McCarthy & Stone plc Half year results to 29 February 2016 Strong growth delivers increased profits. Liberty House, Raynes Park, Assisted Living

Transcription

1 McCarthy & Stone plc Half year results to 29 February 2016 Strong growth delivers increased profits Liberty House, Raynes Park, Assisted Living

2 Disclaimer THIS DOCUMENT IS BEING MADE AVAILABLE TO THE RECIPIENT ONLY ON A STRICTLY CONFIDENTIAL BASIS. THIS DOCUMENT AND ITS CONTENTS MAY NOT BE DISTRIBUTED TO ANY OTHER PERSON, REPRODUCED, PUBLISHED OR USED IN WHOLE OR IN PART FOR ANY OTHER PURPOSE. The information in this document, which does not purport to be comprehensive, is for information only and has not been independently verified by McCarthy & Stone plc or any other person. 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 forwardlooking 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 source. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this document. 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 market. If you are in any doubt about the contents of this presentation or the action you should take, you should consult a person authorised under the Financial Services and Markets Act 2000 (as amended) (or if you are a person outside the UK, otherwise duly qualified in your jurisdiction). 2

3 Horizons, Poole, Assisted Living Clive Fenton, Chief Executive Officer

4 The UK s leading retirement housebuilder The UK's leading retirement housebuilder Only national retirement housebuilder with c.70% market share of the owner-occupied market 1 Experienced management team with deep sector and financial expertise Structural under-supply of retirement housing Exceptional growth market with positive demographics Uniquely placed to serve the fastest growing demographic in the UK Strategic objective to build and sell more than 3,000 units per annum by 2019 Experienced housebuilder with proven business model Over 38 years, the Company has sold almost 51,000 apartments across more than 1,100 developments Differentiated business processes provide competitive advantage in an industry marked by real barriers to entry Strong financial track record with robust balance sheet Strong financial position with high-quality land bank Land bank of c.10,800 units equivalent to 5.6 years' supply 2 for future development at attractive margins Targeting ROCE of at least 25% over the medium turn 1 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 plc 2 Based on financial year ended 31 August 2015 legal completions of 1,923 units 4

5 Medium-term financial outlook Strategic objectives Legal completions 3,000 by 2019 Net ASP 300k by 2019 Gross profit margin Margin embedded in land bank comparable with 2015 ROCE At least 25% ROCE in medium term Gearing Maintain strong balance sheet Dividend Initial 30% pay-out ratio (pro rata interim 2016) 5

6 H1 Performance highlights Legal completions increased to 923 units (+19%); net average selling price of 253k (+12%); revenue 250.2m (+33%) Underlying profit before tax 39.1m (+23%) despite first half investment in new regional offices and operational infrastructure Strong balance sheet; gearing reduced substantially to 4% (2015: 16%) Further improvements in capital turn to 1.0x (2015: 0.9x) as a result of strategic initiatives HBF 5 Star satisfaction award for an industry-record eleventh consecutive year Successful IPO on the London Stock Exchange, entered the FTSE 250 on 21 March

7 Ocean House, Carlyon Bay, Ortus Homes Nick Maddock, Chief Financial Officer

8 Financial performance: Overview Key financial metrics H1-16 H1-15 Change Revenue 250.2m 188.5m 33% Legal completions % Net average selling price 253k 226k 12% Underlying profit before tax m 31.8m 23% Profit before tax 29.0m 29.1m 0% Underlying basic earnings per share 1 6.0p 5.3p 13% Underlying operating profit m 36.5m 10% Underlying operating profit margin 1 16% 19% (3ppt) Operating profit 30.1m 33.8m (11%) Gearing 2 4% 16% (12ppt) Return on capital employed 3 (ROCE) 18% 18% 0ppt Interim dividend per share 1.0p 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 and exceptional administrative expenses to operating profit and profit before tax respectively 2 Gearing is calculated by dividing net debt by net assets 3 Return on capital employed (ROCE) is calculated by dividing underlying operating profit for the previous 12 months by the average tangible gross asset value at the beginning and end of the 12 month period. Tangible gross asset value is calculated as net assets excluding goodwill and intangible assets, excluding net debt 8

9 Financial performance: Revenue Legal completions (units) Full year completions (units) 1,677 1, % 923 New outlets and improved reservation rates Net average selling price ( k) H1-14 H1-15 H1-16 Full year Net ASP ( k) +12% H1-14 H1-15 H1-16 Quality, location and incentive discipline Full year revenue ( m) % Revenue ( m) Strong top-line growth H1-14 H1-15 H Source: FY14 unaudited management information prepared in accordance with UKGAAP, FY15 and FY16 unaudited management information prepared in accordance with IFRS

10 Financial performance: Profit Underlying operating profit ( m)¹ Full year ( m) % First half investment H1-14 H1-15 H1-16 Underlying operating profit margin (%) 1 Full year (%) 19% 20% (3ppt) 16% 19% 16% H1-14 H1-15 H1-16 New regional offices and additional operational infrastructure Underlying profit before tax ( m) 1 Full year ( m) % Before exceptional items and amortisation H1-14 H1-15 H Source: FY14 unaudited management information prepared in accordance with UKGAAP, FY15 and FY16 unaudited management information prepared in accordance with IFRS 1 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 and exceptional administrative expenses to operating profit and profit before tax respectively

11 Financial performance: Capital Full year ROCE (%) 17% 20% ROCE (%) 1 13% +0ppt 18% 18% c.100bps improvement expected for full year H1-14 H1-15 H1-16 Year end TNAV ( m) % TNAV ( m) m net IPO proceeds H1-14 H1-15 H1-16 Gearing (%) 3 Year end Gearing (%) 10% 8% (12ppt) 21% 16% 4% Strong balance sheet and robust financial position H1-14 H1-15 H Source: FY14 unaudited management information prepared in accordance with UKGAAP, FY15 and FY16 unaudited management information prepared in accordance with IFRS 1 Return on capital employed is calculated by dividing underlying operating profit for the previous 12 months by the average tangible gross asset value at the beginning and end of the 12 month period. Tangible gross asset value is calculated as net assets excluding goodwill and intangible assets, excluding net debt 2 Tangible net asset value is defined as net asset value excluding goodwill and intangible assets 3 Gearing is calculated by dividing net debt by net assets

12 Financial performance: workflow Year end land bank (units) 8,701 10, % Land bank (units) 8,457 9,459 c.10,800 Increased to years supply H1-14 H1-15 H1-16 Land exchanges (units) Full year land exchanges (units) 2,539 3, units 1,654 c.1,700 1,109 Addition of 40 further high-quality sites H1-14 H1-15 H1-16 Investment in land and build ( m) Full year investment ( m) % 233 Progress with 2.5bn investment plan H1-14 H1-15 H Source: FY14 unaudited management information prepared in accordance with UKGAAP, FY15 and FY16 unaudited management information prepared in accordance with IFRS 1 Based on financial year ended 31 August 2015 legal completions of 1,923 units

13 Land bank growth starting to show in workflow Land exchanges (units) Build starts (units) Legal completions (units) Land bank growth drives completions growth 3,522 2,539 2,595 1,776 1,474 1,784 1,527 1,677 1,

14 Interim dividend First pro rata interim dividend of 1.0p per share announced, in line with IPO guidance To be paid on 31 May 2016 to holders of ordinary shares on the register at the close of business on 29 April 2016 Board is guiding towards a final dividend for the year of not less than 3.5p per share This would give a total dividend for the year of not less than 4.5p per share Kings Place, Fleet, Assisted Living 14

15 Heritage Place, Ickenham, Assisted Living Clive Fenton, Chief Executive Officer

16 Our growth opportunity A growing need for specialist retirement housing UK population: 64.6m people Of which: 14.9m > 60 years old Of which: 4.4m with total household wealth between 250k and 500k Of which: 3.7m living alone / with spouse Which is equivalent to 2.6m households Of which: 0.9m households are in the sweet spot aged over Source: ONS, YouGov, Knight Frank 1 Independent data provided by EAC, April 2016 Only 141k 1 owner occupied retirement properties built to date across the UK

17 Our growth strategy McCarthy & Stone s strategy is to create an efficient and scalable business, capable of building and selling more than 3,000 units per annum over the medium term Increased investment 2.5bn investment in land and build over 4 years 1 Sales growth Build and sell more than 3,000 units per annum Continued product innovation Meet our customers changing needs and expand our customer base Operational efficiency Create an even more efficient and scalable business Focus on performance Target top-quartile 2 sector margins and deliver a 25%+ return on capital in Projected investment in land and build over four financial years to 31 August 2019, financed from business operations 2 Top quartile amongst generalist housebuilder peer group comprising Barratt, Bellway, Bovis, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey

18 H1 progress Investment and growth strategy 40 high-quality sites added to the land bank, equivalent to c.1,700 plots (2015: 1,654) Land bank now at c.10,800 units, equivalent to years supply, of which years has full planning consent Sufficient land under control to deliver all targeted sales to 2019 Achieved 19 further full planning consents Sufficient full planning consents to deliver all targeted sales to 2017 First developments opened in new North London region Southend reserved out (opened November 2015) and only one unit left at Maldon (February 2016) Now selling from a further five developments including Bourne End (100% reserved off-plan) Walmsley Place, Bishops Waltham, Ortus Homes New regional offices in the South West, East Midlands and North West now fully operational in own premises, with senior management teams in place All regions already contributing land and profit 1 Based on financial year ended 31 August 2015 legal completions of 1,923 units 18

19 H1 progress Investment and growth strategy New Regional Offices SCOTLAND Legal completions Legal completions Land exchanges Land bank Land exchanges Land bank 113 Units 113 units 22 sites 960 units 960 units NORTH EAST Legal completions Legal completions Land exchanges Land bank Land exchanges Land bank 83 Units 83 units 88 sites 1208 units 1,208 units NORTH WEST Legal completions Land exchanges Land bank 61 Units 1 site 955 units EAST MIDLANDS WEST MIDLANDS SOUTH WEST SOUTHERN NORTH LONDON SOUTH EAST Legal completions Legal completions Land exchanges Land bank 41 Units 41 units 7 7 sites 1397 units 1,397 units Platform in place to deliver operational growth to more than 3,000 units per annum 19

20 H1 progress - Investment and growth strategy Ortus Homes product was launched in October 2014 for over 55s seeking to downsize 28 Ortus Homes developments in the pipeline, representing c.6% of the land bank First development: Scarlet Oak, Solihull Reserved out within a year of opening in February 2015 Won best Retirement Scheme at annual Housebuilder Awards Azaleas, Compton Acres, Ortus Homes Second development: Shore House, Swanage First completion in August 2015, only 5 units left 44 legal completions in H Currently selling from a further 7 sites across UK, including 4 sales released in H Targeting to grow to 10% of completions over medium term 20

21 H1 progress Shortening the working capital cycle Significant management effort continues to be placed on accelerating the working capital cycle through 3 strategic initiatives 1) Sales initiative: increase in proportion of units sold off-plan to 51% on new developments in H (2015: 44%) Two developments sold 100% of units off-plan 2) Development initiative: reduced for H build starts to 19.7 months (2015: 23.0 months / 2014: 25.2 months for standard sites) Blyton House, Bourne End, Retirement Living 3) Build initiative: accelerating timescales and reducing build costs Targeting margin improvements through value engineering procurement and supplier partnerships c. 12m of cost reductions already identified which will benefit the Group over the next four years Improved capital turn in H to 1.0x (2015: 0.9x) 21

22 H1 progress - Customers Achieved the full 5 star rating in the HBF survey for Customer Satisfaction for an eleventh consecutive year 90%+ of customers have said that they would be prepared to recommend us to a friend One of only 3 major housebuilders to retain the rating McCarthy & Stone are the only housebuilder to achieve the top rating in this survey since its inception in

23 Outlook Strong start to second half with forward order book up 26% to c. 306m at 15 April 2016 (c. 243m at 17 April 2015) 1 Full year expectations remain in line with previous guidance of 20% volume growth and a c.100bp improvement in ROCE from 2015 level of 20% Group remains on track to sell more than 3,000 units per annum by 2019 at a ROCE of at least 25% Elizabeth Court, Bournville, Retirement Living 1 Forward order book includes legal completions between 1 March 2016 and 15 April 2016 and reservations as at 15 April

24 24 Questions?

25 Appendices Horizons, Poole, Assisted Living

26 Appendix A: Exceptional items The Group charged total exceptional costs of 9.0m to the consolidated statement of comprehensive income during the period H1 2016: 7.5m transaction related costs 1.5m relating to other costs Across 2015 and 2016, the total transaction related costs incurred were 13.3m (of which 11.5m was directly related to the November 2015 IPO): 1.8m of exceptional costs were reflected in the consolidated statement of comprehensive income in m of exceptional costs were reflected in the consolidated statement of comprehensive income in H m of transaction costs have been capitalised into share premium 26

27 Appendix B: IPO impact on balance sheet Primary issue raised 90m gross proceeds Provides significant flexibility to support investment in land and build and pay transaction expenses Net 79m proceeds to Company after IPO costs Seek to maintain a long-term, sustainable capital structure 200m RCF with appropriate headroom Peak intra-year gearing of 15-20% Half year gearing of 4%, with similarly low level of gearing expected at financial year end Capitalisation and indebtedness ( m) Feb-15 Aug-15 Net IPO proceeds Pro-Forma Aug-15 1 Long term borrowings: RCF (79) 9 97 Add back: Debt issuance costs Land-related promissory notes Feb-16 Total borrowings (79) Cash and cash equivalents (45) (57) (57) (86) Net debt (79) (35) 24 Net assets Goodwill & Intangible assets (74) (73) 0 (73) (72) Tangible net assets Gearing 2 16% 8% (6%) 4% 27 1 Updated for final IPO proceeds 2 Gearing is calculated by dividing net debt by net assets

28 Appendix C: IPO guidance - financial performance Aug-15 historical performance Near-term expectations Strategic objectives Land and build spend Land 102m Over 200m of land spend in 2016 Investment of 1.0bn by 2019 in land Build 249m Over 300m of build spend in 2016 Investment of 1.5bn by 2019 in build Top line growth Legal completions 1,923 c.20% growth in completions in 2016; another c.15% in 2017 We are targeting to deliver 3,000 units per annum by 2019 Net ASP 239k Net ASP of 255k in 2016 Target Net ASP of 300k by 2019 Profitability and returns Gross profit margin 25% 2016 gross profit margin in line with 2015 Underlying operating profit margin 20% Continuing to target top quartile 1 operating margins Gross profit margin embedded in land bank consistent with current Continuing to target top quartile 1 operating margins ROCE 20% Improving by 100bps in %+ ROCE in medium term (2019) Balance sheet Leverage Pro forma: net cash Pro forma year-end tangible gearing reduced to c.(6%) post the 90m gross primary issuance Significant investment in the growth of the Company, and tangible gearing expected to peak intra-year at 15-20% 28 Source: Audited management information, prepared in accordance with IFRS 1 Top quartile amongst a peer group comprising Barratt, Bellway, Bovis, Crest Nicholson, Persimmon, Redrow and Taylor Wimpey

29 Appendix D: IPO guidance dividend policy Progressive dividend policy targeting an initial payout of c.30% of profit after tax excluding certain exceptional items Company expects to pay an interim dividend and a final dividend in respect of each financial year in the approximate proportions of one-third and two-thirds, respectively, of the total annual dividend It is expected that the first interim dividend will be pro rata from Admission to 29 February 2016 and will be paid in Q3 FY16 29

30 30 Appendix E: Illustrative cashflow for typical site

31 Appendix F: Investor relations calendar Date Event 01 Feb 2016 Trading update 29 Feb 2016 Half year close 03 Mar 2016 Half year trading update 19 Apr 2016 Half year results announcement 09 May 2016 Expiry of shareholder lock up 29 Jun 2016 Trading update 31 Aug 2016 Financial year end 05 Sep 2016 Full year trading update 15 Nov 2016 Full year results announcement Jan 2017 Trading update and AGM 31