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mccarthyandstone.co.uk

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mccarthyandstone.co.uk

Our Strategy

Our 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 four years to FY19 to support growth and capture a larger share of the retiree market

Medium-term targets Measure/KPI FY15 FY16
  • £2.5bn investment in land and build by FY19
Cash investment in land and build (£bn) £0.4bn £0.5bn
Land bank (units) 10,087 units 10,186 units
Sites acquired 90 sites 65 sites
Progress FY16
  • Cash spend on target to achieve strategic objective
  • Land bank now represents 4.4 years’ supply
  • Sufficient land with detailed planning to deliver all targeted sales to FY18 and sufficient land under control to deliver all targeted sales to FY19
  • Fewer sites acquired this year due to more measured approach to land acquisition in light of market uncertainty in Q4
  • Terms agreed on a further 42 sites (c.1,700 plots) (FY15: 11 sites, 486 plots) ensuring a healthy land pipeline
Priorities FY17
  • Continue to target high-quality land in the best possible locations in accordance with our strict site purchase criteria, maintaining contract conditionality where possible
  • Land acquisition volumes to be targeted in support of our growth strategy to build and sell more than 3,000 units per annum over the medium term
  • Target land and build spend of c.£0.5bn
Sales growth

Sell more than 3,000 units per annum

Medium-term targets Measure/KPI FY15 FY16
  • Sell more than 3,000 units per annum by FY19 at a net ASP of c.£300k
Legal completions (units) 1,923 2,299
Net average selling price (£k) £239k £259k
Revenue (£m) £485.7m £635.9m
Progress FY16
  • 20% increase in legal completions this year in line with strategic objective
  • Three new regional offices with quality management teams now in place providing a platform for our growth plans
  • 8% increase in net ASP in line with strategic objective reflecting the quality and location of new developments and sustained incentives control
  • Industry-leading growth of 31% resulting in a record level of revenue achieved this year
Priorities FY17
  • Continue to develop capacity and capability of our regional teams to enable growth
  • Continue to grow completion volumes and optimise pricing
Continued product innovation

Meet our customers’ changing needs and expand our customer base

Medium-term targets Measure/KPI FY15 FY16
  • Retain Five Star HBF customer satisfaction rating
  • Grow Ortus Homes to c.10% of annual legal completions
Customer satisfaction rating 5 star 5 star
Ortus Homes legal completions (% of total completions) 1% 4%
Progress FY16
  • Five Star HBF customer satisfaction rating retained for 11th consecutive year
  • Successfully increased capacity and capability of our Management Services business to ensure that we can meet the needs of customers at all new developments. Volume of developments managed increased from 196 to 264
  • Ortus Homes now represents c.8% of land bank
  • 5 new Ortus Homes developments released for sale in FY16 (FY15: 3)
Priorities FY17
  • Retain Five Star HBF customer satisfaction rating
  • Continue to increase capacity and capability of Management Services business in order to keep pace with growth in new developments
  • Grow Ortus Homes to c.10% of land bank
  • Continued innovation in our core products and platinum range ensuring that we are meeting the needs of our customers
Operational efficiency

Create an even more efficient and scalable business to support planned investment and targeted growth

Medium-term targets Measure/KPI FY15 FY16
  • Improve capital turn in order to maximise ROCE (25% ROCE target)
Capital turn (x) 1.0x 1.2x
Progress FY16
  • Sales initiative
    50% off-plan sales achieved with two developments reserving 100% off-plan and a further nine at over 80%
    Good progress towards our target to sell our developments within an average of 12 months of first occupation with an average 18 months to see out for all sites sold out during FY16
  • Development initiative
    Reduction in average time from land exchange to build start from c.23 months in FY15 to c.19 months in FY16 (standard sites only)
    All sites fully developed within this new initiative have been within our 16 month target
  • Build initiative
    c.3 week time saving achieved from build start to first occupation
    Build savings of c.£12m identified which will benefit the Group over the four years to FY19. Collection of rebates has more than doubled since prior year
Priorities FY17
  • Continue to improve off-plan sales rates and target futher reductions in time to sell out
  • Continue to target further reductions in average time from land exchange to build start
  • Focus on tighter management of build cycle by embedding consistent working practices
  • Continue to adopt modern methods of construction in order to reduce build times further
Focus on performance

Target top-quartile sector margins and returns on capital

Medium-term targets Measure/KPI FY15 FY16
  • Improve underlying operating profit margin, targeting top-quartile sector margins
  • Target improved ROCE (25% target)
Underlying operating profit (£m) £95.3m £107.2m
Underlying operating profit margin (%) 20% 17%
ROCE (%) 20% 20%
Net debt/ (cash) (£m) £44.4m (£52.8m)
Progress FY16
  • 12% increase achieved driven by increased completion volumes
  • 3ppt decrease due to additional investment in new regions and additional incentives offered to customers to close out completion chains in Q4
  • Sustained capital discipline enabled 20% ROCE to be maintained despite margin challenges experienced during the year
  • Significant improvement in cash position due to more measured approach to land and build investment in Q4 and IPO proceeds
Priorities FY17
  • Continue to target high-quality land with attractive margins
  • Maintain strong balance sheet and focus on cash management
  • Continue to pursue build cost savings via build initiative