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FY19-FY23 Business transformation strategy

25 Sep 2018 07:00

RNS Number : 7866B
McCarthy & Stone PLC
25 September 2018
 

 

 

Tuesday, 25 September 2018

 

 

McCarthy & Stone plc

 

FY19-FY23 Business transformation strategy

 

McCarthy & Stone plc (the 'Group'), the UK's leading developer and manager of retirement communities, is today hosting a scheduled event for analysts and institutional investors to provide an update on its strategic review to establish a strong financial platform for the business.

 

Background

 

Since the Company's IPO in November 2015 the business has faced a number of market headwinds including political uncertainty following the outcome of the vote to leave the European Union and a lack of Government support for the retirement housebuilding sector. These headwinds have resulted in a challenging economic backdrop, lowering consumer confidence and consequently reducing volumes in the secondary housing market with UK housing transactions showing a decline of c. 40% since 2015.

 

The Board announced earlier this year that it would be undertaking a strategic review and is today announcing the results of that review which will position the business to succeed in this more challenging market environment.

 

Key highlights of the transformation

 

· Shift in business mindset from growth to increasing ROCE and margins;

· Realigning the workflow and rightsizing the operational cost base to deliver steady state volumes of c.2,100;

· Change of year end to 31 October 2019 to decouple from peak holiday season;

· Focus on two core products, Retirement Living and Retirement Living Plus (formerly Assisted Living);

· Improved offering through increasing affordability, flexibility and choice for our customers;

 

 

Optimising our operations for strong financial performance across four fundamental pillars:

 

· Workflow realignment - generating a stable monthly flow of land exchanges, build starts, sales releases and first occupations - fundamental to operational efficiency;

· Rightsizing the business - rightsizing the operational cost base to reflect steady state volumes;

· Efficient sales and marketing model - a reorganisation of the sales teams and a centralised approach to the Group's marketing function;

· Build cost reduction - utilising standard, more efficient designs and optimising subcontract procurement practices

 

 

Financial targets FY19-21

 

· ROCE improvement to greater than 15% by FY21, increasing to over 20% by FY23;

· Improvement in operating margins to more than 15% by FY21;

· Total cost savings of more than £40m per annum by FY21;

· Total cumulative cash savings in excess of c.£90m between FY19 - FY21;

· The Group will focus on reducing its capital employed by at least £70m between FY18 and FY21.

 

Leveraging strategic opportunities

 

As part of its new strategy, the Group is also announcing a new long-term vision for the business to leverage the strategic opportunities in its services and product offering. The business will aim to create even deeper and longer relationships with customers to increase its appeal, diversify its revenue streams and reduce its exposure to market cyclicality. The long-term aim will be to create retirement communities that enrich the quality of life of its customers and their families and to become the UK's leading developer, manager and owner of retirement communities.

The Group's proposition is underpinned by three key principles:

· Flexibility within its services to respond to evolving customer needs and increase revenue. This will include the introduction of a new tiered service for new and existing homeowners, expanding its care offering, opening up new developments for wider community use and integrating technology enabled services (e.g. motion monitoring, medication control sensors and home automation).

· Choice of ownership through multi tenure options, including outright ownership, shared ownership and rental.

· Affordability - the business will seek to maximise its mass market appeal by increasing the affordability of its products. This will be achieved by reducing build costs, increasing efficiencies and introducing new contemporary and compact designs.

 

Shareholder returns

 

· 2018 ordinary dividend to be consistent with prior year, reflecting the Board's confidence in the strategic plan

· As we implement the strategic plan, we expect to generate strong cash flow

· The Board will review the capital allocation policy on a regular basis

 

Appointment of Chief Executive Officer

 

The Board is pleased to announce that John Tonkiss, formerly Chief Operating Officer and latterly interim Chief Executive Officer, has today been appointed Chief Executive Officer of McCarthy & Stone plc with immediate effect.

John Tonkiss, Chief Executive Officer, commented:

 

"As the new Chief Executive Officer of McCarthy & Stone, I am pleased to announce our new strategy which represents a shift in business mindset from growth to increasing our return on capital employed and margins. We are positioning the business to succeed in the current challenging market environment and over the next three years, we will be focusing on increasing shareholder returns by optimising our operations to deliver strong financial performance. In parallel, we will also aim to leverage our longer term strategic opportunity to increase our customer appeal, diversify our revenue streams and reduce our exposure to the market cyclicality.

 

"As the market leader in the retirement sector, we need to set the vision for what retirement living should become. We are more than just a housebuilder, as we create retirement communities that enrich the quality of life of our customers and their families. So today we have also announced a new long-term vision to create even deeper and longer relationships with our customers to meet the challenges of an ageing population. This is an exciting time for our business as we seek to meet the many challenges and opportunities presented by an ageing population, and the evolving needs of our customers.

 

"I believe that our new strategy will further build upon the strong fundamentals in the business, which include an expected c.88% increase in the number of people aged 85 and over by 2037, our significant share of the owner-occupied retirement market, and our industry-leading levels of customer service and build quality."

Event details

 

Further details will be provided at today's strategy review event. The event will be hosted at 10.30am today at Deutsche Bank's offices, Winchester House, 75 London Wall, London EC2N 2DB. Management presentations will be webcast live on our website and the presentation materials will be published on our website afterwards.

 

-Ends-

 

For more information, please contact:

 

McCarthy & Stone plc

01202 292 480

John Tonkiss, Chief Executive Officer

 

Rowan Baker, Chief Financial Officer

 

Paul Teverson, Director of Communications

 

 

 

Deutsche Bank

020 7545 8000

Neil Collingridge / Simon Hollingsworth

 

 

 

Peel Hunt

020 7418 8900

Charlie Batten / Edward Knight

 

 

 

Powerscourt

020 7250 1446

Justin Griffiths / Nick Dibden / Marina Calero

 

 

 

 

 

Notes to Editors

 

McCarthy & Stone is the UK's leading developer and manager of retirement communities, with a significant market share. 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 growing demand for retirement communities. There are currently 11.8 million people aged 65 or over, rising to 17.3m by 2037, representing a 47% increase1. 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 living2, yet only c.162,000 units of specialist retirement housing for homeowners have been built3.

 

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. 

 

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

 

 

 

 

1 ONS (2017)

2 Demos (2013)

3EAC (2018)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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