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Investor presentation Creating retirement communities to enrich the quality of life for our customers and their families 2019 Based on full year results ended 31 August 2018 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 full year results ended 31 August 2018
IR Contact: marina.calero@mccarthyandstone.co.uk
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Undisputed market leader with high market share
▪
Built and sold more than 56,000 properties across more than 1,200 retirement developments since 1977
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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
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Rapidly ageing population
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Structural undersupply of retirement housing Strong operational capabilities
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Recognised, well-respected brand
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High-quality housebuilder
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Strong landbank
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Best customer satisfaction ratings – consistently 5 star rating
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93% of our customers would recommend us to a friend
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High-quality services – 100% of our registered RLP developments achieved “Good” or “Outstanding” CQC ratings
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Great people – committed and talented employees
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Two new COO appointments in January 2019 Offering a unique customer proposition
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Lifestyle built around retirement community and wellbeing
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c.17,000 homeowners across c.400 managed developments
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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.
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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
>15% operating margin by FY21 >15% ROCE by FY21 >£90m additional cash generated
– Broadening market appeal via
increased affordability
– Streamlined, contemporary and
compact designs
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Cost saving >£40m in FY21 FY21 Operating margin >15% FY21 ROCE >15% Cash saving >£90m FY19 to FY21 Focus on ROCE and margins
ROCE >20% by FY23 Increased market penetration New revenue streams Reduced cyclicality
FY23: Developer, Manager, Owner FY19: Housebuilder
FY21
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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
1,779 1,100
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 rate 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
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Rightsizing operational cost base to reflect steady state volumes while remaining positioned to scale for growth
regions – focus on more densely populated areas
and footprint
Progress: Formal collective consultation process for reducing footprint from nine to seven regions now completed. Regions now resourced in line with steady state volumes. Total headcount reduction resulting in c.£10m of annualised cash saving Group oversight and control strengthened Reorganisation of sales teams and centralisation of marketing
centralised marketing function - streamlined staffing, standardised sales processes and improved marketing effectiveness
enhanced customer insight and analytics
system Progress: Optimised sales operating model and centralised marketing function now implemented. Salesforce CRM system – phased roll out now commenced Deliver more standardised and efficient designs, deploy more cost effective building solutions and streamline procurement practices
spec guidelines
and stronger competitive tendering processes Progress: Design efficiency reviews currently being undertaken
Share of expected >£40m savings FY21 Share of expected >£40m savings FY21 Share of expected >£40m savings FY21
20-30% 10-20% 50-60%
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Design efficiency review
Cambourne plans, before and after
Methodology
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15 schemes were reviewed and identified three key design parameters:
–
Quantity of building articulation to primary and secondary frontages
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Net to gross floor area ratio
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Apartment area over group standard
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These parameters highlighted clear areas of inefficiency Application: Cambourne development Design changes (spatial efficiency only):
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Floor area was reduced by 375msq
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Increased efficiency of the communal areas resulted in additional 3 apartments
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Primary façade articulation was reduced by 5%, and secondary façade articulation was reduced by 8% Estimated impact of Cambourne redesign, £000 Build cost savings 230 Additional revenue 610 Additional profit 840 Site margin increase 4.4%
Ground Floor First Floor Second Floor Third Floor
Redesign subject to local authority consultation and detailed design work
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Choice 2 Flexibility 1 Affordability 3
Growth in Management Services revenues (management and care fees) Opportunity = >5% of group revenue On balance sheet trial up to £50m 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
Strategic opportunity:
Multi–tenure: Build to sell and rent/shared
Variety of payment options Flexible, future proofed and evolving with needs products Streamlined, contemporary and compact designs at mass market average prices
Strategic objective: Limited capital investment requirement
Incubator approach in progress to develop operation platform and refine customer proposition Location for incubator pilots identified Incubator hub locations identified Customer focus groups set up Working with potential partners in order to further develop proposition Approach to compact, affordable product defined Full consideration given to design parameters and MMC Potential volumetric schemes identified
Progress update:
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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
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Operational
Financial 2,134 legal completions (FY17: 2,302) ASP £300K (FY17: £273K), a 10% increase due to sales mix, as well as quality and location of our developments 68 first occupations (FY17: 49) brought to market 5* customer satisfaction rating (FY17: 5*) Revenue at £671.6m (FY17: £660.9m) £67.5m underlying operating profit1 (FY17: £96.2m), in line with 6 September announcement 10% underlying operating margin1 (FY17: 15%) Year end net cash of £4.0m (FY17: £30.7m) Proposing a final dividend of 3.5p per share, making the total dividend for the year 5.4p per share, in line with prior year (FY17: 5.4p) Volume and operating profit constrained by: heavy H2 weighting of first
investment in operating cost base to support the previous growth strategy continuing economic uncertainty slower secondary market, particularly in the South East Key performance drivers
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15% 20% 65%
FY18
7% 20% 73%
FY17
Part-exchange (PX) usage Part-exchange proving to be a valuable tool for the business Increased volume of PX transactions: 35% of legal completions (FY17: 27%) reflecting ongoing subdued secondary market and full year national roll-out of on balance sheet solution Saving of c.£6.6m (FY17: c.£1.2m) 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.13.1 weeks (FY17: c.8.5 weeks) post buy-in, with increase reflecting full year roll-out Tight controls in place to ensure regions do not exceed capital allocation
335 163 418 464
FY18 FY17
PX transactions
In-house PX 3rd party PX
753 627
On balance sheet part-exchange usage 335 properties purchased (FY17: 163) and 302 sold (FY17: 49) Average buy-in price of 96% of market value ▪ Average purchase price £283k ▪ Average loss on sale of £3.1k 147 properties on balance sheet at year end (FY17: 114)
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Positive announcement by Ministry of Housing, Communities and Local Government (MHCLG) proposing to allow an exemption for the retirement community sector to continue to charge ground rents after they are capped elsewhere Consultation paper states that older people should have the choice in how they pay for their retirement housing. Proposal is to exempt retirement housing from the changes, subject to various conditions including:
–
A potential buyer having the choice to either pay a higher sale price at a ground rent of £10 per annum or a lower sale price with a specified economic ground rent This is consistent with our new strategy which offers increased choice to our customers The proposal recognises the unique way the sector uses ground rents to recover much of the construction cost of the significant communal areas so integral to the retirement living lifestyle However, it is still a proposal and is subject to further consultation and passage through Parliament No impact on FY19 which always assumed the benefit of FRI sales. >15% FY21 ROCE target achievable without the benefit of new FRI sales from FY20 onwards due to 50% of FRI benefit having been mitigated and further plans to mitigate remaining gap via introduction of other charges. No revision of targets until full detail of potential exemption and its impact on our contingency planning is fully understood
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YTD sales releases FY18: 17 FY19: 4
Forward order book (including legal completions)
Sales lead indicators running moderately ahead of prior year on a per
Secondary market continues to be challenging, particularly in the South East - customers continuing to exercise caution due to economic uncertainty House price inflation remains subdued Build cost inflation is at expected 3-4% level, underpinning the Group’s new strategic priority of build costs reduction Forward order book currently in line with management expectations at £267m, c.4% behind prior year driven by lower level of sales releases Recent trading impacted as expected by organisational design changes within sales function across the last 6 weeks – collective consultation process now completed
£267m £174m £277m £141m 9 November 1 September FY18 FY19
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FY19 out-turn (14m to 31 October) remains in line with the Board’s expectations Group reiterates the expected FY19 savings range announced as part of the new strategy (c.20-30% of the FY21 targeted P&L saving of c.£40m). Impact of savings is mainly at gross profit level c.2,300 legal completions expected in FY19 due to extended 14 month period More than 40 first occupations expected in FY19 with all sites currently under construction FRI sales assumed to go ahead as planned in FY19 Build cost inflation expected to continue at 3-4% Exceptional items:
Next reporting date: 10 April 2019:
Half Year results announcement
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Total legal completions of 2,134 units (FY17: 2,302) volumes constrained by the heavy H2 weighting of first
Full year revenue of £672m (FY17: £661m) supported by 10% improvement in average selling price to £300k (FY17: £273k) reflecting improvement in quality and location of developments Margin impacted by: sales mix, build cost increases, increased usage of part- exchange and incentives to counteract subdued market conditions, additional marketing activity to promote the higher level of sales releases and investment in regional
Key financial metrics FY18 FY17 Change Legal completions 2,134 2,302 (7%) Average selling price1 £300k £273k +10% Revenue £671.6m £660.9m +2% Gross profit £104.6m £130.7m (20%) Gross profit margin 15.6% 19.8% (4.2ppts) Underlying operating profit2 £67.5m £96.2m (30%) Underlying operating profit margin2 10.1% 14.6% (4.5ppts) Underlying profit before tax2 £62.1m £94.1m (34%) Statutory profit before tax £58.1m £92.1m (37%) Underlying basic earnings per share2 9.2p 14.2p (35%)
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ROCE decrease by 6ppts and reduction in capital turn to 1.0x (FY17: 1.1x) driven by lower profit and increase in finished stock levels Net cash of £4m (FY17: £31m) reflecting management’s
TGAV increase to £692m (FY17: £646m) driven by £157m increase in finished stock (including PX properties) reflecting 52 first occupations delivered in the second half
Proposing a final dividend of 3.5p per share, giving a total dividend for the year of 5.4p (FY17: 5.4p) reflecting the Board’s confidence in the Group’s new strategy
Key financial metrics FY18 FY17 Change Return on capital employed3 (ROCE) 10% 16% (6ppts) Capital turn 1.0x 1.1x (0.1x) Net cash £4.0m £30.7m (£26.7m) Tangible gross asset value (TGAV) £692m £646m +£46m Total dividend per share 5.4p 5.4p 0 p
intangible assets, excluding net cash
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14.6% 10.1% 7.2% 0.1% 7.1% 2.1% 1.1% 1.1% 0.4% FY17 Op. Profit margin List price Land & Build cost increase (location and specification improvement) Build cost inflation Total incentive costs Sales & marketing Operating costs Other FY18 Op. Profit margin
Pricing increase reflecting continued improvements in quality and locations rather than house price inflation This has been offset by: ▪ Land and build cost increases (reflecting location & specification improvements) ▪ Build cost inflation c.3-4% p.a. Margin also impacted by: ▪ Increased discount and incentive costs to counteract subdued market conditions ▪ Additional marketing costs in relation to TV ad campaign and to promote high level of sales releases and first
▪ Increased operating costs reflecting inflation and continued investment in anticipation of planned growth under our previous strategy
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£m 31 August 2018 31 August 2017 £m £m Goodwill and intangible assets 67.8 69.3 Fixed assets & investments 2.7 3.0 Land 99.6 148.6 Land creditors (56.9) (67.4) Sites in the course of construction 290.3 341.2 Finished stock 385.9 238.7 PX properties 41.7 31.9 Total net stock 760.6 693.0 Net cash 4.0 30.7 Other net assets / liabilities (71.7) (50.3) Net assets 763.4 745.7
+62% +31% +10% Total land bank of 9,797 plots (FY17: 9,967) Lower land value reflects more cautious approach to land buying as a result of proposed changes to ground rents legislation ▪ 54 land exchanges (FY17: 75) and 43 land completions in FY18 (FY17: 58) Significantly higher level of first occupations
in finished stock and a 15% reduction in sites under construction
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Enter cashflow bridge
£30.7m £659.1m £4.0m £111.9m £379.2m £139.7m £15.4m £10.0m £29.6m
100 200 300 400 500 600 700 800
Opening net cash Net revenue Land spend Build spend Operating costs &
Tax & interest Promissory note debt Dividends paid Closing net cash
Total land & build spend £491m
*
* Includes incentive costs, build repairs and other variable cost
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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)
23 January 2019 – AGM 10 April 2019 – Half year results announcement 31 October 2019 – Year end 7 November 2019 – Full Year trading update 28 January 2020 – Full Year FY19 results announcement
Investor relations calendar:
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Rightsizing the business Efficient sales and marketing model Build cost reduction Workflow realignment Stable monthly flow of land exchanges, build starts, sales releases and first occupations – fundamental to operational efficiency Rightsizing operational cost base to reflect steady state volumes Reorganisation of sales teams and centralisation of marketing Utilising standard, more efficient designs and optimising subcontract procurement practices 2 3 4 1 >£40m P&L savings in FY21
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Uneven workflow and continued pursuit of growth strategy impacted results:
Average rate of first occupations FY16 – FY18, % Expected rate of first occupations FY21, %
Inefficient use
Margin dilution 7 23 17 53 Q4 Q3 Q2 Q1 3,000 unit sales target Steady volume at c. 2,100 units 23 29 23 25 Q1 FY21 Q3 FY21 Q2 FY21 Q4 FY21
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Fundamental shift in mindset and business practices
across all elements of the business model:
1,779 1,100 FY18 Actual FY21 Target Finished stock, units
reducing finished stock levels
conditional land acquisition subject to planning and commercial viability
31 October 2019
>4 years landbank supply1
1 - calculated based on FY18 legal completions of 2,134 units
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Historical set up with focus on growth:
Rightsize the business to deliver workflow with optimal efficiency while positioned to scale for growth
seven regions
marketing and commercial Share of expected >£40m savings FY21 Rightsizing the business
Build cost reduction Sales model reorganisation
Regions across the UK
Regions optimised
Regional footprint:
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Enhanced sales effectiveness and efficiency through improved Salesforce IT system and new sales and marketing operating model Roll out of Salesforce CRM platform 2 Deliver an improved website and content management system
1
Current model:
Share of expected >£40m savings FY21 Strategic levers 3 Optimise sales operating model and centralised marketing function to achieve streamlined sales staffing model and consistent, efficient marketing activities
experience
reduced cost per lead Sales model reorganisation
Rightsizing the business Build cost reduction
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Focus on speed & acceleration to drive growth increased build costs
Achieve more standardised and efficient designs, deploy more cost effective building solutions and streamline procurement practices Key initiatives Share of expected >£40m savings FY21 Design efficiency through standard designs and spec guidelines and introduction of compact design solutions Value engineering - prelim standardisation and optimising of technical specs (e.g. foundations, balconies, wall structures) Procurement initiatives through increased framework agreements and stronger competitive tendering processes
Rightsizing the business Sales model reorganisation
Build cost reduction
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Cost saving >£40m in FY21 FY21 Operating margin >15% FY21 ROCE >15% Cash saving >£90m FY19 to FY21 FY21: Focus on ROCE and margins
ROCE >20% by FY23 Increased market penetration New revenue streams Reduced cyclicality
FY23: Developer, Manager, Owner FY19: Housebuilder
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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
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…through well established Management Services supporting our developments since 2010
Dedicated in-house management services team Ongoing service quality underpins McCarthy & Stone brand
‘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
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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
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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
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Where are we today:
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:
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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
customer-facing business
inclusive management fee model (with flexible payment methods)
– Sleep quality sensors, remote
monitoring
– Activity detection sensors – Machine learning and AI
– Home automation control – Medication control sensors
– Video communication – Community challenges
– Fall awareness sensors – Security cameras
hub-and-spoke delivery model (e.g. preparing food centrally and served at nearby sites)
wider community use generating additional revenue
centres, NHS partnerships)
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FLEXIBILITY – All-inclusive management fee and flexible ways of paying for services C
Hybrid fees
B
Deferred fees
customer’s property, up to a certain maximum
A
Pay monthly/annually
billed monthly or annually for their management fees
highly valued, and preferred to variable model
become a fully fledged profit centre
New, flexible ways to pay for services
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CHOICE - Choice of ownership through multi-tenure options OWNERSHIP SHARED OWNERSHIP RENTAL
▪ 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
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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
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)
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Compact Two bed 62.7m2 Classic Two bed 72.1m2 Size:
smaller than classic
smaller than classic AFFORDABILITY – Classic apartment vs. compact model specifications
classic specification
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AFFORDABILITY – Opportunity for systemised development approach
SOURCE: Base imagery supplied by ShedKM
A rigorous approach to standardisation will lead to a high quality McCarthy & Stone signature design
Standard components can be ‘bolted’ to modules extending to additional rooms or storage
Easy management of customer options, e.g., a walk in wardrobe, twin room/ double room
A modular approach could be extended to bungalow or ‘cottage’ design
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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
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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
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Incubate Prototype Innovate Rollout Benefits realisation
FY19 FY20 FY21
Approach to rollout:
£
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This document has been prepared by McCarthy & Stone plc solely for use at a presentation in relation to its FY18 full year results. 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
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