McCarthy & Stone half year results for the six months ended 28th February 2014

31 March 2014

McCarthy & Stone, Britain’s leading builder of retirement housing, today announces its half year results for the six months ended 28 February 2014, ahead of its preliminary full year trading update in early September 2014.

HALF YEAR RESULTS

  • Revenue up 49% to £149.7m (2013: £100.4m) driven by higher volumes and selling prices
  • EBITDA up 106% to £21.6m (2013: £10.5m) and net profit of £11.5m, reversing a loss of -£9.3m in 2013
  • Legal completions up 30% to 659 units (2013: 506) and average selling price rose 17% to £205k (2013: £175k)
  • Net debt on 28 February reduced to £93m following successful refinancing in August 2013 (2013: £431m)
  • Tangible gross asset value on 28 February of £467m (2013: £422m)
  • Forward sales revenues up 79% to £131.3m (2013: £73.2m)
  • Land bank increased to c. 8,500 plots, owned and under control, with a projected sales value of c. £2bn
  • Good progress on planning with all consents already in place to deliver anticipated sales volumes for the next financial year (to 31 August 2015)
  • Five Star award for customer satisfaction for the ninth year in succession 

Commenting on the results, John White, Chairman said: “We are pleased to report significant improvements across our operations.  We have had a successful first half to the financial year, more than doubling our profits[1].  We are now in a strong position to increase volumes, improve margins, and continue to grow the value of the business.  We are on target to legally complete more than 1,700 units this year.

“We remain focused on leading the retirement housing market, both in terms of unit delivery and build quality, while growing our business profitably.  Our previously announced business review, which is currently being implemented, will ensure that we operate efficiently while providing an increase in much-needed retirement housing across the whole market.”

OVERVIEW

A new and highly experienced leadership team has been appointed since September 2013.  John White (former Chairman and Chief Executive of Persimmon) has joined as Chairman, and Clive Fenton (former Barratt Group Director and CEO of Mount Anvil) has joined as CEO.  Two Non Executive Directors have also joined the Board: Mike Parsons (founder of Barchester Healthcare) and Frank Nelson (former Finance Director of Galliford Try PLC).  In addition, John Tonkiss (former Chief Operating Officer at Unite Group) has been appointed as Business Transformation Director. 

We are pleased to report a successful first half to our financial year.  The business is benefiting from a growing demand for retirement housing in the context of the wider upturn in the market and increased consumer confidence.  The backing of a new supportive shareholder group that came on board after the Company’s refinancing in August 2013 has ensured that McCarthy & Stone is now well-capitalised and well-placed to focus on driving growth, value and quality throughout the business. 

The Company is benefiting from significant innovation with its house types to meet the changing needs of its customers.  This includes larger apartments, increased customisation and the growth of in-house management and support services.  2014 will also see the launch of a new product to capture a wider share of the active retiree market looking to downsize from the family home, but for whom the traditional concept of retirement housing has not been appropriate. 

We have introduced a new central procurement process at Group level to strengthen our procurement discipline and ensure that we take advantage of our significant purchasing power.  This is already providing benefits in controlling our build costs, which, as with other house builders, have been subject to some upward price pressure.  In addition, regional agreements are being reviewed to keep labour costs under control, and build techniques and alternative methods of construction are being considered.

Our ongoing commitment to maintaining the highest standards of build quality and customer service were recognised by the NHBC / HBF Customer Satisfaction Awards in March 2014.  For the ninth year in succession, McCarthy & Stone received the Five Star award for customer satisfaction.  The Company is the only UK house builder, of any size or type, to have taken top marks every year since the launch of the awards in 2005.

LAND & PLANNING

The Company has a sizeable land bank under its control, equating to c. 8,500 units, providing the business with more than four years supply as we increase volumes to achieve our medium term volume targets.  The total value of the land bank is expected to generate forward sales revenue of c. £2bn at attractive margins with improving returns.

In the six months ended February 2014, the company has stepped up its rate of land acquisition, legally agreeing to buy 34 new development sites in attractive locations across the UK (2013: 23), totalling 1,109 plots (2013: 892).  While there is evidence of increasing competition in the land market, the company’s pipeline for this financial year and beyond remains buoyant, with a healthy continuous flow of good quality land opportunities being actively pursued.  We plan to invest £1.5bn in land and construction in the four years from September 2013.

The Company has also seen an increase in the number and speed of planning consents in the first half and has all of its planning consents in place to deliver sales in the next financial year through to 31 August 2015.   In addition, we anticipate securing our target number of planning consents for the remainder of the current financial year, giving good visibility for the business over future years.

McCarthy & Stone continues to mitigate the impact of the Community Infrastructure Levy (CIL) and other planning contributions and is pleased with the Government’s positive response to the housing needs of the ageing population and with its increasing focus on a planning system that proactively facilitates the delivery of this type of specialist housing.  This includes new planning guidance adopted by the Department for Communities and Local Government (DCLG) in March 2014, which states that the delivery of new housing for older people has now become ‘critical’.  DCLG is also undertaking a tender process ahead of commissioning a high-level research project aimed at developing policy to increase the supply of suitable housing for older people. The project is expected to commence in April and complete by July 2014. 

OUTLOOK

The second half of the financial year has started very strongly and we are confident that the Company will deliver a solid performance for the full year.  Forward sales are up 79% to £131.3m (2013: £73.2m) and visitor levels are up 25% to 13,346 for the half year (2013: 10,649).  Total sales, including legal completions to date are c. 80% of our target for the current financial year.

The Company is currently selling from 83 developments across the UK.  We expect to open for sale 23 new developments during the second half of this financial year.  We also have an additional 22 sites under construction with a further 39 sites due to start construction in this second half, creating a strong pipeline for the business, which will ensure our sales momentum is carried forward into next year and beyond.

McCarthy & Stone is focused on driving operational performance and efficiencies within the business.  An organisational review was announced on 4 March 2014 with the goal of transforming the business and achieving long-term growth.  It will deliver the right structures, systems and processes to create a more profitable, scalable and effective business. 

Market conditions look positive for the remainder of 2014 and rising demand for retirement housing presents an optimistic outlook.  There is a significant nation-wide need for more specialist retirement developments, with those aged 65 and over in the UK set to rise from 10.4 million in 2011 to 17 million in 2033.  Recent analysis by Demos, the think-tank, commissioned for the Home Builders Federation, found that 58% of over-60s homeowners are interested in moving home but that many are restricted by a lack of suitable alternative housing.  One quarter (25%) expressed particular interest in buying a retirement property – a total of 3.5 million people – which dwarfs the 106,000 retirement properties currently built for home ownership to-date. 

We therefore remain confident that McCarthy & Stone is in a great position to increase volumes and to grow our business profitably over future years.

Finally, we recognise the role of our employees in helping to deliver these strong results.  McCarthy & Stone has a highly professional and specialised team of people working across the UK to build quality retirement housing that makes a difference to the lives of thousands of older people and performs a vital social function.  This would not be possible without their input and we thank them for their continued hard work.

*(Figures included are unaudited)

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Notes to Editors:

McCarthy & Stone is Britain’s leading builder of retirement housing, responsible for the construction of more than 45,000 properties for more than 50,000 homeowners.  The company is renowned for its focus on the needs of people in later life.

For further information, please contact Andrew Baud at Tala, andrew.baud@teamtala.com, 020 3397 3383 or 07775 715775