Investor presentation Creating retirement communities to enrich the - - PowerPoint PPT Presentation
Investor presentation Creating retirement communities to enrich the quality of life for our customers and their families 2019 Based on half year results ended 28 February 2019 Retirement living to the full IR Contact:
Retirement living to the full
2019 Creating retirement communities to enrich the quality of life for our customers and their families
Based on half year results ended 28 February 2019
IR Contact: marina.calero@mccarthyandstone.co.uk
2
We have a great underlying business with strong fundamentals…
Undisputed market leader with high market share
▪
Built and sold more than 56,000 properties across more than 1,200 retirement developments since 1977
▪
Transitioning from UK’s leading retirement housebuilder to become the UK’s leading developer, owner and manager of retirement communities through two-stage transformation strategy Operating in a market with significant growth opportunity
▪
Rapidly ageing population
▪
Structural undersupply of retirement housing Strong operational capabilities
▪
Recognised, well-respected brand
▪
High-quality housebuilder
▪
Strong landbank
▪
Best customer satisfaction ratings – consistently 5 star rating
–
93% of our customers would recommend us to a friend
▪
High-quality services – 100% of our registered RLP developments achieved “Good” or “Outstanding” CQC ratings
▪
Great people – committed and talented employees
▪
Two new COO appointments in January 2019 Offering a unique customer proposition
▪
Lifestyle built around retirement community and wellbeing
▪
c.17,000 homeowners across c.400 managed developments
▪
Two key products: Retirement Living (RL) and Retirement Living Plus (RLP) Projected UK population growth1, million
11.8 17.3 2037 2017
1.6 3.0
Aged 65+ Aged 85+
Projected supply gap2, thousand
579
Retirement housing demand, 2018-28
People Units
Existing stock
162
72% shortfall (1)Office for National Statistics population projections (2017) (2)Note: Analysis based on the assumption that 25% of the over-65 population would consider retirement housing. SOURCE: ONS, Knight Frank Research; team analysis
Highly experienced management team with deep sector expertise
Paul Lester Chairman Appointed Jan 2018 Currently Chairman
Forterra plc. Formerly CEO of VT Group plc and Group Managing Director of Balfour Beatty plc John Tonkiss CEO Appointed Sep 2018 Joined in 2014 and was previously Group Chief Operating Officer Rowan Baker CFO Appointed Jan 2017 Joined in 2012 and was previously Group Financial Controller Nigel Turner COO, Build Appointed Jan 2019 Formerly Developments Property Services Director and Executive Director at Kier Group plc Mike Lloyd COO, Services & Customers Appointed Jan 2019 Formerly Commercial Director responsible for Group Marketing at The AA.
3
We are positioning the business to succeed in this challenging market environment
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 units p.a. Change of year end to 31 October 2019 to decouple from peak holiday season Focus on two core offerings, Retirement Living and Retirement Living Plus (formerly Assisted Living) Improved product offering through increasing affordability, flexibility and choice for our customers
Key operational highlights of transformation Transforming the business from a retirement housebuilder to a developer, manager and owner of retirement communities
– Buy, rent, shared ownership – Part–exchange – Let customer’s property (Rent to rent) – Gym, local events, clubs, technology – Doctors’ surgeries, pharmacies,
convenience stores
– Variety of payment options – Broadening market appeal via
increased affordability
– Streamlined, contemporary and
compact designs
4
Two stages of our business transformation
Optimising our operations for strong financial performance…
Cost saving >£40m in FY21 FY21 Operating margin >15% FY21 ROCE >15% Cash saving >£90m FY19 to FY21 Focus on ROCE and margins
…leveraging strategic opportunities
ROCE >20% by FY23 Increased market penetration New revenue streams Reduced cyclicality
FY23: Developer, Manager, Owner FY19: Housebuilder FY21 1
Workflow realignment In progress
3 4
Efficient sales and marketing model In progress Build cost reduction In progress
2
Rightsizing the business
Flexibility of services Choice of tenure Affordability of product
5
Stage 1 Summary: optimising our operations for strong financial performance
Rightsizing the business Efficient sales and marketing model Build cost reduction Workflow realignment
COMPLETED IN PROGRESS
2 3 4 1
IN PROGRESS IN PROGRESS
>15% operating margin by FY21 >15% ROCE by FY21 >£90m additional cash generated >£40m Cost saving in FY21
20-30% 10-20% 50-60%
Share of expected >£40m savings FY21
Stages Targets
No impact on P&L
6
Stable monthly flow of land exchanges, build starts, sales releases and first occupations – fundamental to
Uneven workflow in pursuit of previous growth strategy impacted results – planning mindset focused on first time consents, tendency to accelerate activity to deliver volumes Progress: ✓ Planning actions completed ✓ Incentive scheme launched ✓ Landbank optionality maintained ✓ Inventory levels reducing in line with strategic plan ✓ 10 high quality development sites added to the landbank (HY18: 22) ✓ 21 planning consents achieved (HY18: 21)
Stage 1 - optimising our operations for strong financial performance
1,779 1,579
441 new stock 1,138
FY18 Actual FY21 Target Finished stock, units
Optimise balance sheet and reduce finished stock levels - >£70m reduction in inventory FY18 to FY21 Stable monthly flow of build starts and first occupations
7 23 17 53 23 29 23 25 Average rate of first occupations FY16 – FY18, % Expected profile of first occupations FY21, % 3,000 unit sales target Steady volume at c. 2,100 units Q4 Q3 Q2 Q1 Q1 FY21 Q3 FY21 Q2 FY21 Q4 FY21
3.9 years’ landbank supply1
1 - calculated based on FY18 legal completions of 2,134 units
HY19 Actual
1,100
7
Rightsizing operational cost base to reflect steady state volumes while remaining positioned to scale for growth
areas
working
activities: Build & Production and Sales & Services
Share of expected >£40m savings FY21
Stage 1 - optimising our operations for strong financial performance …Cont
20-30%
FY19 FY20 FY21 Full benefit
Regions across the UK, each targeting 400+ units across their entire footprint
Regions optimised
line with their steady state volume
New regional footprint:
c.£10m of annualised cash saving
Rightsizing
8
Reorganisation of sales teams and centralisation of marketing
Optimised sales operating model and centralised marketing function streamlined staffing, standardised sales processes and improved marketing effectiveness Improved website and content management system on track for roll-out summer 2019
Share of expected >£40m savings FY21
Stage 1 - optimising our operations for strong financial performance …Cont
10-20%
2 1 3
Strategic levers
Ongoing phased roll-out of Salesforce CRM system.
2019
regions
FY19 FY20 FY21 FY19 FY20
Salesforce rollout Revised operating model
Full benefit
Streamlined staffing c.£2m of annualised cash saving
9
Deliver more standardised and efficient designs, deploy more cost effective building solutions and streamline procurement practices
Share of expected >£40m savings FY21
Stage 1 - optimising our operations for strong financial performance …Cont
50-60%
Completed design efficiency reviews through standard designs and spec guidelines of FY19 and FY20 sites for margin improvement opportunities. New schemes more design compliant Value engineering - prelim standardisation and optimising of technical specs (e.g. foundations, balconies, wall structures) Standard construction programme and preliminary schedule rolled out
Procurement initiatives - a programme for competitive tendering of sub-contract packages commenced
Design compliance Improve design and materials Redesigning and re-engineering the way we build Full benefit
FY21 FY19 FY20
10
Build cost reduction – Bingley RL case study 4
Bingley RL development
Design changes
▪
Communal areas rationalised and reduced
▪
Building articulation reduced – less complicated build
▪
Simpler material palette used on rear elevation
▪
Additional 4 two bed apartments to floor plan
▪
One bedroom added to existing 1 bed apartment
▪
Improved internal efficiency
▪
Standard apartment type Estimated impact of Bingley redesign, £000
Design management / Net margin benefit 760 Site margin increase 5% Prelims / Supply chain / Tendering 110 BCR Savings 870 After Before
Simpler material palette to rear
Communal areas rationalised and reduced
Apartment position ‘swapped’ to increase saleability Reduced articulation – less complexity Additional bedroom
+ +
Reduction in floor communal floor area Simplified corner – more efficient construction Additional bedroom
+ + +
First floor Second floor Third floor Ground floor apartment
11
Strategic timeline – Two stages to deliver our business transformation Optimising our operations for strong financial performance…
Cost saving >£40m in FY21 FY21 Operating margin >15% FY21 ROCE >15% Cash saving >£90m FY19 to FY21 FY21: Focus on ROCE and margins
…leveraging strategic opportunities
ROCE >20% by FY23 Increased market penetration New revenue streams Reduced cyclicality
FY23: Developer, Manager, Owner FY19: Housebuilder
Flexibility Choice Affordability Incubators launched Design, planning and supplier selection in progress
12
Stage 2 - leveraging our strategic opportunities
Flexibility 1
Growth in Management Services revenues (management and care fees) Opportunity = >5% of group revenue
Strategic opportunity:
Variety of payment options Flexible, future proofed and evolving with needs products
Strategic objective:
Launched trials on 21 services across 6 categories in early February Incubator hub live in West Midlands, involving 300 customers Further incubator hub launched in South East Business partners engaged and services provisioned for this stage Review and monitoring underway: level of uptake, commercial viability, scalability
Progress update:
Social / Other Food & Drink Transport Health & Wellbeing Technology Care & support “We should use new technology if it can help us manage our health” “Mum – I think it would be a good idea to give it [remote monitoring] a go, there’s no harm in trying it” “You mean I could talk to a GP the same day? Well that's better than the 3 weeks [for last non-urgent]“ “I have lunch [in the restaurant] every day. I would come for dinner every day if you provided it” “I would attend events there [other developments]… but what are you going to do about transport”
Southsea (at both Tudor Rose Court and Savoy House) – discuss the bistro catering offer and services to RL
13
Stage 2 - leveraging our strategic opportunities
Choice 2
On balance sheet trial up to £50m Opportunity = transfer to separate rental fund with potential positive ROCE impact and regular asset management income streams
Strategic opportunity:
Multi–tenure: Build to sell, Part Buy Part Rent and rent only
Strategic objective:
Incubator now launched in 2 regions across 11 developments. 160 apartments on multi-tenure options: outright purchase, Part Buy Part Rent and Rent only First rental reservations have been taken under Assured Tenancy Agreement:
thereafter
ground rent and service charge New website and marketing materials Performance and feedback monitored to refine the proposition.
Progress update:
South East: LIVE 3xRL, 3xRP
North-East: LIVE 3xRL, 2xRP
West Midlands: Early May 2xRL, 1xRP South East: LIVE 3xRL, 3xRP
Upper Norwood RL Crowthorne RP Maidenhead RL & RP Southborough RL c. 50 miles SE of Woking Walton on Thames RP
North-East: LIVE 3xRL, 2xRP
Ilkley RL & RP Scarborough RP Brough RL Darlington RL c. 50 miles N of York
West Midlands: Early May 2xRL, 1xRP
Edgbaston RP Solihull RL Redditch RL
14
Stage 2 - leveraging our strategic opportunities
Affordability 3
Opportunity = increased market penetration by introducing lower cost product offering Target = c.15% of land bank
Strategic opportunity:
Streamlined, contemporary and compact designs at mass market average prices
Strategic objective:
Agreed designs for compact, contemporary, affordable (MMC) offering, tested using customer focus groups Scope includes Classic and Bungalow products Working with various MMC suppliers for panelised solutions Volumetric partner assessed and selected to develop the modular designs and design to cost Location for first panelised scheme identified and planning is underway for build start end 2019 Shortlist of volumetric schemes identified to commence in FY20
Progress update:
Compact Two bed 62.7m2 Classic Two bed 72.1m2 to Open Plan Cellular
One bed apartment
Full length windows Brighter, fresher finish
15
Capital allocation
Optimise operations to deliver strong financial performance Progress turnaround and set business for steady state production at c.2,100 units p.a. Organic investment subject to market opportunity Maintain the necessary balance sheet strength with continuing focus on careful cash management Investment into multi-tenure proof of concept Maintain ordinary dividend payment level at 5.4p with intention to grow the ordinary dividend cover to around 2x underlying earnings over the medium-term Subject to market conditions, intention to return surplus capital to shareholders by way of share buy-back or special dividends
16
We continue to make our sector’s case with Government
2. Reform planning
Paper
downsize
additional revenue from new chains created The Spring Statement on 13 March 2019 also included plans for new guidance on diversifying housing types on large sites and an ‘Accelerated Planning Green Paper’
Rt Hon James Brokenshire MP, Secretary of State for MHCLG, meeting our homeowners in 2018
for the retirement community sector to continue to charge economic ground rents after they are capped elsewhere
17
18
Key highlights
Significant progress in delivering new strategy with key milestones achieved in accordance with plan
Nigel Turner - Build & Production Mike Lloyd - Sales & Services
staffing of sales substantially complete, delivering annualised cash saving of c.£12m
and choice with incubator hubs now live 845 legal completions (HY18: 760), with revenue at £281m (HY18: £240m) ASP1 £319k (HY18: £298k), a 7% increase, reflecting improvements in quality and locations together with change in geographic and product mix £21.3m underlying operating profit2 (HY18: £14.5m) Increased use of discounts and incentives, particularly part-exchange, to counteract a more challenging secondary market 10 high quality development sites added to land bank (HY18: 22 sites) and 21 planning consents achieved (HY18: 21) 5 Star customer satisfaction awarded for the 14th consecutive year Proposing an interim dividend of 1.9p per share, to be paid on 11 June 2019 (HY18 1.9p)
1. Average selling price is calculated as average list price less cash discounts and part-exchange top-ups and fair value adjustments (2019 only due to IFRS 15 changes) 2. Underlying operating profit (including underlying operating profit margin and underlying basic earnings per share) and underlying profit before tax are calculated by adding amortisation of brand of £1.0m (2018: £1.0m) and exceptional items of £14.3m (2018: £nil) to operating profit and profit before tax respectively.
UK Consumer Confidence index, GfK Index
Strategy announcement
National Average Sales Per Surveyor, RICs Feb19
EXTERNAL MARKET FACTORS
19
54 28
10 20 30 40 50 60 FY18 FY19
Sales release sites
5th April
17 4
10 20 30 40 50 60 FY18 FY19
Sales release sites
9th November
6 weeks trading post period end
Completion volumes remain ahead of prior year, despite increasingly challenging market conditions with continued use of part- exchange Sales leads and enquirers in line with prior year despite the planned lower level of sales releases (2019: 28, 2018: 54) reflecting strategic focus on rebalancing workflow Forward order book as at 5 April 2019 (week 31) currently c.17% behind prior year at c. £485m (6 April 2018: £581m) with higher quality reservations now being held due to improved controls Shortfall due to:
completed)
FY19 volume out-turn (14m to 31 October) remains in line with Board’s expectations with increased use of discounts and incentives, particularly part-exchange, now expected to continue into H2 to counteract more challenging secondary market
£485m £267m £174m £581m £277m £141m 5 April 9 November 1 September FY18 FY19
Forward order book (including legal completions) Sales releases
13 26
20
6.0% 7.6% 1.5% 2.9% 1.5% 1.0% 0.1% 2.2% 1.3% 1.1% 0.8% H1 FY18 Op. Profit margin Volume List price Land & Build cost increase (location and specification improvement) Build cost inflation at estimate of 3% Total incentive costs Stock holding costs Sales & marketing Operating costs Other FY19 H1 Op. Profit margin
Operating profit margin bridge
Margin improvements driven by Increase in legal completions volumes of 85 units Pricing increase reflecting continued improvements in quality and locations, geographic and product mix This has been offset by: ▪ Land and build cost increases (reflecting location & specification improvements) ▪ Build cost inflation c.3-4% p.a. ▪ Increased usage of discounts and incentives, particularly part-exchange, to counteract a more challenging secondary market Positive impact from planned margin improvement activities in line with new strategy ▪ Rightsizing of the business ▪ Sales and marketing efficiencies
Impact from strategic initiatives
21
Part-exchange performance
Part-exchange (PX) usage Part-exchange continues to be a valuable tool for the business Increased volume of PX transactions: 46% of legal completions (2018: 40%) reflecting ongoing subdued secondary market Saving of c.£2.7m (HY18 c.£2.6m) through use of on balance sheet PX compared to use of third party PX with average capital employed of £27.2m On balance sheet PX properties resold in line with target at average of c.13.3 weeks (FY18: c.13.1 weeks) post buy-in Board approved increased limit of 10% of net assets (c.75% utilised at 28 Feb), with tight controls in place to ensure regions do not exceed capital allocation Group expects to utilise full part exchange allocation in H2 On balance sheet part-exchange usage 214 properties purchased (HY18: 126) and 196 sold (HY18: 130) Average buy-in price of 96% of market value ▪ Average purchase price £310k ▪ Average loss on sale £2.7k 165 properties on balance sheet at HY19 (31 August 2018: 147)
25% 21% 54%
HY19
17% 23% 60%
HY18
214 126 176 178
HY19 HY18
PX transactions
In-house PX 3rd party PX
22
FY19 volume out-turn (14 months to 31 October) remains in line with the Board’s expectations:
with all sites currently under construction
FY21 targeted P&L saving of £40m) at gross profit level Increased use of discounts and incentives, particularly part-exchange, now expected to continue into H2, to counteract more challenging secondary market House price inflation remains subdued and build cost inflation expected to remain at c.3-4% level Roll-out of new strategy underway with key milestones achieved in accordance with plan
FY19 outlook
Next reporting date: 7 November 2019:
Trading update announcement
23
HY19 Financial performance
24
Total legal completions of 845 units (HY18: 760) positive momentum in legal completions driven by higher
Half year revenue of £281m (HY18: £240m) supported by 7% improvement in average selling price to £319k (HY18: £298k) reflecting improvement in quality and location of developments and change in geographic and product mix Underlying operating profit margin of 7.6% (HY18: 6.0%) driven by volume increase, ASP profile, planned margin improvement activity in line with new strategy partially offset by increased usage of part-exchange and incentives to counteract more challenging market conditions Exceptional items of £14m (HY18: £0m) represents restructuring and redundancy costs, realignment
consultancy fees (£5.6m cash impact in H1)
Headline HY19 results
Key financial metrics HY 19 HY 18 Change Legal completions 845 760 11% Average selling price1 £319k £298k 7% Revenue £280.5m £239.6m 17% Gross profit £39.0m £32.0m 22% Gross profit margin 13.9% 13.4% 0.5ppt Underlying operating profit2 £21.3m £14.5m 47% Underlying operating profit margin2 7.6% 6.0% 1.6ppt Underlying profit before tax2 £18.9m £11.5m 64% Statutory profit before tax £3.6m £10.5m (66%) Underlying basic earnings per share2 2.9p 1.7p 1.2p
1. Average selling price is calculated as average list price less cash discounts and part-exchange top-ups and fair value adjustments (2019 only due to IFRS 15 changes) 2. Underlying operating profit (including underlying operating profit margin and underlying basic earnings per share) and underlying profit before tax are calculated by adding amortisation of brand of £1.0m (2018: £1.0m) and exceptional items of £14.3m (2018: £nil) to operating profit and profit before tax respectively.
25
ROCE decrease by 2ppt driven by a lower 12 month
Net debt of £57m (HY18: £76m) reflecting ongoing focus
activity TGAV decreased to £738m (HY17: £743m) driven by £12m increase in net stock offset by £19m improvement in net debt position Proposing an interim dividend of 1.9p per share (HY18: 1.9p)
Headline HY19 results
Key financial metrics HY19 HY18 Change Return on capital employed3 (ROCE) 10% 12% (2ppt) Capital turn 1.0x 0.9x (0.1x) Net debt £57.2m £75.9m £18.7m Tangible gross asset value (TGAV) £738m £743m (£5m) Interim dividend per share 1.9p 1.9p
excluding goodwill of £41.7m (2018: £41.7m) and intangible assets of £25.2m (2018: £26.7m), excluding net debt of £57.2m (2018: £75.9m)
26
28 February 2019 28 February 2018
£m £m 66.9 68.4 2.5 2.8 90.2 112.0 (30.1) (50.4) 299.2 451.1 381.4 239.0 740.7 751.7 55.8 32.5 796.5 784.2 (57.2) (75.9) (60.6) (44.1) 748.1 735.4
Balance sheet
£m
31 August 2018
£m Goodwill and intangible assets 67.8 Fixed assets & investments 2.7 Land 99.6 Land creditors (56.9) Sites in the course of construction 290.3 Finished stock 385.9 Total net stock (excl. PX properties) 718.9 PX properties 41.7 Total net stock 760.6 Net cash/debt 4.0 Other net assets / liabilities (71.7) Net assets 763.4
+40% +60%
+2% Total land bank of c.8,372 plots (HY18: c.10,021) Lower land value reflects decreased level of land buying as a result of move away from growth to steady state workflow delivery ▪ 10 land exchanges (HY18: 22) ▪ 13 land completions in HY19 (HY18: 25) Lower level of first occupations expected in H2 resulted in 34% decrease in sites under construction, in line with the new strategy Finished stock levels reduced to 1,579 (31 Aug 18: 1,779). 641 units of opening stock sold in H1 partially offset by 441 units of new stock added during period Increased value of part-exchange properties held on balance sheet in response to more challenging secondary market +72%
27
Cashflow – net cash / (net debt)
Enter cashflow bridge
£4.0m £268.4m £57.2m £71.1m £7.7m £18.8m £5.6m £57.9m £168.6m
50 100 150 200 250 300
Opening net cash Net revenue Land spend Build spend Operating costs &
Tax & interest Dividends paid Exceptional items Closing net debt
Total land & build spend £227m (2018:£245m)
*
* Includes incentive costs, build repairs and other variable cost
Continuing to exercise careful cash management and maintain a strong balance sheet Existing revolving credit facility has been extended from May 2021 to March 2023 Positive net cash position expected at year end
28
Change of auditors and new financial calendar
New financial calendar
FY19 H1 period end 28 February FY19 H2 period end 31 October FY20 H1 period end 30 April FY20 H2 period end 31 October FY19 - 14 months FY20 - 12 months
Audit tender completed in June 2018 in line with ten year statutory requirement EY appointed as auditors effective from FY19 (current auditors: Deloitte)
31 October 2019 – Year end 7 November 2019 – Full Year trading update 28 January 2020 – Full Year FY19 results announcement
Investor relations calendar:
29
Strategy Stage 2 in detail: Leveraging strategic
30
We are not just a housebuilder, we create retirement communities … (1/2)
Sales and marketing Construction Planning and design Land Targeting different land
▪ Centrally located, brownfield
sites
▪ Close to amenities, c.1 acre ▪ Fragmented competitive
landscape
▪ Land acquisition conditionality ▪ High density parking &
amenity space
Significant planning & design expertise High-quality construction Industry leading trusted brand
▪ Specialist in-house planning
team
▪ Strong reputation with local
authorities
▪ Increased government
recognition of benefits of our products
▪ Limited on-site affordable
housing requirements
▪ Trusted brand – 40 years
experience
▪ Dedicated customer service
teams
▪ Full national capability ▪ Industry- leading quality
performance
▪ Experienced subcontractors
and established supply chain
▪ Repeatable build process ▪ Customer-focused build
31
We are not just a housebuilder, we create retirement communities … (2/2)
…through well established Management Services supporting our developments since 2010
16,900 homeowners Across 379 developments 31,000 hours of care and support per month 60,900 meals per month
Dedicated in-house management services team Ongoing service quality underpins McCarthy & Stone brand
▪ Achieving ‘Good’ or
‘Outstanding’ CQC ratings in 100% of registered Retirement Living Plus developments in FY18 House and Estate Management teams undertake day-to-day running
Provides added peace of mind for customers
▪ Social events ▪ Care support and services ▪ Safety and security
32
Enriching the quality of life of our customers and their families
1 Survey of homeowners by the NHBC and HBF (2016); 2 Survey of new homeowners by the NHBC and HBF (2017); 3 Homeowner survey (2017) and research by Demos (2016); 4 Homeowner survey (2017); 5 Internal figures (2018)
Almost nine out of 10
said their new property improved their quality
33,500 social events were held in our managed properties
months5 83% of our customers said they experienced a sense of community in their new property, compared to 51% of
96% of our homeowners said they feel safe and secure in their new property4
More than 93% of our homeowners would recommend us to a friend2
‘I just love it here. I’ve never looked back…always chat to people about how great the development is.’ ‘My life is so much easier since we moved here. We can relax knowing that everything is taken care of.’ ‘My home is everything I’d ever dreamt it would be’ ‘My flat has outside space and I potter in the garden most days’
We have a strong service platform to build on
33
Customer research informed our strategic plan
Affordability Flexibility Choice Key principles to underpin our proposition Independence- like proximity to transportation, privacy and own outdoor space
▪ 91% of our customers have good access to local amenities and facilities
Support- during life transitions, including social activities and healthcare
▪
92% of our customers feel their House and Estate Manager is approachable and listens to their issues; they value 24-hour support Convenience- customers value features that are easy to use and enhance their lifestyle and safety
▪ 94% of our customers now feel their new property is easy to maintain ▪ Customers move into our properties because of home maintenance (52%),
futureproofing (50%) and pre-existing health conditions (36%) Community- "I don't want to be isolated, if you are older and you don't have good health, the community is vital“
▪ c.7/10 customers have made new friends and socialise more ▪ c.8/10 customers take part in organised events within our developments
Affordability- 1 in 5 list purchase price as primary reason for not purchasing and 1 in 10 are concerned about service costs; half would consider renting Our customers value Analysis we have done Approach: Surveys, focus groups, one-to-one interviews, direct customer feedback, and non-take-up research
▪ Surveyed 4,200
homeowners in July 2017, representing 51% of homeowners who lived with us for >18 months
▪ HBF new home customer
satisfaction survey of 1,457
2018
We have asked our customers and we can do so much more for them
SOURCE: McCarthy & Stone Homeowner Survey, 2017 | Non-take up research, 2017; HBF new home customer satisfaction survey, 2018
34
Where are we today:
Evolving the business model to meet the changing needs of our customers
Single tenure: Build to sell Complex design at high ASP Inflexible product, services and payment options Flexibility 1 Choice 2 Affordability 3 Multi–tenure: Build to sell and rent/shared ownership Variety of payment options Flexible, future proofed and evolving with needs Streamlined, contemporary and compact designs at mass market average prices Strategic objective:
35
FLEXIBILITY – Management Services offering that responds to evolving customer needs
Business model adapted to flexible needs Integrated technology enabled services New offerings ensuring full support and inclusive of the community
▪ Shift Management Services to
customer-facing business
▪ Change charging model into all-
inclusive management fee model (with flexible payment methods)
▪ New tiered offering:
– Bronze / Silver / Gold – Pay-as-you-go option for add-ons
▪ Quality of life
– Sleep quality sensors, remote
monitoring
– Activity detection sensors – Machine learning and AI
▪ Convenience
– Home automation control – Medication control sensors
▪ Community
– Video communication – Community challenges
▪ Safety
– Fall awareness sensors – Security cameras
▪ Expanded care offering based on
hub-and-spoke delivery model (e.g. preparing food centrally and served at nearby sites)
▪ Opening our development for
wider community use generating additional revenue
▪ New partnerships (e.g. fitness
centres, NHS partnerships)
1
36
FLEXIBILITY – All-inclusive management fee and flexible ways of paying for services C
Hybrid fees
▪ Partial payment of management fees on an annual/monthly basis ▪ Remainder to be transferred into equity release on the property
B
Deferred fees
▪ Possibility of paying management fees as an equity release to the
customer’s property, up to a certain maximum
▪ Upon sale, the equity released is paid to McCarthy & Stone
A
Pay monthly/annually
▪ Similar to current payment methods, the customer has the option to be
billed monthly or annually for their management fees
▪ Customer feedback shows the peace
highly valued, and preferred to variable model
▪ Allows Management Services to
become a fully fledged profit centre
New, flexible ways to pay for services
1
37
CHOICE - Choice of ownership through multi-tenure options OWNERSHIP SHARED OWNERSHIP RENTAL
2
▪ N/A – core model ▪ Target of 10% of new RL and RLP
developments by FY21
▪ Target of 10% of new RL and 20% RLP
developments by FY21 Full-scale plan
▪ N/A – current offering ▪ Initial partnership with Heylo for
affordable offering in place
▪ Own shared ownership offering to be
piloted Q1 2019
▪ Partnership with Places for People (PfP)
in FY17 and FY18
▪ Own rental offering to be piloted in
H1 2019 Existing/ future pilots
▪ Expand affordability levels of customers ▪ Offer customers high equity release ▪ Widens addressable market ▪ Option for customers to trade up ▪ Enter the rental market ▪ McCarthy & Stone retains part interest
in properties and sells to investors, becoming an asset holder McCarthy & Stone proposition
▪ Current offering ▪ Customer acquires an apartment or a
bungalow on leasehold/ freehold basis and passes property on as inheritance
▪ Customer benefits from property price
increase and has flexibility to sell at any time
▪ Customer acquires a share of the long
leasehold (>50%) and pays monthly rental on the remainder
▪ Customer can increase the share they
▪ Customer benefits from their share of
any increase in property price with the flexibility to sell at any time
▪ Requires lowest capital outlay and
transaction costs
▪ Provides customers with choice on
disposal of existing property and move dates
▪ Enables high equity release upon sale
▪ Reduces hassle of resale by heirs
Customer proposition
38
AFFORDABILITY – Broadening market appeal by making our products more affordable
SOURCE: Base imagery supplied by ShedKM 1 Concept in planning and fire and H&S safety assessment is to be done | 2 modern methods of construction
Achieved through
apartment designs New, more affordable, contemporary living solutions
Reduced ASP increasing the size of potential addressable market
3
Apartment optimised for
ensures full depth daylight1) Volumetric MMC2 applicable, reducing costs (modules are fully transportable)
▪ Desirable apartments ▪ Reduced build time ▪ Higher quality finish and
construction
▪ Repeatable components (All
apartments use a common kit of parts)
39
Compact Two bed 62.7m2 Classic Two bed 72.1m2 Size:
smaller than classic
smaller than classic AFFORDABILITY – Classic apartment vs. compact model specifications
3
Layout:
classic specification
40
AFFORDABILITY – Opportunity for systemised development approach
3
SOURCE: Base imagery supplied by ShedKM
Signature Designs
A rigorous approach to standardisation will lead to a high quality McCarthy & Stone signature design
Bolt on components
Standard components can be ‘bolted’ to modules extending to additional rooms or storage
Customer options
Easy management of customer options, e.g., a walk in wardrobe, twin room/ double room
Different building types
A modular approach could be extended to bungalow or ‘cottage’ design
41
Evolving the business model to deliver improved financial returns
Single tenure: Build to sell Complex design at high ASP
Choice 2
Inflexible product, services and payment options
Flexibility 1 Affordability 3
Growth in Management Services revenues (management and care fees) Opportunity = >5% of group revenue Opportunity = transfer to separate rental fund with potential positive ROCE impact and regular asset management income streams Opportunity = Increased market penetration by introducing lower cost product offering Target = c.15% of land bank
Opportunity:
Multi–tenure: Build to sell and rent/shared
Variety of payment options Flexible, future proofed and evolving with needs Streamlined, contemporary and compact designs at mass market average prices
Strategic objective: Limited capital investment requirement
42
Focus on our core RL and RLP product offering
Retirement Living (RL) Retirement Living Plus (RLP) Lifestyle Living (LL)
1 as of FY11-FY18 H1
To be discontinued
Offering type
▪ 40 unit (on average) developments,
with 1 or 2 bed solutions
▪ Basic level of services offered ▪ Larger, more adapted apartments ▪ High level of services and care ▪ High proportion of communal spaces ▪ Similar to a mainstream dwelling ▪ Limited amount of services
provided 79 83 73 Average age1 71% / 67% 26% / 31% 3% / 2% Current share of total revenues/ total site margins
▪ Prioritise two product lines (RL and RLP) ▪ Incorporate bungalows from LL ▪ Provide customer flexibility and choice through product innovations ▪ Build out existing land bank ▪ Discontinue product line and
transfer bungalows to RL and RLP Product strategy Olivier Place, Wilton Liberty House, Raynes Park Azaleas, Poole
43
Delivery through an extension of our existing capabilities
Incubate Prototype Innovate Rollout Benefits realisation
FY19 FY20 FY21
Approach to rollout:
£
44
This document has been prepared by McCarthy & Stone plc solely for use at investor meetings. The information in this document, which does not purport to be comprehensive, is for information only and has not been independently verified. Neither McCarthy & Stone plc, its affiliates or any of their respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this information or opinions contained herein or for any loss howsoever arising from any use of this document or its contents. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future strategy, projections, targets, estimates or forecasts contained in this document. Certain statements contained in this document are, or may be deemed to be, statements of future plans, targets and expectations and other forward looking statements that are based on management‘s current intentions, beliefs, expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Forward-looking statements are not guarantees of future performance and the actual results of operations, financial condition and liquidity, and the development of the industry in which McCarthy & Stone plc operates, may differ materially from those made in or suggested by the forward-looking statements set out in this document. As a result, you are cautioned not to place any undue reliance on such forward-looking statements. To the extent available, the industry and market data contained in this document has come from official or third party sources. There is no guarantee of the accuracy or completeness of such data. In addition, certain of the industry and market data comes from McCarthy & Stone plc’s own internal research and estimates. While McCarthy & Stone plc believes that such research and estimates are reasonable, they, and their underlying methodology and assumptions, have not been verified by any independent
The information and opinions in this document (including forward-looking statements) are provided as at the date of this document and are subject to change without notice. McCarthy & Stone plc expressly disclaims any obligation to update or revise any information or opinions in this document. This document does not constitute an offer or invitation to purchase or subscribe for any shares and neither it nor any part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Nor does this document purport to give legal, tax or financial advice. You are not to construe the content of this presentation as investment, legal or tax advice and you should make your own evaluation of McCarthy & Stone plc and the
and Markets Act 2000 (as amended) (or if you are a person outside the UK, otherwise duly qualified in your jurisdiction).
Disclaimer