MCS.L Regulatory News (MCS)

Thursday 6 September 2018

McCarthy & Stone plc

Full Year 2018 Trading Update

McCarthy & Stone plc (the 'Group'), the UK's leading retirement housebuilder, is today issuing its trading update for the full year ended 31 August 2018 ('2018'), ahead of reporting its annual results on 13 November 2018. All comparatives are to the full year ended 31 August 2017 ('2017') unless otherwise stated.

· Full year revenue is expected to be c.£670m (2017: £661m) supported by a 10% increase in average selling price to c.£300k (2017: £273k) reflecting continuing improvements in the sales mix, as well as quality and location of our developments.

· The Group achieved total legal completions of 2,134 units (2017: 2,302) during the period, with volumes and operating profit constrained, as expected, by the heavy H2 weighting of first occupations, continuing economic uncertainty coupled with a slower secondary market and a softening of pricing, particularly in the South, during the second half of the year.

· The Group's sale of the Freehold Reversionary Interests was successfully completed in August with a total cash value of c.£25m.

· Operating profit for the year is now expected to be within the current analyst forecast range of c.£65m to c.£73m (2017 operating profit: £96m).

· Year end net cash is expected to be c.£4m (2017: net cash of £31m).

· The Group delivered 68 first occupations during the year, representing a substantial increase on 49 first occupations in 2017.

· Year end forward order book is currently c.23% ahead of prior year at c.£174m (2017: £141m) supported by 69 sales releases during the year (2017: 52).

· In response to the uncertainty resulting from the Government's announcement on ground rents, the Group exercised additional caution throughout the year with 54 land exchanges (2017: 75) and 37 planning consents (2017: 64) achieved during the period. This lower level of activity is the result of a more measured approach to land buying and further time taken to renegotiate s.106 contributions with local planning authorities in order to partially mitigate the potential impact of zero-rating future ground rents on new build properties. 

John Tonkiss, Interim Chief Executive Officer commented: "It has been a tough year for the Group with ongoing adverse market conditions continuing to impact the business, and without the benefit of any additional Government support for the retirement housing sector. Build delivery remained strong, however, with 68 (2017: 49) high-quality developments brought to market during the year.

"In light of the continuing challenging market conditions, the Group began a review of its strategy in April. As previously announced, our strategic focus will be on pursuing a more measured trajectory and smoothing our workflow to create a more efficient business. This will naturally lead to a right-sizing of our cost base, with build cost savings being a key area of focus.  Additionally, we are continuing to trial a number of strategic initiatives designed to increase customer appeal and offer a broader choice of tenure options, increased flexibility and affordability. We will provide the market with more detail on this at our Strategy Update later this month.

"We are continuing to engage with Government in an effort to secure an exemption from the proposed changes to ground rents.  We believe that there is a strong case for a specific exemption for the retirement housebuilding sector and we are awaiting clarification on this matter. Until this is received, we continue our planning to try and mitigate the potential impact on the business, including maintaining discipline around our cash position and adopting a more measured approach to securing land.

"We continue to lead the market when it comes to customer satisfaction and remain the only housebuilder of any size or type to have received the full Five Star rating in the Home Builders Federation customer satisfaction survey for thirteen consecutive years."

Strategy Update:

McCarthy & Stone plc will host a Strategy Day for institutional investors and analysts at 10:30am on Tuesday 25 September 2018 at Deutsche Bank's offices, Winchester House, 75 London Wall, London, EC2N 2DB.

The event will be hosted by Paul Lester, Chairman, John Tonkiss, Interim CEO and Rowan Baker, CFO.  

Analysts and investors wishing to attend the presentation are asked to contact Powerscourt at: mccarthy-stone@Powerscourt-group.com.

A live webcast of the presentations will be available via the McCarthy & Stone corporate website and those wishing to register to view may now do so at: 

http://www.mccarthyandstonegroup.co.uk/investors/strategy-day. A recorded version will be available on the corporate website following the presentation.

- Ends -

For more information, please contact:

McCarthy & Stone, 01202 292480

John Tonkiss, Interim Chief Executive Officer

Rowan Baker, Chief Financial Officer

Paul Teverson, Director of Communications

Powerscourt, 020 7250 1446 / mccarthy-stone@powerscourt-group.com

Justin Griffiths

Nick Dibden

Victoria Heslop

Notes to Editors

McCarthy & Stone is the UK's leading retirement housebuilder, with a c.70% share of the owner-occupied market1. The Group buys land and then builds, sells and manages high-quality retirement developments. It has built and sold more than 56,000 properties across more than 1,200 retirement developments since 1977, and is renowned for its focus on the needs of those in later life.

There is a growing demand for retirement housing. There are currently 11.8 million people aged 65 or over, rising to 17.3m by 2037, representing a 47% increase2. For those aged 85 or over, the increase will be larger, from 1.6m to 3.0m, representing an 88% increase. One in four over 60s are interested in retirement living3, yet only c.162,000 units of specialist retirement housing for homeowners have been built4.

McCarthy & Stone has two main product ranges - Retirement Living and Retirement Living Plus, which provide mainly one and two bedroom apartments across the country with varying levels of support and care for older homeowners. Retirement Living developments provide independence in private apartments designed specifically for the over-60s, as well as facilities such as shared lounges and guest suites that support companionship. Retirement Living Plus developments, which are designed specifically for the over-70s, offer all of this plus more on-site facilities such as restaurants, well-being suites and function rooms. Importantly, they also provide flexible care and support packages to assist those needing additional help. 

In 2014, McCarthy & Stone also launched its Lifestyle Living product, which is exclusively for the over-55s and those in the earlier stages of retirement who are seeking to downsize for their leisure years.

All developments built since 2010 are managed by the company's in-house management services team, providing peace of mind that it will look after customers and their properties over the long term. This is a key part of how McCarthy & Stone seeks to enrich its customers' lives. This commitment to quality and customer service continues to be recognised by homeowners. In March 2018, the Group received the full Five Star rating for customer satisfaction from the Home Builders Federation for the thirteenth consecutive year - making it the only UK housebuilder, of any size or type, to achieve this accolade.

The Group was also pleased to win 20 awards at the 2018 NHBC Pride in the Job awards, marking a 33% increase in awards from 2017. The scheme recognises construction site managers who achieve the highest standards in housebuilding and has been instrumental in driving up standards in the sector for 38 years.

For further information, please visit www.mccarthyandstone.co.uk.