over 5 years’ supply of land.

Outlook

The Group is carrying forward over £95m of sales revenues into FY15 (2013:£76m).

Given the substantial demographic opportunity open to the Group in retirement housing and the current pipeline of land under control, the Group is raising its four-year £1.5 billion investment target for land and build, announced in September 2013, to £2 billion. This additional investment, along with the vision and commitment of the new management team and the strong fundamentals for the specialist retirement market ensure McCarthy & Stone is well-positioned for the future.

- Ends -

For more information please contact:

McCarthy & Stone, 01202 292480

Clive Fenton, Chief Executive Officer                                              

Nick Maddock, Chief Financial Officer

Paul Teverson, Head of Public Affairs and PR

Brunswick Group, 020 7404 5959

Craig Breheny                                                                        

Alison Kay

Notes to Editors:

McCarthy & Stone is Britain’s leading retirement housebuilder, with a 70% share of the owner-occupied market.  The Group has sold c. 50,000 homes across more than 1,000 schemes since 1977.  The Company is renowned for its focus on the needs of people in later life.

UK demographics remain strongly in favour of the specialist retirement development market, with the number of people aged over 85 in the UK expected to double by 2030, and the number of over 65 year olds expected to increase by 51%. According to recent research, 1 in 4 over 60s are interested in retirement living, yet there are only c. 110,000 units of specialist retirement housing for homeowners (Demos, 2013).