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2020 15 July 2020 Retirement living to the full IR Contact: - PowerPoint PPT Presentation

Half year results presentation for six months ended 30 April 2020 15 July 2020 Retirement living to the full IR Contact: marina.calero@mccarthyandstone.co.uk Agenda Overview and strategic update John Tonkiss, CEO Operational update:


  1. Half year results presentation for six months ended 30 April 2020 15 July 2020 Retirement living to the full IR Contact: marina.calero@mccarthyandstone.co.uk

  2. Agenda Overview and strategic update John Tonkiss, CEO Operational update: Customers and Services Mike Lloyd, COO, Services & Customers Financial performance Rowan Baker, CFO Summary and Outlook John Tonkiss, CEO 2

  3. John Tonkiss, CEO Overview 3

  4. Overview • Emerging from extraordinary period • Responded early to Covid-19 with absolute focus on our customers and our people • Acting decisively to protect the financial health of our business (Financial Times, 2 June 2020) • Gradual remobilisation reflecting the nature of our customer base • Covid-19 backdrop has illustrated the unique benefits of independent retirement living - the ‘Third Way’ • Reaffirmed that we have the right long term strategy in place • Beyond Covid-19, we see exciting opportunities ahead due to o Our unique proposition and strong brand o Expected new land market opportunities o Recent policy announcements around stamp duty, planning and adult social (Daily Telegraph, 29 June 2020) (Daily Mail, 3 July 2020) care reform o Emergence of a new and attractive retirement living property asset class (The Times, 13 June 2020) 4

  5. Emerging from extraordinary period - HY20 review • Three discrete phases: ‘Boris bounce’ General Election Covid-19 lockdown April Jan Nov Dec Feb March • Good progress in both stages of the transformation strategy Continued focus on ‘optimising financial performance’ and cash generation o Build Cost Reduction – £30m in construction budget or delivered o o Multi-tenure performing well across all developments delivering attractive yields • Awarded 5* HBF customer satisfaction rating – 15th consecutive year • Five site managers won coveted Pride in the Job Quality Award from the National House Builders’ Council (NHBC) • AIIR* significantly improved to 100 from 532 in HY19 and vs 268 industry benchmark • Financial metrics impacted by Covid-19 18 £(25)m 471 1. The Group recognises a legal completion at the point of completion of a sale of an apartment to a purchaser or a tenancy HY19: 10 commencement on a rental apartment, including a bulk sale of 135 units (2019: nil). The HY20 transaction comprises the sale of 41 HY19: £21m HY19: 845 show flats and sales offices with a subsequent 12-month leaseback, and the sale of 94 finished apartments and apartments under construction in Scotland. 2. Underlying operating (loss)/profit (including underlying operating (loss)/profit margin and underlying basic earnings per share) and underlying (loss)/profit before tax are calculated by adding amortisation of brand of £1.0m (2019: £1.0m) and exceptional items of Land exchanges £63.4m (2019: £14.3m) to operating (loss)/profit and (loss)/profit before tax respectively. See note 3 of condensed consolidated Underlying Operating Legal Completions 1 financial statements for further information. (Loss)/Profit 3 5 *AIIR – annual injury incident rate

  6. Safety and wellbeing of customers and employees has been our absolute priority Covid-19 infection rates (total cases per 1000 people) Customers: 18.15 • On site help, support & guidance • Strict hygiene practices • Range of wellbeing activities 6.14 • Low infection rates vs general over 65s and over 85s UK population 4.7 4.5 Employees: UK population UK population UK population McCarthy & • Excellent employee engagement through group wide survey: 65+ 85+ Stone o 84% felt well informed o 75% feel recognised for their contribution to the business • Ensured PPE provision for on-site staff • Buddying schemes and redeployment of staff to support customers • Regular communication, video blogs and online courses etc. ‘ Thank you’ to our employees and homeowners 6

  7. Acting decisively to protect the financial health of our business • Cancelled dividend • Stopped discretionary spend • Image to be added Voluntary 20% salary reduction by all Board members and wider leadership team • Paused all sales, marketing and build activity • Stopped land spend and minimised land liabilities • Payments to suppliers honoured and good relationships maintained • Employees from build and sales furloughed at 80% of salary • Monthly cash burn rate reduced from c.£10m to c.£7m during lockdown • Secured access to £300m CCFF funding & relaxation of RCF covenants • Further steps to align resources to workflow – annualised cash saving of c.£4m Excellent liquidity with strong cash controls in place 7

  8. Gradual remobilisation reflecting the nature of our customer base New Leads • Our customers remain our absolute priority 2500 o Full range of services resumed in compliance with social distancing guidelines Lead Generation 2000 Marketing o Processes for local lockdowns in place. No confirmed cases as of 14 July. Turned-Off 1500 • Measured build remobilisation o 1000 17 out of 44 sites now re-mobilised. c.10 First Occupations expected in FY20 o Low impact on build rates and 1-2% potential margin impact on sites currently in build 500 o No materials or resource issues with supply chain. Close collaboration continues 0 April March May June Nov Dec Jan Feb • Gradual and systematic remobilisation of sales and marketing Gross Reservations (incl. rentals) o Processes and pace of remobilisation reflects vulnerability of customer base 70 o Sales leads and gross reservation rates increasing in line with gradual ramp up plan 60 • Proactive land buying now fully reinstated 50 40 • Phased return of furloughed staff in line with ramp up of activity Sales restarted 30 on 8 th June 20 10 While we are past the peak of the crisis, the financial impact will be weighted towards H2 0 April May Nov Dec Jan Feb March June 8

  9. Unique benefits of independent retirement living - the ‘Third Way’ • Unique nature of independent retirement living • Purpose built retirement communities • Private apartment and own front door • Tailored on-site assistance and support from our 1,600 strong Services team • Rapid response • Clear and frequent homeowner guidance, strict hygiene measures, restricted access to communal areas and 500 volunteers through our Buddy scheme • Low Covid-19 infection rates across our developments • Supported 20,000 homeowners across the UK through the pandemic • High customer satisfaction during the outbreak Our customers felt safe, secure and supported o 93% feel safe or extremely safe in their apartment throughout the outbreak 88% very happy with the support they’ve received during the pandemic o 9

  10. John Tonkiss, CEO Strategic update 10

  11. Short term priorities remain in place Stage 1: Optimising financial performance Progress Implications pre-Covid-19 post Covid-19 1 • Further restructuring with additional c.£4m • Rightsizing the business £10m p/a cash saving achieved saving p/a • • Centralised teams Covid secure sales journey 2 • • Tight discount control New processes and a hub sales operating Efficient sales & marketing tools • Salesforce rollout model • BCR practices embedded 3 • • £48m savings identified (c.£30m savings Phasing of savings affected Build cost reduction (BCR) • secured) Managing impact of additional Covid-19 compliance costs • 4 Increased land buying • Covid-19 pause enabled re-set of workflow Workflow realignment • Even flow of land exchanges on fully optimised basis • Finished stock reduction Continued focus on margin improvement with timing of delivery impacted 11

  12. Workflow trajectory • Priority is to sell down finished stock (1,373 units, £323.4m) Smooth workflow expected in FY22 & FY23 • 44 sites under construction paused in March. o 37 scheduled to restart by year end o of which c.7 are expected to first occupy in H2 FY20 • Targeting return to c.2,000 first occupation unit delivery from FY22 on a smoothed basis Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 • 87% of FY22 units already have planning consent • 80% of FY23 units are already under our control Scheduled build starts (units) Scheduled first occupation (units) 2,233 >2,000 c.2,000 1,817 First Occupied c.1,250 Build Started 75% Planning achieved but not Build Started 87% Subject to Planning c.400 94% New Land Exchanges Required 20% 13% FY19 FY20E FY21E FY22E FY23E FY19 FY20E FY21E Reduction in new build starts in FY20 impacting FY21 first occupation delivery 12

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