Half Year Trading Update

Thursday 3 March 2016

McCarthy & Stone plc - half year trading update

On track for full year delivery

McCarthy & Stone (the "Company"), the UK's leading retirement housebuilder, is today issuing a trading update for the half year ended 29 February 2016, ahead of reporting its half year results on Tuesday 19 April 2016.

Highlights

· Legal completions increased by 19% to 923 units (2015: 776) driven by 36 new sales outlets and improved sales rates

· Net average selling price increased by 12% to £253k (2015: £226k)

· Revenue increased by 32% to c.£250m (2015: £189m) and forward sales at 29 February 2016 39% ahead at c.£200m (2015: £144m)

· Strong performance in land purchasing maintained, with 40 (2015: 44) new development sites under control since September 2015, representing c.1,700 units

· Land bank now comprises c.10,800 plots (2015: c.9,460) for future development at attractive margins, with terms agreed on a further c.1,600 plots

· Continued progress on our three major transformation programmes in support of our target ROCE in excess of 25% over the medium term

· On track to deliver strategic objective of building and selling at least 3,000 units per annum by 2019

· Group performance in line with previous guidance and expectations for the full year unchanged

Clive Fenton, Chief Executive Officer, commented:

"We have delivered another period of strong top-line growth as we seek to address the increasing market demand for retirement housing generated by a rapidly ageing population. With the over-65 age group in the UK expected to increase by over 50% in the next twenty years, and a lack of suitable retirement housing, McCarthy & Stone is uniquely placed to capitalise on this opportunity.

"Our operating performance over the past six months has been in line with expectations, with further growth in reservations, legal completions, and c.1,700 additional plots under control in high-quality locations.

"During the period we have delivered our first sales from our new North London region, which has now opened six developments, and the investment we have made to establish the three additional regional offices which opened on 1 September 2015 is beginning to bear fruit. Each of the new regions now has high calibre, senior management teams in place with wide-ranging experience from across the housebuilding sector. We are carrying a strong order book into the second half, with forward sales well ahead of last year.

"We remain on track to deliver our 2016 targets in line with the expectations set for investors at the time of our IPO and, as a result of the land acquired in the first half, now have a sufficient land bank to deliver fully our growth objective of building and selling more than 3,000 new homes per annum by 2019."

Market and current trading

The market for retirement housing remains highly attractive. 3.5 million people over the age of 60 express particular interest in buying a retirement property1 and yet only c.128,000 specialist retirement properties for owner occupation have been built2. McCarthy & Stone is uniquely placed to capitalise on this demographic opportunity, which will see the over-65 age group in the UK expand by more than 50% by 2033.

With this attractive backdrop, the Group opened 36 new sales outlets during the period (2015: 29), contributing towards a 21% increase in the Group's net reservations above 2015. As a result, the Group delivered 923 legal completions in the first half (2015: 776) and carries an increased forward order book of c. £200m into the second half of 2016, 39% ahead of last year (2015: £144m).

The Group's net average selling price increased by 12% to £253k (2015: £226k), reflecting further improvements in the quality of the developments McCarthy & Stone is now bringing to market, as well as sustained discipline around discounts and incentives and the benefits of a return to moderate house price inflation across our regions.

As a result, the Group anticipates margins in 2016 comparable to those achieved in 2015, in line with expectations, with the first half impact of the Group's investment in new regions and additional operational infrastructure mitigated in the second half as these regions increasingly contribute to revenues and profit.

Land, planning and build

The benign market for land continues to offer significant opportunity and the Group has again added good-quality sites with attractive embedded margins into its land bank. 40 sites (2015: 44) were exchanged in the first half, equivalent to c.1,700 additional plots and the land bank now stands at c.10,800 plots (2015: c.9,460 plots). In addition, senior management continues to focus on streamlining the Group's development process to accelerate capital turn, achieving 19 planning consents in the period and starting build on 15 sites.

The land bank now stands at 5.6 years3 supply, of which 3.0 years3 has detailed planning consent, supporting the strategy to invest £2.5bn in the retirement housing market over four financial years, and providing the Group with sufficient land under control to deliver all targeted sales up to and including 2019.

Outlook

The Group has delivered strong first half growth and has substantially increased both the value of the forward order book and the land bank for development. With a significant number of recent sales releases, the opportunity to leverage the investment in new regions and infrastructure and continuing good market conditions, the Group remains confident in the outlook for the full year.

The Group reiterates its expectations of a c.20% increase in sales volumes and a c.100 bp improvement in ROCE in 2016, and as such remains on track to deliver in line with previous guidance for the full year. It remains the Group's intention to pay a first dividend pro rata from admission to 29 February 2016 in the third quarter of the financial year. McCarthy & Stone will release its interim results for the half year ending 29th February 2016 on Tuesday 19th April 2016.

- Ends - 

Conference call for analysts and investors

Clive Fenton, Chief Executive Officer and Nick Maddock, Chief Financial Officer, will be hosting a conference call at 8.00 am today, Thursday 3rd March, to discuss this trading update.

To access the conference call:

International Number: +44 (0) 20 3003 2666

UK Toll Free: 0808 109 0700

Participant PIN: 9017157#

A replay facility will be available shortly after:

Dial in details: +44 (0) 20 8196 1998

Access PIN: 9017157#

For more information, please contact:

McCarthy & Stone, 01202 292480

Clive Fenton, Chief Executive Officer

Nick Maddock, Chief Financial Officer

Paul Teverson, Director of Communications

Powerscourt, 020 7250 1446 / [email protected]

Justin Griffiths

Nick Dibden

Notes to Editors

About McCarthy & Stone 

McCarthy & Stone is the UK's leading retirement housebuilder with a c.70% share of the owner-occupied market4. The Company has sold 50,000 properties across more than 1,000 retirement developments since 1977, and is renowned for its focus on the needs of those in later life. It successfully rejoined the Main Market of the London Stock Exchange in November 2015.

UK demographics remain strongly in favour of the specialist retirement housing market, with the number of people aged over 85 in the UK expected to more than double between 2014 and 2033 from 1.5 million to 3.5 million, and the number of over 65 year olds expected to increase by more than 50% from 11.4 million to 17.2 million. According to recent research, 1 in 4 over 60s are interested in retirement living (Demos, 2013), yet only c.128,000 units of specialist retirement housing for homeowners have been built5.

Older people are also the one group where rates of homeowners have risen in recent years. Homeownership among those aged 65-to-74 increased from 50% in 1981 to 78% in 2012 and among the over 75s it rose from 47% in 1981 to 73%. However, for those aged 25-to-34, it has fallen from 62% in 1981 to 43% in 2012 and for 35-to-44 year olds it fell from 69% to 63%6.

The Company has two established product ranges - Retirement Living and Assisted Living - which provide one and two bedroom apartments across the country with varying levels of support and care for older homeowners. In early 2015, McCarthy & Stone launched its 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. McCarthy & Stone is currently selling its first apartments in this new product range across eight locations, helping the Company to capture a wider share of the active retiree market. The first Ortus Homes development at Scarlet Oak in Solihull won the HBF's 2015 Best Retirement Development award.

McCarthy & Stone's commitment to quality and customer service continues to be recognised by homeowners. In 2015, the Company received the full Five Star rating for customer satisfaction from the HBF for the tenth year in a row - making it the only UK housebuilder, of any size or type, to achieve this accolade.

www.mccarthyandstonegroup.co.uk 

Forward-looking statements

Certain statements in this announcement are forward-looking statements which are based on McCarthy & Stone plc's expectations, intentions and projection regarding its future performance, anticipated events or trends and other matters that are not historical facts. Forward-looking statements sometimes use words such as 'aim', 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan'. 'goal', 'believe' or other words of similar meaning. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as at the date of such statements and, except as required by applicable law, McCarthy & Stone plc undertakes no obligation to update or revised publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

1 Demos (September 2013)

2 Age UK - Buying retirement housing fact sheet (April 2014). Properties built relate to England and Wales as at April 2014

3 Based on 1,923 legal completions achieved in 2015

4 Based on 3,453 registrations of cross tenure properties specifically designed for the elderly with the NHBC during calendar year 2015, of which 2,672 were registered by McCarthy and Stone.

5 Age UK - Buying retirement housing fact sheet (April 2014). Properties built relate to England and Wales as at April 2014

6 ONS - Housing and home ownership in the UK (2015)