Results presentation 14 months ended 31 October 2019 28 January 2020 Retirement living to the full IR Contact: marina.calero@mccarthyandstone.co.uk
Agenda Chairman’s introduction Paul Lester, Chairman John Tonkiss, CEO Summary, current trading & strategy progress Financial performance & guidance Rowan Baker, CFO Strategy – operational update Mike Lloyd, COO, Services & Customers Nigel Turner, COO, Build John Tonkiss, CEO Summary & outlook 2
Summary • A solid performance in line with market expectations in the face of continued challenging economic backdrop (FY19 14 month period) 2,301 £308k £68m £25m 5.4p 14 th consecutive Legal Completions 1 ASP 2 Underlying Net Cash 4 Dividend year Operating Profit 3 per share • Significant progress in both stages of transformation strategy launched in September 2018 o Stage 1 : Margin improvement and cash generation initiatives well underway and delivering results o Stage 2 : Solid progress on rollout of rental • Increased political stability following General Election, but ongoing economic uncertainty likely to continue throughout FY20 • Full year out-turn remains in line with market expectations, weighted towards H2 1. Including a bulk sale of 113 units (2018: 68 units). The FY19 transaction is a sale and lease back of sales offices and show flats to Waverstone LLP, where McCarthy & Stone is a non-controlling member. 3. Underlying operating profit is calculated by adding amortisation of brand and exceptional items to operating profit 2. Average selling price is calculated as average list price less cash discounts, part-exchange top-ups and stamp duty land tax payment (2019 only due to IFRS 15 changes) 4. Calculated as cash and cash equivalents less total borrowings 3
Current trading • New sales leads and visitors ahead of prior year driven by increased marketing activity • Reservations during November and December impacted by uncertainty caused by General Election – H1 out-turn expected to be lower than in prior year • Conversion assisted by broader range of available sales tools (e.g. part-exchange and new rental offering) • Improvement seen across all metrics in January • Rental reservations c.12 per week in January Net reservations (incl. rental) New sales leads Visitors 2000 60 1,000 Increased Pre-election slowdown marketing activity Increased marketing activity 1500 40 500 1000 20 500 0 0 0 September October November December January YTD September October November December January YTD September October November December January YTD FY19 FY20 (inc. rental) FY19 FY20 FY19 FY20 Full year out-turn remains in line with market expectations, weighted towards H2 4
Two stage transformation strategy Stage 1: Stage 2: Optimisation (FY19-FY21) Strategic Opportunities (FY19-FY23) 1 Rightsizing the business 2 Efficient sales & marketing tools Services & Customers Mike Lloyd, COO 3 Build cost reduction 4 Workflow realignment Build Nigel Turner, COO 3 Transforming the business from a housebuilder to a developer, manager and owner of retirement communities 5
Stage 1: Optimisation (FY19-FY21) – Good progress towards FY21 targets Progress Share of expected FY19 Delivered P&L FY19 Delivered cash >£40m savings saving (£m) saving (£m) 1 Rightsizing the business 10 10 20-30% 2 Efficient sales & marketing tools 2 2 10-20% 3 50-60% Build cost reduction 3 8 FY21 weighted 4 - - Workflow realignment No P&L impact 10% 9% £15m £20m FY19 Progress >15% >£40m >£90m >15% ROCE FY21 Targets operating margin cost saving additional cash 6
7 3 Build cost reduction efficiencies (BCR): FY19 progress Savings breakdown £48m BCR savings delivery stages 124 schemes reviewed | Saving identified at 101 schemes Secured on FY19 £7m first occupations £33m Design efficiency reviews of FY19 and FY20 sites for margin improvement Approved construction budgets £16m New schemes more design compliant for sites in build £7m Value engineering - prelim £25m Subject to planning standardisation and optimising of technical specs Phasing of £48m savings delivery to P&L Competitive tendering of £8m sub-contract packages 7% c.20% c.50% c.20% £48m Total identified BCR saving (equivalent to c.£10k per unit) FY19 FY20 FY21 FY22 FY19-FY21: Original land purchased and designed using old hurdle rates FY22: New land purchased at a higher hurdle rates (c.3%) Work in progress 7
Choice: rental performance • Performed ahead of expectations and now live across all developments Rental Reservations p/week • New multi-tenure team in place 12 • Increased proportion of c.2,100 target volumes expected to come from rental offering during FY20 7 8 6 6 Part buy part rent Rent to buy Rent only 5 4 (PBPR) 3 2 2 1 47 101 21 As of 31 Oct 2019 Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Completions Rental yields As of 26 Jan 2020 75 175 43 Reservations & Completions Gross yields c.6-8% Gross/net leakage 15-20% Bed mix Geographic mix Product mix (excluding void) Average rental price (excl. service charge and ground rent) 24% 25% 33% 44% Retirement Living Retirement Living PLUS 56% 17% One-bed £1,112 One-bed £1,805 67% 34% Two-bed £1,686 Two-bed £2,639 SO LSE MID NO 1 bed 2 bed RL RP Strong rental performance delivering attractive yields 8
Choice: rental investment case • Workstream well progressed with Rothschild & Co to secure high-quality third party capital partners to co-invest in rental proposition o Clear path to grow to c.£300m portfolio over next 3 years Potential Fund / JV structure o Initial proposals received from high-quality funding partners with commercial negotiations ongoing McCarthy & Stone plc New investor(s) • Multi-tenure offering driven by customer choice to rent or buy Minority interest Management o services all developments managed and operated by McCarthy & Stone MC&S Management Rental vehicle Services Management Services Management fees o low occupancy churn Seed portfolio potential ‘best in class’ gross to net leakage o Agreed no. of units MC&S Developments Pipeline o highly attractive yields on RLP, driven by acute shortage of suitable independent living accommodation with care and support Initial release of cash through seed portfolio sale • followed by tranche sales at pre-agreed pricing Private pay care sector is +£7.7bn market in the UK, with customers paying c.£44k p.a. for care provision 1 • Strong pipeline with potential to develop into full Build To Rent strategy Resulting in a more resilient business model with longer term enhanced ROCE benefit Source: LaingBuisson – Care homes for older people UK market report 29 th edition 1. 9
Rowan Baker, CFO Financial performance 14 months to 31 October 2019 FY20 guidance 10
Headline FY19 results (14 month period) FY19 FY18 14 months Key financial metrics (14 months) (12 months) change • Strong volumes and ASPs Legal completions 2,301 2,134 8% • Average selling price 1 Margins mainly impacted by increased PX used to £308k £300k 3% counteract challenging market conditions Revenue £725.0m £671.6m 8% • Gross profit £104.9m £104.6m 0% Statutory PBT shown after exceptional costs of £17m (FY18: £2m) to deliver new strategy: Gross profit margin 14.5% 15.6% (1.1)ppt Underlying operating profit margin 2 9.4% 10.1% (0.7)ppt o restructuring, redundancy and consultancy fees Underlying operating profit 2 £68.1m £67.5m 1% o realignment of land bank to deliver steady state Underlying profit before tax 2 £63.1m £62.1m 2% volumes Statutory profit before tax £43.4m £58.1m (25%) o £11m cash impact in FY19 Underlying basic earnings per share 2 9.5p 9.2p 0.3p 1. Average selling price is calculated as average list price less cash discounts, part-exchange top-ups and stamp duty land tax payments (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 £2m (2018: £2m) and exceptional items of £17m (2018: £2m) to operating profit and profit before tax respectively. 11
Recommend
More recommend
