MCS.L Regulatory News (MCS)

Tuesday 6 March 2018

McCarthy & Stone plc

Half year trading update

McCarthy & Stone plc (the 'Group'), the UK's leading retirement housebuilder, is today issuing a trading update for the half year ended 28 February 2018 ('2018'), ahead of reporting its half year results on Wednesday 11 April 2018. All comparatives are to the prior year equivalent six month period ended 28 February 2017 ('2017') unless otherwise stated.

· Forward sales including legal completions are currently c.16% ahead of the prior year at £487m (2017: £418m), supported by 50 new sales releases during the period (2017: 32). Trading has remained resilient during the first two months of the new calendar year and the new sales releases have performed well.

· Total legal completions of 7601 units (2017: 8642) were achieved during the period, constrained as expected by the lower number of new first occupation sites (16) in the first half (2017: 19) and ongoing subdued conditions in the secondary market impacting older stock.

· Half year revenue is expected to be c.£240m (2017: £238m) supported by a 14% increase in average selling price to £296k (2017: £260k) reflecting continuing improvements in the quality and location of our developments.

· As previously guided, H1 margins and operating profit are expected to be lower than the prior year, reflecting the level of investment required to deliver H2 completions, the additional marketing activity to promote the high level of current year sales releases (including a new television advertising campaign) and increased usage of part exchange to counteract subdued market conditions in the period.

· Workflow and build activity remain on track to deliver c.80 new sales releases (2017: 52) and more than 65 first occupations in the year (2017: 49) with c.49 first occupations scheduled to come through in H2. The Group's profit will be more heavily weighted to H2 than previously expected, with H1 operating profit likely to be in the order of c.12% of current market expectations for the year. However, the 16% increase in our forward order book together with the higher level of first occupations in H2 over H1 gives us confidence in our expectation that the full year outturn will be within the current range of analyst forecasts, albeit with continuing uncertainty resulting from the Government announcement on ground rents.

· Period end net debt is expected to be c.£76m (2017: £30m) reflecting an increased level of investment in build activity in preparation for H2.

· In response to the uncertainty resulting from the Government announcement on ground rents, the Group exercised additional caution in H1 with 22 land exchanges and 21 planning consents achieved during the period (2017: 30 land exchanges and 34 planning consents). This lower level of activity reflects 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. The Group's land bank remains strong, however, at more than 4 years' supply (2017: 4.4 years).

· The Group successfully completed its H1 sale of freehold reversions during the period and due diligence work has now commenced on the sale for H2.

Clive Fenton, Chief Executive Officer, commented:

"Trading remained resilient during the first half of FY18 despite ongoing subdued conditions within the secondary market. Our forward order book is currently showing a 16% increase year on year and this gives us confidence in our expectation that the full year outturn will be within the current range of analyst forecasts for the full year, albeit there remains continuing uncertainty created by the Government announcement on ground rents.

 "We continue to address the increasing market demand for retirement housing generated by a rapidly ageing population and welcome the recent CLG Select Committee report from a group of leading MP's for a new national strategy for older people's housing. We are working with the Government to build on policies in this area which have the potential to support the delivery of a greater range of specialist retirement housing to address the significant shortfall of supply across the UK.

"As previously stated, we are actively engaging with the Government in an effort to secure an exemption from the proposed changes to ground rents announced on 21 December 2017. We believe that there is a strong case for a very specific exemption for the retirement housebuilding sector and we are seeking swift clarification on this matter. Until this is received, we continue our planning to mitigate the potential impact on the business, including maintaining discipline around our cash position and adopting a more measured approach to securing land."

The Group will release its results for the half year ended 28 February 2018 on Wednesday 11 April 2018.

- Ends -

For more information, please contact:

McCarthy & Stone, +44 (0) 1202 292480

Clive Fenton, 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

Notes to Editors

About McCarthy & Stone plc

McCarthy & Stone plc is the UK's leading retirement housebuilder with a c.70% share of the owner-occupied market3. The Group has sold over 54,000 properties across c.1,200 retirement developments since 1977 and is renowned for its focus on the needs of those in later life. It re-joined the Main Market of the London Stock Exchange in November 2015 and re-entered the FTSE 250 following its quarterly review on 21 March 2016.

There is a growing need for retirement housing. There are currently 11.8 million people aged 65 or over, rising to 17.3m by 2037, representing a 47% increase4. For those aged 85 or over, the increase will be larger, from 1.6m to 3.0m, representing an 88% increase. According to research by Demos, one in four over 60s are interested in retirement living5, yet only c.157,000 units of specialist retirement housing for homeowners have been built6.

The Group has two established product ranges - Retirement Living and Retirement Living Plus (formerly known as Assisted Living) - which provide mainly one and two bedroom apartments across the country with varying levels of support and care for older homeowners. In late 2014, McCarthy & Stone launched its Lifestyle Living (formerly Ortus Homes) 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.

The first Lifestyle Living development at Scarlet Oak in Solihull won the Best Retirement Scheme at the annual Housebuilder Awards in November 2015. At the same awards in November 2016, we were pleased to again receive Best Retirement Scheme for Ramsay Grange and Lyle Court, our combined Retirement Living Plus and Lifestyle Living development in Barnton, Edinburgh, as well as Best Customer Satisfaction Initiative for our approach to ensuring that we deliver a Five Star service for our homeowners.

The Group was also pleased to win 15 awards at the 2017 NHBC Pride in the Job awards and 7 Seals of Excellence, marking a 50% increase in awards from 2016. The scheme is dedicated to recognising construction site managers who achieve the highest standards in housebuilding and has been instrumental in driving up standards in the sector for 37 years.

McCarthy & Stone's commitment to quality and customer service continues to be recognised by homeowners. In March 2017, the Group received the full Five Star rating for customer satisfaction from the Home Builders Federation for the twelfth consecutive year - making it the only UK housebuilder, of any size or type, to achieve this accolade.

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. McCarthy & Stone Management Services (MSMS) provides management services in Retirement Living and Lifestyle Living developments. YourLife Management Services (YLMS), which is owned 50/50 by MSMS and Somerset Care Group, a leading not-for-profit care provider, provides management services, domestic assistance, catering, personal care and additional support in Retirement Living Plus developments, and each development is run by an Estate Manager and a team of staff delivering services 24 hours a day, 365 days a year.

www.mccarthyandstonegroup.co.uk  

Forward-looking statements

Some of the information in this document may contain forward-looking statements regarding McCarthy & Stone plc and its subsidiaries (the Group). You may be able to identify forward-looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. McCarthy & Stone plc (the Company) wishes to caution you that actual events or results may differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this document and the Company undertakes no obligation to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in forward-looking statements of the Group, including among others, general economic conditions, the competitive environment as well as many other risks specifically related to the Group and its operations. Past performance of the Group cannot be relied on as a guide to future performance. Nothing in this document should be construed as a profit forecast.