TIDMMCS
RNS Number : 3797W
McCarthy & Stone PLC
14 November 2017
McCarthy & Stone plc
Annual results announcement for the year ended 31 August
2017
McCarthy & Stone (the 'Group'), the UK's leading retirement
housebuilder, announces its financial results for the full year
ended 31 August 2017 (FY17). All comparatives are to the full year
ended 31 August 2016 (FY16) unless otherwise stated.
FY17 FY16 Change
------------------------------- ---------- ---------- -----------
Legal completions(1) 2,302 2,296 0%
------------------------------- ---------- ---------- -----------
Revenue GBP660.9m GBP635.9m 4%
------------------------------- ---------- ---------- -----------
Average selling price(2) GBP273k GBP264k 3%
------------------------------- ---------- ---------- -----------
Gross profit GBP130.7m GBP136.4m (4%)
------------------------------- ---------- ---------- -----------
Operating profit GBP94.2m GBP95.1m (1%)
------------------------------- ---------- ---------- -----------
Underlying operating
profit(3) GBP96.2m GBP107.2m (10%)
------------------------------- ---------- ---------- -----------
Profit before tax GBP92.1m GBP92.9m (1%)
------------------------------- ---------- ---------- -----------
Underlying profit before
tax(3) GBP94.1m GBP105.0m (10%)
------------------------------- ---------- ---------- -----------
Basic earnings per
share 13.8p 13.9p (1%)
------------------------------- ---------- ---------- -----------
Underlying basic earnings
per share(3,4) 14.2p 16.1p (12%)
------------------------------- ---------- ---------- -----------
Net cash(5) GBP30.7m GBP52.8m (GBP22.1m)
------------------------------- ---------- ---------- -----------
Return on capital employed(6)
(ROCE) 16% 20% (4ppts)
------------------------------- ---------- ---------- -----------
Total dividend per
share 5.4p 4.5p 20%
------------------------------- ---------- ---------- -----------
Financial highlights
-- Legal completions in line with prior year at 2,302 units
(FY16: 2,296), despite a significantly lower number of first
occupations during the year (FY17: 49, FY16: 69)
-- Revenue increased by 4% to a new record of GBP661m (FY16: GBP636m)
-- 52 new sales outlets opened during the period (FY16: 64)
-- Average selling price increased by 3% to GBP273k (FY16: GBP264k)
-- Strong recovery in underlying operating margin in H2 to 17%
(FY16: 17%) from H1 underlying operating margin of 10% (+700 bp)
(FY16: 16%)
-- Profit before tax decreased by 1% to GBP92m (FY16: GBP93m)
-- Underlying profit before tax(2) at GBP94m (FY16: GBP105m),
mainly impacted by age and mix of units sold and increased
incentives and build costs
-- Underlying basic earnings per share(3,4) decreased by 12% to 14.2p (FY16: 16.1p)
-- Basic earnings per share decreased by 1% to 13.8p (FY16: 13.9p)
-- Strong financial position, with GBP31m of net cash(4) (FY16:
GBP53m) at the year end notwithstanding significant ongoing
investment in land and work in progress
-- The Directors are proposing a final dividend of 3.6 pence per
share, giving a total dividend for the year of 5.4 pence per share
(FY16: 4.5 pence per share pro-rated for period since listing).
Strategic and operational highlights
-- 75 high-quality development sites (FY16: 65 sites) added to
the land bank. Total land bank of 9,967 plots (FY16: 10,186),
equivalent to 4.3 years' supply
-- Sufficient land under control and operational platform in
place to deliver strategic objective of building and selling more
than 3,000 units per annum over the medium-term
-- Workflow on track to support growth strategy and deliver c.80
new sales releases (FY17: 52) and more than 65 new first
occupations in FY18 (FY17: 49)
-- New strategic relationship with PfP Capital to access the
growing rental market with the bulk sale of 126 units in FY17
-- Awarded Five Star rating for customer satisfaction by the
Home Builders Federation (HBF) for the twelfth consecutive year -
the only UK housebuilder, of any size or type, to achieve this
accolade
-- 15 Quality awards (FY16: 10), 7 Seals of Excellence and 1
Regional Winner at the 2017 National House Building Council (NHBC)
Pride in the Job awards, underpinning exceptional build
quality.
Current trading and outlook
-- Forward sales as at 10 November 2017 (week 10) up 11% at GBP277m (11 November 2016: GBP250m)
-- c.80 new sites planned for sales release in FY18 (FY17: 52),
of which 96% are already in build
-- First occupations are planned to increase to more than 65 in
FY18 (FY17: 49) and are expected to be weighted towards the second
half of the year due to the timing of build programmes
-- The demand for high-quality retirement housing remains strong
and the Group remains confident of delivering its medium-term
growth objective of building and selling more than 3,000 units per
annum.
Commenting on the results, Clive Fenton, Chief Executive
Officer, said:
"We achieved a strong result in the second half of the year and
delivered an improvement in both margins and volumes compared to
the first half of FY17. Our full year completion volumes were in
line with the prior year despite some headwinds as a result of the
increased level of uncertainty in the secondary market and the
expected lower number of first occupations. We delivered to market
49 high-quality new developments and maintained our exceptional
build quality and levels of customer satisfaction.
"The Group starts the new financial year with a strong forward
order book and a robust balance sheet. We remain focused on
delivering profitable growth and are on track to open c.80 sales
outlets and deliver more than 65 first occupations in FY18. We have
sufficient land under control, much of which already has detailed
planning consent, to deliver our strategic growth plan of building
and selling more than 3,000 units per annum."
- Ends -
This announcement contains certain forward-looking statements
about the future outlook for the Group. Although the Directors
believe that these statements are based upon reasonable
assumptions, any such statements should be treated with caution as
future outlook may be influenced by factors that could cause actual
outcomes and results to be materially different.
Presentation for analysts and investors:
Clive Fenton, Chief Executive Officer, Rowan Baker, Chief
Financial Officer and John Tonkiss, Chief Operating Officer will
host an analyst and investor meeting at 9.15am GMT today at
Deutsche Bank, Winchester House, 75 London Wall, London, EC2N 2DB.
Refreshments will be served from 9.00am.
Webcast for analysts and investors:
A live webcast of the presentation is available via the
following link:
http://www.mccarthyandstonegroup.co.uk/investors/webcast
An on demand version of the webcast will be made available later
today on the Group's corporate website:
http://www.mccarthyandstonegroup.co.uk/investors/webcast
Conference call details:
A conference call facility is also available. To access the
conference call:
UK Access: 020 3059 8125
International Number: +44 20 3059 8125
Participant Password: McCarthy & Stone
Conference call replay facility:
A replay facility will also be available. To access the replay
dial in details:
UK Access: 0121 260 4861
United States: 1844 2308 058
All other locations: +44 121 260 4861
Replay Pin: 6638245#
For more information, please contact:
McCarthy & Stone, 01202 292480
Clive Fenton, Chief Executive Officer
Rowan Baker, Chief Financial Officer
Paul Teverson, Director of Communications
Powerscourt, 020 7250 1446 /
mccarthy-stone@powerscourt-group.com
Justin Griffiths
Nick Dibden
Legal Entity Identifier (LEI): 213800CEJ4OQ5YPU8Z37
(1) Excludes three commercial units in FY16
(2) Average selling price is calculated as average list price
less cash discounts and PX top-ups
(3) 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. See note 6 of
consolidated financial statements for further information
(4) Underlying basic earnings per share have been reconciled
within note 6 of consolidated financial statements
(5) See note 24 of consolidated financial statements for net
cash reconciliation
(6) 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
cash
Chairman's statement
I am pleased to present our second set of full year results
since re-joining the London Stock Exchange in November 2015. The
Group delivered a solid performance this year notwithstanding the
headwinds experienced as a result of increased political and
economic uncertainty. Revenue increased to a record GBP661m (FY16:
GBP636m) and the Group continued to capitalise on the attractive
demographic opportunity and structural shortage of supply of
retirement housing in the UK. As previously announced, trading in
the first six months of FY17 was constrained by the lower forward
order book brought into the year impacted by the market uncertainty
following the EU Referendum. Trading in the second half of FY17 saw
an improvement due to an increased weighting of completions from
newer higher margin sites, reflecting the quality and location of
the developments McCarthy & Stone is now bringing to
market.
Profit Before Tax reduced from GBP93m in FY16 to GBP92m in FY17
with Underlying Profit Before Tax reducing from GBP105m in FY16 to
GBP94m in FY17. This reduction in profitability was mainly driven
by the age and mix of units sold, increased incentive costs, build
cost increases offset by pricing improvements, some additional land
renegotiation costs as we repositioned our land bank in the face of
more challenging market conditions and our continued investment in
regional operational infrastructure to support our growth
strategy.
The Group remains the UK's leading retirement housebuilder with
a greater than 70% share of the owner-occupied market. Our strength
of brand and continual striving for operational excellence ensures
that we can continue to deliver solid results in a challenging
market without any support from the Government Help To Buy scheme.
We have a strong and experienced management team that is focused on
delivering the Group's strategic objectives, a high-quality land
bank, a robust balance sheet and the necessary operational
expertise and infrastructure in place to deliver our medium-term
growth strategy of building and selling more than 3,000 units per
annum.
We continue to lead the housebuilding sector on customer
satisfaction. We are the only housebuilder of any size or type to
have received the full Five Star rating in the Home Builders
Federation customer satisfaction survey for twelve consecutive
years, in which more than 90% of our customers would recommend us
to a friend.
Outlook
The improvement of forward sales experienced throughout the year
has continued into FY18 with total forward sales including legal
completions since 1 September 2017 standing at GBP277m at 10
November 2017 (FY17: GBP250m).
Economic and political environment
The underlying housing market continues to be supported by low
interest rates, good mortgage availability and low levels of
unemployment. The market for retirement housing also remains highly
attractive, underpinned by strong demand, albeit the secondary
market was impacted by political and economic uncertainty. Research
by the Department for Communities and Local Government (DCLG)
recognises that around 74% of household growth in the UK to 2039 is
expected to come from those aged 65 and over(1) and McCarthy &
Stone remains uniquely placed to capitalise on this unprecedented
demographic opportunity in which demand continues to dramatically
exceed supply.
Dividend
The Group's solid performance this year has enabled the
Directors to propose a final dividend of 3.6 pence per share. This
follows the interim dividend of 1.8 pence per share, giving a total
dividend for the year of 5.4 pence (FY16: 4.5 pence per share
pro-rated for period since listing), which represents 20% growth on
the FY16 dividend and is in line with our progressive dividend
policy as stated at the time of our Initial Public Offering
('IPO').
Board changes
There were a number of Board changes during the year.
On 6 January 2017, we were pleased to announce the appointment
of Rowan Baker as the Group's Chief Financial Officer. Rowan was
previously Group Financial Controller and has worked for the Group
since January 2012. She took over the role from Nick Maddock whose
resignation was announced on 11 October 2016.
On 1 June 2017, we announced the appointment of John Tonkiss as
the Group's Chief Operating Officer. This role has been created to
help drive the Group's growth strategy. A key part of the role will
be overseeing the continued development of the Group's nine
regional operations across the UK. John joined McCarthy & Stone
in 2014 and was previously the Group's National Operations
Director.
In addition to this, John Carter joined the Board on 1 October
2017. John is currently Chief Executive of Travis Perkins plc,
which owns many of the building industry's most popular brands and
spans the trade, home improvement and DIY markets. John joined
Travis Perkins in 1978 and held a number of senior strategic roles
within the business before being appointed as Chief Executive in
2014.
Finally, on 9 November 2017 we were pleased to announce the
appointment of Paul Lester CBE as a Non-Executive Director and
Chairman Designate. He will join the Board on 3 January 2018 and,
subject to his election by shareholders, will take over from me as
Chairman at the conclusion of the Company's next AGM in January
2018. Paul is currently Chairman of Essentra plc and Forterra plc
and was formerly a director of Invensys plc. Previously, he was
Group Managing Director of Balfour Beatty plc before becoming Chief
Executive of support services company VT Group plc in 2002. Paul
was also Chairman of John Laing Infrastructure Fund until September
this year.
We are very pleased that Paul will be joining the McCarthy &
Stone Board and succeeding me as Chairman. McCarthy & Stone is
a great business and I am proud to have served on the Board during
a transformational period for the Company, culminating in its
successful IPO in 2015. While market uncertainty following recent
political events has acted as a stern test for our business model,
I am pleased that our high-quality product and excellent team led
by Clive Fenton have proved McCarthy & Stone's resilience.
The Company remains uniquely-placed to capitalise on the
substantial growth opportunity in retirement housing, driven by a
rapidly ageing population, and the team can look to the future with
confidence. The Group has made solid progress towards achieving its
strategic objectives this year and my thanks go to all employees,
the management team and my fellow Board members for the significant
contribution they have made.
(1) The Department for Communities and Local Government (DCLG)
projections (July 2016)
Chief Executive Officer's operational review
Our results
The Group delivered solid progress in its first full year of
trading since re-joining the Main Market of the London Stock
Exchange in November 2015. Trading improved consistently throughout
the year notwithstanding the increased uncertainty in the secondary
market following the General Election in June 2017, and the Group
made good progress in rebuilding its forward order book and
progressing its workflow.
Revenue increased by 4% to GBP661m (FY16: GBP636m) primarily
driven by an increase in average selling prices from GBP264k to
GBP273k, reflecting a continuing improvement in sales mix and
quality of sites. Legal completions were slightly ahead of prior
year levels at 2,302 (FY16: 2,296) despite a weakened forward order
book brought into the year and a lower level of just 49 first
occupations during the period (FY16: 69). This year's volumes
benefitted from accelerated off-plan sales rates which improved to
53% (FY16: 50%) and the bulk sale of 126 apartments to PfP Capital
as part of a new strategic relationship allowing us to access the
growing rental market.
Consistent with previous guidance, underlying operating profit
decreased by 10% to GBP96m (FY16: GBP107m) at a gross profit margin
of 20% (FY16: 21%), an underlying operating profit margin of 15%
(FY16: 17%) and an operating profit of GBP94m (FY16: GBP95m). The
reduction in profitability was mainly driven by the age and mix of
units sold, increased incentive costs, build cost increases offset
by pricing improvements, some additional land renegotiation costs
as we repositioned our land bank in the face of more challenging
market conditions and our continued investment in regional
operational infrastructure to support our growth strategy.
PfP Capital
Over the course of the financial year, we sought to diversify
and enhance our business model by developing a strategic
relationship with PfP Capital. This represents an exciting new
opportunity to access the growing rental market and has the
potential to improve capital turn and enable land investment in
new, previously untapped locations. This strategic relationship
resulted in the sale of 126 apartments (included within the total
legal completions of 2,302) across 27 sites to be held within a
specialist retirement PRS Fund being established and managed by PfP
Capital, the fund management business of Places for People. The
apartments will be offered for private open market rent. PfP
Capital aims to grow its assets under management from GBP150m to
more than GBP750m over the short to medium-term by acquiring
residential units and we are well placed to provide them with
access to the retirement housing sector. We intend to develop this
relationship further over the coming financial year.
Investment and growth strategy
We continue to pursue our strategy of creating an efficient and
scalable business, capable of building and selling more than 3,000
units per annum over the medium-term. There is significant demand
for our products and we are confident that we have put in place all
the necessary elements that will enable us to achieve our planned
growth. We have a respected brand with 40 years' experience, a
high-quality land bank, a strong balance sheet with a robust
capital structure and the necessary organisational capability and
platform. Our experienced management team is focused on achieving
this goal.
Market demand
The structural imbalance between supply and demand within the
housing market continues to provide us with an exceptional market
opportunity. Despite the recent growth in housebuilding activity,
there remains a significant and growing shortage of housing supply
in the UK. This imbalance is particularly acute in the market for
retirement housing, and McCarthy & Stone stands alone among the
national housebuilders as the only one that focuses entirely on
this market.
During four decades as the retirement housing market leader, the
Group has formulated a tailored approach to sales, site
acquisition, design, securing detailed planning consents and
construction that mainstream housebuilders have been unable to
replicate. We also ensure that our customers receive the highest
standards of ongoing support through our management services
offering. The high barriers to entry in our market ensure that we
maintain a unique position as the only housebuilder capable of
meeting the nationwide need for high-quality specialist housing for
the growing number of older people who are looking to move to
properties more suited to their needs and lifestyle.
Land bank
In total, c.GBP472m (FY16: GBP468m) was invested in land and
build during the period. We added a further 75 high-quality sites
with attractive embedded margins into the land bank (FY16: 65),
equivalent to c.3,164 additional plots (FY16: c.2,614), with terms
agreed on a further c.1,355 plots (FY16: c.1,700 plots) in line
with our normal land buying model. The land was secured with a high
level of optionality.
At the year end, our land bank stood at 9,967 plots (FY16:
10,186), equivalent to 4.3 years' supply, of which 2.6 years had
detailed planning consent. As a result, the Group now has
sufficient land under control to deliver all targeted sales to
FY20.
We secured 64 detailed planning consents (FY16: 60) and started
build on 66 additional sites (FY16: 42). There is detailed planning
in place for 100% of FY18 planned first occupations and 71% of FY19
planned first occupations.
The market for land remains benign and competition for our
typical brownfield sites remains highly fragmented. Our business
continues to maintain operational focus and discipline in the
assessment of our land purchases to ensure that returns continue to
flow to our shareholders.
Operational infrastructure and capability
Our newer regional offices established in North London, South
West, East Midlands and North West regions continued to drive the
momentum of their workflows during the year. We have high-calibre
senior management teams in place, combining McCarthy & Stone
experience with volume mainstream housebuilder operational
expertise.
Having established these new offices, we have now commenced the
roll-out of a new 'Divisional' operational structure, to manage our
nine regions. The three Divisions, under John Tonkiss, our Chief
Operating Officer, will each consist of three established
regions.
This operational structure is similar to many national volume
housebuilders and will provide the framework to run an efficient
business at scale. Our existing nine regions will be clustered
into: a North Division, covering Scotland, the North West and North
East; a Central Division, covering East Midlands, West Midlands and
South West; and a South Division, covering North London, South East
and Southern. We expect to fill all the new positions from internal
candidates. The establishment of these new divisions will complete
the platform required to deliver our planned operational
growth.
Strategic initiatives
Our continued focus on achieving operational excellence by
accelerating our working capital cycle has allowed us to deliver
further improvement in our three key strategic initiatives:
improving sales rates, reducing time taken between securing land
and starting build and implementing build programme
efficiencies.
Sales initiative
The sales initiative, launched in FY15, sets out to consistently
deliver off-plan reservations of 50% or more by the date of first
occupation, and then to reserve out all remaining apartments within
an average 12 month period.
Our sales initiative continued to make good progress during the
year. The main focus has been on enhancing the early part of the
customer journey via website improvements and the development of
early relationships with enquirers prior to site sales launches.
New relationship management teams are now in place in all regions
and are working well. These improvements have contributed to an
increase in the off-plan sales rate to 53% (FY16: 50%) from the 49
sites (FY16: 69) that first occupied in FY17.
A number of sites achieved significantly more than 53% of the
off-plan sales rate, for example Jameson Gate, Portobello,
Edinburgh which sold 100% off-plan. A further five sites sold more
than 80% of apartments off-plan. It is particularly pleasing that
we have been able to achieve these accelerated sales rates in a
challenging market whilst also improving pricing.
The Group continued to be impacted by the challenging secondary
housing market with the average time to sell out slightly higher
than in the prior year. This average now stands at 19 months (FY16:
18 months) for all sites sold out during FY17.
During FY17, we worked closely with our third-party
part-exchange providers to improve the terms of the part-exchange
offering. In addition, we successfully piloted an in-house part
exchange scheme on 163 transactions in which dependent properties
are temporarily taken onto our own balance sheet pending onward
sale. This resulted in a cost saving of c.GBP1m in relation to the
49 properties re-sold during FY17, when compared to the costs
associated with using third-party part-exchange providers. As at 31
August 2017, we held 114 properties on the balance sheet at a net
carrying value of GBP31.9m.
Development initiative
Our development initiative, also launched in FY15, aims to
reduce the time taken between securing land and build start. This
involved the implementation of a number of process improvements
with particular focus on 'ways of working', the planning process
and increased standardisation. This enables the business to bring
forward profitable developments, accelerate growth plans and
improve capital turn. The initiative is now embedded in all regions
and is beginning to produce positive results.
A number of changes designed to accelerate this cycle were
implemented during the year. In particular, we have focused on
local consultations within the planning process and implemented our
new Datum tool to support product and design standardisation and
value engineering. Our target for reducing the time taken between
land exchange and starting build is 16 months for standard sites
achieving a first-time detailed planning consent. During FY17, we
saved an average of four weeks per scheme, with the total time
taken from land exchange to build start averaging c.18.1 months
(FY16: c.19.1 months).
During the year, a Product Approval Group ('PAG') was
established to enhance our product offering and identify and
resolve persistent issues. The PAG is made up of senior management
team members with representatives from Sales and Marketing,
Management Services, Development, Construction, Procurement,
Customer Services, and Health & Safety. The PAG meets regularly
to achieve greater standardisation across the Group, optimise
product selection and improve design.
Build initiative
The build initiative, launched in FY15, continued to drive
improvements to the build process during the year, to accelerate
build timescales, reduce build costs and enhance margins. Specific
focus has been placed on supply chain management to maximise
savings as well as driving towards longer term benefits via the
increased use of modern methods of construction. The Group's
framework of critical controls introduced last year is now fully
embedded across all our regions and is driving improvements to
build cycle times and budgets. This initiative has delivered a c.
four week (FY16: c. three week) time saving from build start to
first occupation and has identified savings opportunities to the
value of GBP127k per development in relation to materials and
labour which will help mitigate the impact of build cost
inflation.
Our product ranges
During the year we repositioned our product branding in order to
capitalise on our existing strong McCarthy & Stone brand
recognition. This will now be used in a unified way across our
three products: our Assisted Living product has been rebranded
Retirement Living Plus and our Ortus Homes product has been
rebranded as Lifestyle Living. This also allows us to optimise our
marketing spend and create consistency across our product
names.
As part of our Lifestyle Living range, we will shortly deliver
our first 100% bungalow development of 30 units at Wymondham,
Norfolk, which is now under construction. There is a growing need
for modern, low-maintenance and well-connected bungalows among the
older population and the appropriateness of this form of housing in
later life is well-proven. The supply of bungalows in the UK has
also been in steady decline, with only 2,210(1) new bungalows
registered with the NHBC in 2016, in comparison to 26,408(1) in
1986. The particular shortage of bungalows and other houses for
older people means they are likely to attract a high level of
demand.
We are also exploring the provision of bungalows and cottages on
larger schemes, opening up exciting new possibilities for
maximising development potential on certain sites, as well as
providing for completely new land opportunities. As of 31 August
2017, we had 222 (FY16: 127) bungalows within our land bank.
(1) NHBC, New Homes Statistics Review 2016
Our Management Services business
The rapid growth of our Management Services business continued
during the year, adding 48 new developments to its portfolio, which
now total 312 (FY16: 264) managed developments. Providing our own
management services allows us to establish a unique relationship
with our customers, providing personal and efficient services that
not only help them, but also support the point of sale, and allow
us to deliver industry-leading standards of customer
satisfaction.
Our customers
We are pleased to report that we have, once again, achieved the
full Five Star rating in the HBF customer satisfaction survey this
year. This marks the twelfth consecutive year in which more than
90% of our customers have said that they would be prepared to
recommend us to a friend. We are the only housebuilder of any size
or type to win this award every year since it was introduced in
2005. This sustained recognition by our customers of the quality of
product and service we deliver is a strong endorsement of our
continued desire to design, build, sell and manage the very best
retirement developments.
Quality
The Group was also pleased to achieve 15 Quality awards, 7 Seals
of Excellence and 1 Regional Winner in the 2017 NHBC Pride in the
Job awards, marking a 50% increase in awards from 2016. The scheme
is dedicated to recognising construction site managers who achieve
the highest standards in housebuilding and has been instrumental in
driving up standards in the sector for 37 years.
Our employees
Our performance this year would not have been possible without
the dedication, enthusiasm and expertise of our people. We are
building a culture of excellence that provides opportunities for
development and recognises achievements by regularly celebrating
those employees who go the extra mile for a customer or colleague
through our instant, quarterly and annual PRIDE awards. I am also
delighted to report that, in our most recent employee survey, 87%
(FY16: 89%) of our employees confirmed that they are proud to work
for McCarthy & Stone.
Health and safety
I am also pleased to report that we have continued to make good
progress with developing a culture of excellence in health and
safety across the Group. Our vision is not just to achieve health
and safety compliance but to lead our sector with a robust and
consistent safety culture across our organisation. Our internal
monitoring regime is supported by a rigorous, independent site
inspection programme including regular reporting updates to the
Board.
During FY17 we received three BSG Health and Safety awards,
including one award for Best Use of Technology for our pioneering
work using drones for roof inspection to reduce the need for work
at height.
Housing White Paper
In February 2017, we welcomed the Housing White Paper "Fixing
our broken housing market", the country's first housing strategy
for six years. It proposed a number of measures to support
housebuilding and we were particularly pleased to see a number of
positive references to the need to increase the provision of
specialist retirement housing.
The White Paper notes that the Government will explore ways to
stimulate the market to deliver new homes for older people and is
introducing a new statutory duty, through the Neighbourhood
Planning Act, on the Secretary of State to produce, for the first
time, guidance for local planning authorities on how their local
development documents should meet the housing needs of older
people. Guidance produced under this duty will set clearer
expectations about planning to meet the needs of older people,
including supporting the development of such homes near local
services, and we understand this will be published shortly.
In addition, the White Paper notes the Government's new
commitment to explore ways to help older people move at the right
time, including possible future incentives. We are working with the
Government to provide more information on how this incentive might
work, including a possible one-time Stamp Duty exemption for older
people downsizing. Such policies would help older people to move,
which would also in turn help first time buyers onto the housing
ladder and encourage further demand for retirement housing.
Government consultation on ground rents
In June 2017, the Government also launched a consultation on
tackling unfair practices in the leasehold market with particular
reference to leasehold housing and unfair escalation clauses for
ground rents. We understand and support the need for action in this
area. Our ground rents are on fair and stable terms as they are
fixed for fifteen years and increases are linked to higher of 2% or
RPI. There have undoubtedly been cases where the system has been
abused by some, including with ground rents that double every ten
years, and we understand why DCLG is considering taking action to
protect homebuyers. We welcome this, but have raised concerns about
the further proposals around reducing ground rent income for all
leasehold properties to a zero or peppercorn rent.
Leasehold is a common and widely accepted form of tenure for
apartment living and has traditionally been used as an efficient
way of managing apartment blocks and managed estates that contain a
number of residents on the same site, often with competing voices.
With best practice and proper guidance in place, it can work well,
and has done for a number of years, and the vast majority of
apartments are on fair terms. Ground rent helps to keep the
freeholder actively involved in the development and is a key part
of this system. We have responded accordingly to the Government's
consultation and we await its outcome.
Outlook and current trading
The workflow of the business remains on track to support our
growth strategy. Build activity commenced on 73 sites during FY17
(FY16: 54) and of the c.80 sales releases which the Group plans to
deliver in FY18 (FY17: 52), 96% are now under construction. During
the first 10 weeks of the year 17 new sites (FY17: 13) have been
successfully launched and this has contributed to an improvement in
our forward order book, which currently stands at GBP277m (FY17:
GBP250m). First occupations are planned to increase to more than 65
in FY18 (FY17: 49) and are expected to be weighted towards the
second half of the year due to the timing of our build programmes.
We therefore expect the delivery profile of the Group's profits
between H1 and H2 to be similar to that in FY17.
We have started the new financial year with a high-quality land
bank, a strong net cash position and an experienced management team
in place. We also have the necessary regional infrastructure and
strength of brand that ensures that we are uniquely placed to
capitalise on the significant demographic opportunity available to
us. We remain on track to deliver our strategic growth objective of
building and selling more than 3,000 units per annum and continue
to target a ROCE of 25% when the business achieves scale.
Financial Review
Our performance
McCarthy & Stone has continued to make progress towards
achieving its medium-term strategic objective with significant
focus placed on investment in land and build and keeping the
workflow of the business firmly on track.
Revenue
Revenue increased by 4% this year to GBP661m (FY16: GBP636m)
primarily driven by an increase in average selling prices from
GBP264k to GBP273k reflecting a continuing improvement in sales mix
and quality of sites. Legal completions remained in line with the
prior year at 2,302 units (FY16: 2,296) despite a weakened forward
order book brought into the year and just 49 first occupations
during the period (FY16: 69). Volumes benefitted from the
accelerated off-plan sales rates improvement from 50% in FY16 to
53% in FY17 and the bulk sale of 126 apartments to PfP Capital as
part of the new strategic relationship allowing us to access the
growing rental market.
Profit
The Group achieved an underlying profit before tax for the year
of GBP94m (FY16: GBP105m) and a statutory profit before tax of
GBP92m (FY16: GBP93m). This was achieved at a gross profit margin
of 20% (FY16: 21%) and an underlying operating margin of 15% (FY16:
17%). This reduction in operating profit margin was driven by the
age and mix of stock sold, an increase in incentives offered to
customers to close out completion chains in light of the increased
uncertainty in the secondary market, build cost increases offset by
pricing improvements, some additional abortive land costs as we
sought to reposition our land bank and our continuing investment in
regional operational infrastructure to support our growth
strategy.
The overheads in the business continued to be well-controlled
with total administrative expenses for the year of GBP37m (FY16:
GBP33m), excluding exceptional items and amortisation of brand.
They remain at broadly the same proportion of revenue as last year
of 6% (FY16: 5%) and reflect the investment being made to deliver
the strategic growth of the business.
Capital structure and interest
We closed the year with a tangible gross asset value of GBP646m
(FY16: GBP574m), which was a year-on-year increase of 13%,
primarily due to the continued land and build investment during the
year. Similarly, our tangible net asset value increased to GBP676m
(FY16: GBP627m). The Group continued to maintain a robust financial
position with a net cash balance of GBP31m at 31 August 2017 (FY16:
GBP53m) and negative gearing of 4% (FY16: 8%). This reflects
management's ongoing focus on disciplined cash spend in response to
continuing economic uncertainty and was achieved notwithstanding
the negative cash impact of our new in-house part-exchange tool
which resulted in GBP32m part exchange assets being held on the
balance sheet at the year end (FY16: GBPnil). We maintained a
strong balance sheet and appropriate headroom against our GBP200m
revolving credit facility ('RCF') throughout the year.
The Group incurred net finance expenses of GBP2m during the year
(FY16: GBP2m), benefitting from a full year of lower interest costs
under the Group's amended RCF and the annual revaluation of its
shared equity debtors.
Exceptional costs
There were no exceptional costs incurred during FY17. Total
exceptional costs recognised within the Consolidated Statement of
Comprehensive Income during FY16 were GBP10m, of which GBP9m
related to IPO advisor fees and associated costs and GBP1m related
to management incentives, restructuring, redundancy and refinancing
costs.
Taxation
The effective tax rate was close to the statutory rate during
the current financial year. The total tax charge for the year was
GBP18m (FY16: GBP19m) which represents an effective tax rate of 19%
(FY16: 21%) based on a profit before tax of GBP92m (FY16: GBP93m).
Reductions in the rate of corporation tax to 19% from 1 April 2017
and to 17% from 1 April 2020 were substantively enacted on 18
November 2015 and 6 September 2016 respectively.
Earnings and dividend
Adjusted underlying basic earnings per share decreased by 12% to
14.2 pence (FY16: 16.1 pence) reflecting the lower level of profit
after tax achieved this year. Basic earnings per share for FY17
were 13.8 pence (FY16: 13.9 pence). Details of the calculation of
earnings per share can be found in note 12 to the financial
statements.
The Directors are proposing a final dividend of 3.6 pence per
share. This follows the interim dividend of 1.8 pence per share,
giving a total dividend for the year of 5.4 pence per share. The
proposed final dividend reflects our progressive ordinary dividend
policy as stated at the IPO. The proposed dividend is covered 3
times by earnings. Subject to shareholder approval at the Annual
General Meeting ('AGM'), the dividend will be paid on 1 February
2018 to shareholders on the register at 5 January 2018.
The total cost of the final dividend is GBP19m, resulting in a
total dividend cost relating to the year of GBP29m (FY16:
GBP24m).
Risk management
The Group maintains a robust risk management framework,
providing a clear link between strategy and the strategic,
operational and financial risks faced by the business. The approach
to risk is set by the Board, which maintains a close involvement in
identifying and mitigating risk and monitors certain key risk
indicators at Board meetings on a regular basis.
As part of managing the financial risk in the business, the
potential impact of a downturn in the housing market or the broader
UK economic environment is regularly evaluated and we have a number
of key risk indicators that are used at Board level in order to
assess this. Our national reach and diversified portfolio of land
ensures that we are not overly dependent on particular local
markets or individual developments. In addition, our distinct
business model helps to insulate our business from a downturn, with
land acquisition normally contracted subject to planning and also
often subject to commercial viability or by way of option, enabling
us to review land acquisition decisions in light of planning
outcomes and latest market conditions prior to committing
significant capital.
Target returns
Our continuing investment in land and build in order to deliver
future growth together with the lower underlying operating profit
delivered in FY17 led to a decrease in ROCE by 4 ppts to 16% (FY16:
20%) and a reduction in capital turn to 1.1x (FY16: 1.2x). These
metrics will recover, however, once our growth plans begin to
deliver results. The workflow of the business remains firmly on
track as a result of our continuing investment for growth and
allows us to target future increases in both margin and ROCE with
the aim of achieving a ROCE of 25% over the medium-term.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group include,
but are not limited to:
Risk Area Risk Description Mitigating Actions
----------------- ------------------------------------ ----------------------------------
Economic Housebuilding is cyclical The Group closely monitors
conditions and reliant on the broader industry indicators
economy. A deterioration and assesses the potential
in the economic outlook, impact of different
including economic growth, economic scenarios.
inflation, interest Decisions to allocate
rates and buyer confidence, new capital to land
could have a significant and build are managed
impact on the Group's centrally through the
financial performance Group Investment Committee.
and ability to sell The Group aims to maintain
both retirement apartments a national and product
and the properties acquired spread of developments
as part of the recently to ensure that it is
introduced in-house not reliant on one
part-exchange scheme. particular locality
The uncertainty in the or product type.
economy and specifically The operation of in-house
the secondary housebuilding part-exchange scheme
market following the introduced during the
result of the EU Referendum year is subject to
and the General Election strict controls and
is likely to continue regional limits.
in the short to medium-term In addition, over the
as Brexit negotiations course of the last
continue. financial year, the
Group has sought to
enhance the robustness
of its business model
by developing a strategic
relationship with PfP
Capital to access the
growing rental market.
This will help to offset
any potential impact
of a downturn in the
secondary housing market.
----------------- ------------------------------------ ----------------------------------
Reputation The Group constructs The Group enforces
and customer and sells a quality strict procedures over
satisfaction product to an ageing the handover of developments
and sometimes frail for occupation and
customer base and provides the handover of specific
ongoing management and apartments to individual
personal care services. customers. Ongoing
Any issues with the management and personal
products or services care services are provided
the Group provides could within a robust framework
impact on reputation of controls which is
or customer satisfaction closely monitored.
to the detriment of The business has a
the Group's business dedicated customer
model. services team and tracks
Adverse national publicity customer satisfaction
with respect to resales, through NHBC, HBF and
especially older non-managed internal surveys.
properties and those A new in-house estate
sold just prior to the agency has been established
housing market crash to support the resales
in 2008, can result process for customers
in lower resales values, in our managed developments
which in turn can adversely on the private market,
impact our ability to with the aim of speeding
sell new retirement up the sales process
apartments. and maximising value
on resale.
----------------- ------------------------------------ ----------------------------------
Sales The Group's growth plans Detailed reporting
performance assume that it can sell enables the Group to
its products at attractive monitor sales and pricing
prices. Any volume shortfall at a site and unit
or pricing weakness level and regularly
could have a significant review performance
impact on the Group's against expectation
financial performance. with regional management.
A strict approval process
has been introduced
during the year for
awarding discounts
and incentives in excess
of certain thresholds.
----------------- ------------------------------------ ----------------------------------
Workflow The Group has historically The Group is taking
management suffered from a bias action to spread the
towards achieving the workflow more evenly
majority of its completions throughout the year,
and profit in the second which is likely to
half of each financial take effect from FY19
year. Hence, any political onwards, and continues
uncertainty or adverse to seek ways in which
market conditions during to improve this. Workflow
this period could adversely is closely monitored
impact the Group's annual by regional management
performance. This was and the Board.
evidenced by the EU
Referendum result in
2016 and to a lesser
extent the General Election
outcome in 2017.
----------------- ------------------------------------ ----------------------------------
Government Like any other business, The Group closely monitors
legislation the Group is affected Government proposals
by changes in Government and consultations and
legislation. It is possible seeks alternative solutions,
that the outcome of including lobbying
the recent Government Government, submitting
consultation on unfair consultation responses,
leasehold practices and combining views
could adversely impact with other companies
the Group's business in the sector to mitigate
model. any potential adverse
impact on the business
model. The Group has
recently carried out
an impact assessment
of lower and no ground
rents and reviewed
its land appraisal
process accordingly.
----------------- ------------------------------------ ----------------------------------
Build The Group's financial Build progress and
programmes performance is dependent costs are reviewed
and build on its ability to deliver regularly by dedicated
costs build programmes on regional commercial
time and on budget. teams, as well as being
Build programme or cost reported to regional,
over-runs could result divisional and Group
in slower sales or reduced management. Independent
margins. assurance is provided
through a dedicated
commercial internal
audit resource. Framework
agreements have been
established with key
subcontractors and
suppliers to provide
greater certainty of
price and supply. In
addition, the Group
has recently implemented
a tighter control framework
over higher risk more
complex developments.
----------------- ------------------------------------ ----------------------------------
Employees The Group's employees The Group has put in
are central to the achievement place attractive reward
of the Group's objectives. mechanisms and provides
Failure to recruit and extensive opportunities
retain sufficient staff for personal development
resource of the right and training, both
quality could constrain of which are regularly
growth plans. reviewed against peer
housebuilders and other
employers in local
markets. Resource requirements
are assessed against
annual budgets and
recruitment processes
are designed to ensure
talent attraction to
deliver the Group's
plans.
----------------- ------------------------------------ ----------------------------------
Carrying The net realisable value Whenever possible,
value of land owned by the contracts to purchase
of land Group may decline due land are via an option
to changes in the property agreement or are conditional
market or other conditions, on the Group obtaining
or the Group being unable detailed planning consent
to secure detailed planning and contain a commercial
consent on land purchased viability clause. The
unconditionally. Group performs impairment
reviews every six months
in line with International
Financial Reporting
Standards ('IFRS')
requirements.
----------------- ------------------------------------ ----------------------------------
Health Construction sites are The Group strives for
& inherently risky, and excellence in health
safety could expose employees/contractors and safety and considers
to the risk of serious it to be a top priority.
injury/fatality. The Health & Safety
Homeowners in the developments Operations Director
the Group manages are reports directly to
ageing and sometimes the Executive Leadership
frail, with the risk Team, identifying areas
that they can be more of concern, near misses
susceptible to injury. and accidents. This
is supported by a rigorous,
independent site inspection
process which routinely
assesses and reports
on standards. During
the year, the Group
also established a
Health & Safety Committee,
chaired by our Chief
Operating Officer.
----------------- ------------------------------------ ----------------------------------
Land acquisition Poor-quality land and/or Regional land buying
and planning location could result teams are in place
in programme/cost over-runs across all regions
and difficulty in selling. providing local knowledge
Failure to obtain timely and expertise. These
planning permissions teams are targeted
will adversely affect on land exchange and
workflow, resulting completions as part
in failure to meet targeted of their bonus structure.
growth rates, future We acquire land with
sales and/or cash flow. a high-degree of conditionality.
Regional planning teams
have the support and
oversight of the Group
Investment Committee.
----------------- ------------------------------------ ----------------------------------
Cyber/data Failure of any of the The Group maintains
Groups IT systems, in central IT systems
particular those relating and has in place a
to customer data, surveying fully tested disaster
and valuation, could recovery programme.
adversely impact the This is supplemented
performance of the Group. by regular reviews
to seek to reduce the
risk of successful
cyber-attacks and a
General Data Protection
Regulation ('GDPR')
programme to ensure
compliance.
----------------- ------------------------------------ ----------------------------------
Viability statement
In addition to making a going concern statement, the Directors
are also required to make a longer-term viability statement to
comply with provision C.2.2 of the UK Corporate Governance Code
2014.
In response to that, the Directors have assessed the prospects
and financial viability of the Group, taking into account both its
current position and circumstances, and the potential impact of its
principal risks. The Directors consider that a three-year period
was appropriate for this assessment as our capital cycle from land
completion to final sell-out of a development, for FY17 build
starts, is approximately three years. Our land pipeline also
provides us with sufficient land under control to meet sales
targets for the next three years. Accordingly, we consider it
appropriate that our viability review period is broadly aligned
with the expected longevity of our owned land supply.
The Group is subject to a number of principal risks (as outlined
above) and the Directors viability statement review considered the
impact that these risks might have on the Group's ability to meet
its targets. This was undertaken through the performance of a
single downside case sensitivity, which reflects a severe but
plausible impact assuming that appropriate steps are taken to
mitigate the impact of the downside.
The Directors have a reasonable expectation that the Company and
the Group will be able to continue in operation and meet its
liabilities as they fall due over the three-year assessment
period.
Consolidated Statement of Comprehensive Income
For the year ended 31 August 2017
2017 2016
Notes GBPm GBPm
------------------------------------ ----- ------- -------
Continuing operations
Revenue 4 660.9 635.9
Cost of sales (530.2) (499.5)
------------------------------------ ----- ------- -------
Gross profit 130.7 136.4
Other operating income 8 8.9 8.5
Administrative expenses (38.8) (44.7)
Other operating expenses (6.6) (5.1)
------------------------------------ ----- ------- -------
Operating profit 94.2 95.1
------------------------------------ ----- ------- -------
Amortisation (2.0) (2.1)
Exceptional administrative expenses 6 - (10.0)
------------------------------------ ----- ------- -------
Underlying operating profit 96.2 107.2
------------------------------------ ----- ------- -------
Finance income 9 1.6 2.7
Finance expense 10 (3.7) (4.9)
------------------------------------ ----- ------- -------
Profit before tax 6 92.1 92.9
Income tax expense 11 (17.7) (19.4)
------------------------------------ ----- ------- -------
Profit for the year from continuing
operations and total comprehensive
income 74.4 73.5
------------------------------------ ----- ------- -------
Profit attributable to:
Owners of the Company 74.2 73.1
Non-controlling interest 0.2 0.4
------------------------------------ ----- ------- -------
74.4 73.5
------------------------------------ ----- ------- -------
Notes 1 to 34 form part of the financial statements shown above.
All trading derives from continuing operations.
Earnings per share
Basic (p per share) 12 13.8 13.9
Diluted (p per share) 12 13.8 13.9
----------------------------- ---- -----
Adjusted measures
Underlying operating profit 6 96.2 107.2
Underlying profit before tax 6 94.1 105.0
----------------------------- ---- -----
Consolidated Statement of Financial Position
As at 31 August 2017
2017 2016
Notes GBPm GBPm
------------------------------------- ----- ----- -----
Assets
Non-current assets
Goodwill 13 41.7 41.7
Intangible assets 14 27.6 29.6
Property, plant and equipment 15 2.4 2.9
Investments in joint ventures 17 0.4 0.4
Investment properties 0.2 0.2
Trade and other receivables 19 32.1 32.7
Total non-current assets 104.4 107.5
------------------------------------- ----- ----- -----
Current assets
Inventories 18 760.4 685.8
Trade and other receivables 19 9.5 7.5
Cash and cash equivalents 28 40.7 119.0
------------------------------------- ----- ----- -----
Total current assets 810.6 812.3
------------------------------------- ----- ----- -----
Total assets 915.0 919.8
------------------------------------- ----- ----- -----
Equity and liabilities
Capital and reserves
Share capital 25 43.0 43.0
Share premium 26 101.6 100.8
Retained earnings 600.1 553.5
------------------------------------- ----- ----- -----
Equity attributable to owners of the
Company 744.7 697.3
------------------------------------- ----- ----- -----
Non-controlling interests 1.0 0.8
------------------------------------- ----- ----- -----
Total equity 745.7 698.1
------------------------------------- ----- ----- -----
Current liabilities
Trade and other payables 21 85.4 98.7
UK corporation tax 6.7 8.4
Short-term borrowings 23 - 11.3
Land payables 22 67.4 49.3
------------------------------------- ----- ----- -----
Total current liabilities 159.5 167.7
------------------------------------- ----- ----- -----
Non-current liabilities
Long-term borrowings 23 8.0 52.5
Deferred tax liability 20 1.8 1.5
------------------------------------- ----- ----- -----
Total liabilities 169.3 221.7
------------------------------------- ----- ----- -----
Total equity and liabilities 915.0 919.8
------------------------------------- ----- ----- -----
Notes 1 to 34 form part of the financial statements shown
above.
These financial statements were approved by the Board on 13
November 2017 and signed on its behalf by:
Clive Fenton Rowan Baker
Director Director
Consolidated Statement of Changes in Equity
For the year ended 31 August 2017
Share Share Retained Non-controlling Total
capital premium earnings Total interest equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- -------- --------- ------ --------------- -------
Balance at 1 September
2015 381.1 56.4 104.3 541.8 0.7 542.5
-------------------------- -------- -------- --------- ------ --------------- -------
Profit for the year - - 73.1 73.1 0.4 73.5
-------------------------- -------- -------- --------- ------ --------------- -------
Total comprehensive
income for the period - - 73.1 73.1 0.4 73.5
Transactions with owners
of the Company:
Issue of ordinary shares 4.9 104.8 (19.4) 90.3 (0.3) 90.0
Capital reduction of
share capital and share
premium (343.0) (56.4) 399.4 - - -
Share-based payments - - 1.5 1.5 - 1.5
Share issue related
costs - (4.0) - (4.0) - (4.0)
Dividends - - (5.4) (5.4) - (5.4)
-------------------------- -------- -------- --------- ------ --------------- -------
Balance at 31 August
2016 43.0 100.8 553.5 697.3 0.8 698.1
-------------------------- -------- -------- --------- ------ --------------- -------
Profit for the year - - 74.2 74.2 0.2 74.4
-------------------------- -------- -------- --------- ------ --------------- -------
Total comprehensive
income for the period - - 74.2 74.2 0.2 74.4
Transactions with owners
of the Company:
Share-based payments 31 - - 0.9 0.9 - 0.9
Dividends 25 - - (28.5) (28.5) - (28.5)
Share issue related
costs - tax credit - 0.8 - 0.8 - 0.8
Balance at 31 August
2017 43.0 101.6 600.1 744.7 1.0 745.7
-------------------------- -------- -------- --------- ------ --------------- -------
Notes 1 to 34 form part of the financial statements shown
above.
Consolidated Cash Flow Statement
For the year ended 31 August 2017
2017 2016
Notes GBPm GBPm
------------------------------------------------------- ----- ------ ------
Net cash (outflow) / inflow from operating activities 28 (3.8) 18.3
------------------------------------------------------- ----- ------ ------
Investing activities
Purchases of property, plant and equipment (0.7) (1.5)
Purchases of intangible assets (0.4) (0.4)
Proceeds from sale of property, plant and equipment 0.1 0.1
------------------------------------------------------- ----- ------ ------
Net cash used in investing activities (1.0) (1.8)
------------------------------------------------------- ----- ------ ------
Financing activities
Proceeds from issue of share capital - 86.0
Repayment of long-term borrowings (45.0) (35.0)
Dividend paid (28.5) (5.4)
------------------------------------------------------- ----- ------ ------
Net cash (used in) / from financing activities (73.5) 45.6
------------------------------------------------------- ----- ------ ------
Net (decrease) / increase in cash and cash equivalents (78.3) 62.1
------------------------------------------------------- ----- ------ ------
Cash and cash equivalents at beginning of year 119.0 56.9
------------------------------------------------------- ----- ------ ------
Cash and cash equivalents at end of year 40.7 119.0
------------------------------------------------------- ----- ------ ------
Notes 1 to 34 form part of the financial statements shown
above.
Notes to the Consolidated Financial Statements
1. Significant accounting policies
The above results and the accompanying notes do not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006.
The Auditors have reported on the Group's statutory accounts for
the year ended 31 August 2017 under s495 of the Companies Act 2006,
which do not contain a statement under s498 (2) or s498 (3) of the
Companies Act 2006 and are unqualified. The statutory accounts for
the year ended 31 August 2016 have been delivered to the Registrar
of Companies and the statutory accounts for the year ended 31
August 2017 will be filed with the Registrar in due course.
The audited consolidated financial statements from which these
results are extracted have been prepared under the historical cost
convention and in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union, IFRIC
interpretations and those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The principal
accounting policies as set out in the McCarthy & Stone plc
Annual Report and Accounts for the year ended 31 August 2017 have
been applied consistently to all the periods presented.
The preparation of the financial statements in conformity with
the Group's accounting policies requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities at the balance sheet date and the reported
amounts of revenue and expenses during the reported period. Whilst
these estimates and assumptions are based on the Directors' best
knowledge of the amount, events or actions, actual results may
differ from those estimates.
Going concern
The Group meets its day-to-day working capital requirements
through cash in hand and its bank facilities. The Group's forecasts
and projections, taking into account reasonably possible changes in
trading performance, show that the Group should be able to operate
within the level of its current facilities. After making enquiries,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. The Group therefore continues to adopt the
going concern basis in preparing its financial statements. Further
information on the Group's borrowings is given in note 23.
2. Adoption of future standards (new and amended)
There have not been any new standards and amendments adopted for
the first time for the financial year ending 31 August 2017.
3. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the Group's accounting
policies
No critical judgements have been made in the process of applying
the Group's accounting policies that have a material effect on the
amounts recognised in the financial statements.
Assumptions and other sources of estimation uncertainty
The following are assumptions the Group makes about the future,
and other major sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and
liabilities at the year end and within the next financial year.
Fair value of shared equity receivables
Shared equity receivables are recognised at the fair value of
future anticipated cash receipts that takes into account the
Directors' view of an appropriate discount rate, a new build
premium, future house price movements and the expected timing of
receipts.
Shared equity receivables are reviewed at each reporting date
using a variety of estimates that anticipate future cash flows from
the assets. Further information regarding the assumptions and
sensitivity effects of a reasonable possible change can be seen
within note 30.
Cost capitalisation of overheads
Inventory includes a proportion of design, procurement,
construction, health & safety, commercial and planning costs.
Costs associated with these functions are reviewed by management to
attribute those costs relating directly to the cost of the
developments to inventory and those that relate to general business
overheads to expenses. The assumptions used are reviewed annually
by the function heads before being proposed to the Risk and Audit
Committee.
Cost capitalisation involves estimates of the proportion of
costs that are directly attributable to sites. The key source of
estimation uncertainty in this area relates to the percentage of
time spent by our regions on directly attributable site activities.
The percentage of their time which is capitalised ranges between
70-93% for the various functions. Overhead costs capitalised at 31
August 2017 amount to GBP23.2m (2016: GBP25.7m).
Change of estimate
From 1 September 2016, the Group refined its estimate of unit
cost when units are sold and the cost is released to the
Consolidated Statement of Comprehensive Income. Cost of sales is
now recognised on a unit-by-unit basis, by reference to the
forecast future margin across the development. The impact of the
change in estimate on gross profit and inventory for the year ended
31 August 2017 is a decrease of GBP4.1m (0.8% of cost of
sales).
4. Revenue
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
------------ ----------- ----------
Unit sales 631.8 608.2
FRI revenue 29.1 27.7
------------ ----------- ----------
660.9 635.9
------------ ----------- ----------
All unit sales revenue arose from the sale of properties and is
attributable to continuing operations. All revenue was generated
within the UK. No individual customer is significant to the Group's
revenue in any period.
Proceeds received on the disposal of part-exchange properties,
which are not included in revenue were GBP11.6m (2016: GBPnil).
These are recognised on a net basis within cost of sales on the
basis that they are incidental to the main revenue-generating
activities of the Group. The net profit on disposal of these
properties was GBP0.1m (2016: GBPnil).
5. Segmental analysis
IFRS 8 'Operating Segments' establishes standards for reporting
information about operating segments and related disclosures,
products and services, geographic areas and major customers.
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding how to
allocate resources and in assessing performance.
The Group conducts its activities through a single operating
segment. Consequently, no detailed segment information has been
presented.
None of the Group's customers represented more than 10% of the
Group's revenue generated from the building of retirement
apartments for any reporting period presented herein.
6. Profit before tax
Profit before tax has been arrived at after
charging/(crediting):
Continuing operations
Year ended 31
August
-----------------------
2017 2016
Notes GBPm GBPm
------------------------------------------- ----- ----------- ----------
Amortisation of intangibles 14 2.4 2.5
Depreciation of property, plant and
equipment 15 1.1 1.1
Operating lease rental expense 27
Land and buildings 1.4 0.9
Plant and machinery 2.5 2.3
Cost of inventories recognised as
an expense 457.1 436.0
Staff costs 7 92.6 79.0
Change in fair value of derivatives - 0.3
Share-based payments charge to profit
and loss 31 0.9 1.5
Movement in inventory provision (including
part-exchange properties) 1.2 (0.3)
------------------------------------------- ----- ----------- ----------
Reconciliation to underlying operating profit and profit before
tax
The following tables present a reconciliation between the
statutory profit measures disclosed on the Consolidated Statement
of Comprehensive Income and the underlying measures used by the
Board to appraise performance.
Exceptional items are items which, due to their one-off,
non-trading and non-recurring nature, have been separately
classified by the Directors in order to draw them to the attention
of the reader.
Adjusted cost items are items which are material and are
presented separately within the Consolidated Statement of
Comprehensive Income. The Directors are of the opinion that the
separate presentation of these items provides helpful information
about the Group's underlying business performance. Amortisation of
brand has been adjusted in order to reconcile to underlying
operating profit and underlying profit before tax given the
Directors do not believe this cost reflects the underlying trading
of the business.
Exceptionals
Exceptional Adjusted
Administrative cost amortisation
Statutory costs of brand Underlying
Year ended 31 August 2017 Notes GBPm GBPm GBPm GBPm
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Operating profit 94.2 - 2.0 96.2
Finance income 9 1.6 - - 1.6
Finance expense 10 (3.7) - - (3.7)
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Profit before tax 92.1 - 2.0 94.1
Income tax expense (17.7) - (0.4) (18.1)
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Profit for the year from continuing
operations and total comprehensive income 74.4 - 1.6 76.0
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Earnings per share
Basic (p per share) 13.8 - 0.4 14.2
Diluted (p per share) 13.8 - 0.4 14.2
6. Profit before tax (continued) Exceptional Adjusted
Administrative cost Amortisation
Statutory costs of brand Underlying
Year ended 31 August 2016 Notes GBPm GBPm GBPm GBPm
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Operating profit 95.1 10.0 2.1 107.2
Finance income 9 2.7 - - 2.7
Finance expense 10 (4.9) - - (4.9)
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Profit before tax 92.9 10.0 2.1 105.0
Income tax expense (19.4) (0.7) (0.4) (20.5)
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Profit for the year from continuing
operations and total comprehensive income 73.5 9.3 1.7 84.5
------------------------------------------- ---------- --------- --------------- ------------------- ----------
Earnings per share
Basic (p per share) 13.9 1.8 0.4 16.1
Diluted (p per share) 13.9 1.8 0.4 16.1
The exceptional administrative costs in 2016 primarily relate to
the transaction fees and other costs of listing (GBP8.5m). Other
costs recognised within exceptionals relate to redundancy and
restructuring costs (GBP0.9m), Management Incentive Plan payments
(GBP0.4m) and refinancing and other costs (GBP0.2m).
Auditor's remuneration
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
------------------------------------------------- ----------- ----------
Fees payable to the Group's auditor
Annual audit 0.2 0.2
Transaction related audit and advisory services - 0.7
------------------------------------------------- ----------- ----------
0.2 0.9
------------------------------------------------- ----------- ----------
There were no other non-audit fees payable to Group auditor in
the year.
Audit fees in relation to joint ventures audited by the Group's
auditor were GBP3,000 (2016: GBP3,000).
7. Staff costs
Staff costs for the year include Directors' emoluments, which
are detailed below:
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
---------------------- ----------- ----------
Wages and salaries 80.4 67.4
Social security costs 8.0 7.1
Other pension costs 2.6 2.1
Share-based payments 0.9 1.5
Termination payments 0.7 0.9
---------------------- ----------- ----------
92.6 79.0
---------------------- ----------- ----------
The average number of persons, including Executive Directors,
employed by the Group during the year was as follows:
Continuing operations
Year ended 31
August
-----------------------
2017 2016
Number Number
---------------------------- ----------- ----------
Office management and staff 902 900
House managers 1,024 827
Construction staff 219 241
---------------------------- ----------- ----------
2,145 1,968
---------------------------- ----------- ----------
Staff costs include an average of 823 persons employed during
the year from YLMS (2016: 679), a 50% subsidiary held by the
Group.
At 31 August 2017 the Group employed 2,264 people (2016:
2,094).
Directors' emoluments
Amounts recognised in respect of Directors' emoluments:
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
----------------------- ----------- ----------
Wages and salaries 1.7 1.5
Social security costs 0.2 0.2
Share-based payments 0.3 0.6
Other pension costs(1) 0.2 0.2
----------------------- ----------- ----------
2.4 2.5
----------------------- ----------- ----------
(1) Includes salary supplements in lieu of pension
The emoluments of the highest paid director was GBP1.0m (2016:
GBP0.9m), including pension contributions of nil (2016: nil). The
number of Directors in the Company pension plan was two (2016:
two).
8. Other operating income
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
-------------------------- ----------- ----------
Net rental income 0.3 0.6
Other income 7.7 5.9
Non-core business revenue 0.9 2.1
Land sales profit/(loss) - (0.1)
-------------------------- ----------- ----------
8.9 8.5
-------------------------- ----------- ----------
Other income arises on the services provided by Group
subsidiaries to manage certain developments. Non-core business
revenue relates to other income such as customer extras.
9. Finance income
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
-------------------------------------- ----------- ----------
Change in fair value of shared equity
receivables 1.5 2.5
Interest income received 0.1 0.2
-------------------------------------- ----------- ----------
1.6 2.7
-------------------------------------- ----------- ----------
10. Finance expense
Continuing operations
Year ended 31
August
-----------------------
2017 2016
GBPm GBPm
----------------------------------------- ----------- ----------
Loans and overdraft fees 3.1 3.6
Promissory note interest and fees 0.1 0.5
Refinancing issue costs 0.5 0.5
Fair value movement on interest rate cap - 0.3
----------------------------------------- ----------- ----------
3.7 4.9
----------------------------------------- ----------- ----------
11. Tax
2017 2016
Notes GBPm GBPm
-------------------------------------- ----- ----- -----
Corporation tax charges
Current year 17.7 18.6
Adjustments in respect of prior years (0.3) (0.4)
Deferred tax charges
Current year 20 0.3 1.2
17.7 19.4
-------------------------------------- ----- ----- -----
The tax charge for each year can be reconciled to the profit per
the Consolidated Statement of Comprehensive Income as follows:
2017 2016
GBPm GBPm
------------------------------------------------ ----- -----
Profit before tax on continuing operations 92.1 92.9
------------------------------------------------ ----- -----
Tax charge at the UK corporation tax rate
of 19.58% (2016: 20.00%) 18.0 18.6
Tax effect of
Expenses that are not deductible in determining
taxable profit 0.1 1.5
Income not taxable in determining taxable
profit (0.1) (0.1)
Adjustments in respect of previous periods (0.3) (0.4)
Share options timing difference 0.2 -
Other reconciling items (0.2) (0.2)
------------------------------------------------ ----- -----
Tax charge for the year 17.7 19.4
------------------------------------------------ ----- -----
Reductions in the rate of corporation tax to 19% and 18% from 1
April 2017 and 1 April 2020 were substantively enacted on 18
November 2015. A further reduction in the corporation tax main rate
from 1 April 2020 to 17% was fully enacted on 15 September 2016.
The deferred tax assets and liabilities at 31 August 2017 have been
calculated based on the appropriate rate at which the
asset/liability will unwind.
12. Earnings per share
Basic earnings per share is calculated as the profit for the
financial period attributable to shareholders of the Company
divided by the weighted average number of shares in issue during
the period. The actual weighted average number of ordinary shares
during the full year ended 31 August 2017 was 537.3m for the basic
and 537.6m for the diluted calculations, giving a statutory
earnings per share for the year ended 31 August 2017 of 13.8p for
basic and 13.8p for diluted.
2017 2016
------------------------------------------- ------ ------
Profit attributable to shareholders (GBPm) 74.2 73.1
Weighted average no. of shares (m) 537.3 525.6
------------------------------------------- ------ ------
Basic earnings per share (p) 13.8 13.9
------------------------------------------- ------ ------
For diluted earnings per share, the weighted average number of
shares in issue is adjusted to assume the conversion of all
potentially dilutive ordinary shares. At 31 August 2017, the
Company had two categories of potentially dilutive ordinary shares:
3.9m nil cost share options under the LTIP and 4.1m 167.4p share
options under the Sharesave plan.
A calculation is done to determine the number of shares that
could have been acquired at fair value based on the aggregate of
the exercise price of each share option and the fair value of
future services to be supplied to the Group, which is the
unamortised share-based payments charge. The difference between the
number of shares that could have been acquired at fair value and
the total number of options is used in the diluted earnings per
share calculation.
2017 2016
-------------------------------------------- ------ ------
Profit used to determine diluted EPS (GBPm) 74.2 73.1
Weighted average number of shares (m) 537.3 525.6
Adjustments for
Share options - LTIP (m) 0.3 0.3
Shares used to determine diluted EPS (m) 537.6 525.9
Diluted earnings per share (p) 13.8 13.9
-------------------------------------------- ------ ------
13. Goodwill
GBPm
------------------------------------------- ----
Cost
At 1 September 2015 and 31 August 2016 and
2017 41.7
------------------------------------------- ----
Carrying amount
At 1 September 2015 and 31 August 2016 and
2017 41.7
------------------------------------------- ----
No impairment losses have been recognised in any of the
reporting periods presented herein.
Goodwill arose as a result of an acquisition in 2009 of the
assets and liabilities of Monarch Realisations 1 plc (in
liquidation). As the goodwill relates to the business as a whole,
it has not been allocated to a specific CGU. For key assumptions in
determining recoverable amounts in goodwill impairment testing,
refer to note 16.
14. Intangible assets
Brand Software Total
GBPm GBPm GBPm
-------------------- ------ -------- ------
Cost
At 1 September 2015 41.4 3.9 45.3
Additions - 0.4 0.4
-------------------- ------ -------- ------
At 31 August 2016 41.4 4.3 45.7
Additions - 0.4 0.4
-------------------- ------ -------- ------
At 31 August 2017 41.4 4.7 46.1
-------------------- ------ -------- ------
Amortisation
At 1 September 2015 (13.2) (0.4) (13.6)
Charge for the year (2.1) (0.4) (2.5)
-------------------- ------ -------- ------
At 31 August 2016 (15.3) (0.8) (16.1)
Charge for the year (2.0) (0.4) (2.4)
-------------------- ------ -------- ------
At 31 August 2017 (17.3) (1.2) (18.5)
-------------------- ------ -------- ------
Carrying amount
At 31 August 2016 26.1 3.5 29.6
-------------------- ------ -------- ------
At 31 August 2017 24.1 3.5 27.6
-------------------- ------ -------- ------
Brand assets represent the McCarthy & Stone brand name
purchased as part of the business combination in 2009. Brand assets
have 11 years and 7 months of useful life remaining.
All amortisation charged is recognised in administrative
expenses in the Consolidated Statement of Comprehensive Income.
15. Property, plant and equipment
Fixtures,
fittings
and equipment Total
GBPm GBPm
---------------------------------------- -------------- -----
Cost
At 1 September 2015 6.0 6.0
Additions 1.5 1.5
Disposals (0.3) (0.3)
---------------------------------------- -------------- -----
At 31 August 2016 7.2 7.2
Additions 0.7 0.7
Disposals (0.1) (0.1)
---------------------------------------- -------------- -----
At 31 August 2017 7.8 7.8
---------------------------------------- -------------- -----
Accumulated depreciation and impairment
At 1 September 2015 (3.4) (3.4)
Charge for the year (1.1) (1.1)
Eliminated on disposals 0.2 0.2
---------------------------------------- -------------- -----
At 31 August 2016 (4.3) (4.3)
Charge for the year (1.1) (1.1)
Eliminated on disposals - -
---------------------------------------- -------------- -----
At 31 August 2017 (5.4) (5.4)
---------------------------------------- -------------- -----
Carrying amount
At 31 August 2016 2.9 2.9
---------------------------------------- -------------- -----
At 31 August 2017 2.4 2.4
---------------------------------------- -------------- -----
16. Impairment testing
During the periods reported in the financial statements, no
impairments have been recognised against the Group's assets. For
each reported period, management have performed an impairment
review of goodwill, being an indefinitely lived asset. The Group
only has one CGU, being the McCarthy & Stone (Developments)
Limited's business, which was acquired in 2009.
The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected changes to
earnings before interest, tax, depreciation and amortisation
(EBITDA) used as a proxy of free cash flows beyond the budgeted
years as well as the level of capital expenditure required to
maintain the existing business into the future. These assumptions
are reviewed and revised annually in light of current economic
conditions and the future outlook for the business. Management
estimates discount rates using pre-tax rates that reflect current
market assessments of the time value of money and the risks
specific to the business; rates used for 2017 are 7.0% (2016:
8.4%).
The forecast period employed in the impairment assessment was
three years followed by an assessment of cash flows and growth into
perpetuity. The growth rates used are based on management's
assessment of the cash flow forecasts over the medium-term. Due to
the headroom within the calculation no further growth has been
assumed within the perpetuity calculation. These are based on
conservative estimates of the Group's ability to participate in the
growth expected in the industry. Changes in selling prices and
direct costs are based on past practices and expectations of future
changes in the market.
The value of goodwill recognised in the financial statements has
been compared to the derived value in use with no impairment
charges arising. The Group has conducted a sensitivity analysis on
the key assumptions which are material to the impairment assessment
including the discount rate, the cash flow projections and the
terminal growth rate and concluded no material sensitivity exists
in these calculations.
No impairment charges were recorded on items of property, plant
and equipment throughout the period covered by these financial
statements.
17. Investment in joint ventures
The Group has a 50% ownership interest in Kindle Housing
Limited, which manages affordable housing. Kindle Housing Limited
has 100% ownership interest of ordinary shares in each of Kindle
Housing (Worthing) Limited, Kindle Housing (Christchurch) Limited
and Kindle Housing (Exeter) Limited, which rent affordable housing
to local key worker employees. As a result the Group also has a 50%
ownership interest in these companies, all of which are registered
in England and Wales.
The Group accounts for its interests in these companies using
the equity method of accounting.
The share of the assets, liabilities, income and expenses of the
jointly controlled entities is not material.
18. Inventories
2017 2016
GBPm GBPm
------------------------------------ ----- -----
Land held for development 148.6 236.5
Sites in the course of construction 341.2 201.0
Finished stock 238.7 248.3
Part-exchange properties 31.9 -
------------------------------------ ----- -----
760.4 685.8
------------------------------------ ----- -----
Days in inventory amounted to 582 days in 2016 (2016: 574
days).
Inventory days are calculated by taking year end inventory
(excluding part-exchange properties) divided by cost of inventories
recognised as an expense.
19. Trade and other receivables
2017 2016
GBPm GBPm
---------------------------------------- ----- -----
Trade and other receivables due in less
than one year
Trade receivables 2.1 1.5
Other debtors and prepayments 7.4 6.0
---------------------------------------- ----- -----
9.5 7.5
---------------------------------------- ----- -----
2017 2016
GBPm GBPm
------------------------------------------- ----- -----
Trade and other receivables due in greater
than one year
Secured mortgages 3.2 3.4
Shared equity receivables 28.9 29.3
------------------------------------------- ----- -----
32.1 32.7
------------------------------------------- ----- -----
Trade receivables and secured mortgages disclosed above are
classified as loans and receivables and are measured at amortised
cost.
The Directors consider that the carrying amounts of trade and
other receivables and non-current receivables approximates their
fair value.
20. Deferred tax
The following are the major deferred tax liabilities recognised
by the Group:
Other
Accelerated temporary Unrelieved
tax depreciation differences tax losses Total
GBPm GBPm GBPm GBPm
------------------------ ----------------- ------------ ----------- ---------------
At 1 September 2015 - (0.3) - (0.3)
Income statement charge - (1.2) - (1.2)
------------------------ ----------------- ------------ ----------- ---------------
At 31 August 2016 - (1.5) - (1.5)
Income statement charge - (0.3) - (0.3)
------------------------ ----------------- ------------ ----------- ---------------
At 31 August 2017 - (1.8) - (1.8)
------------------------ ----------------- ------------ ----------- ---------------
Deferred tax assets are represented by positive values and
deferred tax liabilities are represented by negative values in the
table above.
Deferred tax assets of GBP0.1m in relation to capital losses
carried forward were not recognised as there is uncertainty as to
whether these losses could be utilised by the Group prior to expiry
(2016: GBP0.1m). These losses have no expiry date.
21. Trade and other payables
2017 2016
GBPm GBPm
-------------------------------------- ----- -----
Trade payables 22.7 26.8
Other taxes and social security costs 1.9 1.9
Accrued expenses 42.6 51.4
Other creditors and deferred income 18.2 18.6
-------------------------------------- ----- -----
85.4 98.7
-------------------------------------- ----- -----
Trade payables and accrued expenses principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases was 20 days during 2017
(2016: 21 days). No material interest costs have been incurred in
relation to such payables. The Group policy is to ensure that
payables are paid within the pre-agreed credit terms and to avoid
incurring penalties and/or interest on late payments. Other
creditors include sales taxes, property taxes, social security and
employment taxes due to local tax authorities. The Directors
consider that the carrying amount of trade payables approximates
their fair value.
No trade payables are purchased on extended payment terms.
22. Land payables
2017 2016
GBPm GBPm
-------------- ----- -----
Land payables 67.4 49.3
-------------- ----- -----
Land payables relate to payment due in respect of land which has
been purchased under an unconditional contract.
23. Borrowings
2017 2016
Short-term borrowings GBPm GBPm
---------------------- ----- -----
Promissory notes - 11.3
---------------------- ----- -----
2017 2016
Long-term borrowings GBPm GBPm
------------------------ ----- -----
Loans 10.0 55.0
Unamortised issue costs (2.0) (2.5)
8.0 52.5
------------------------ ----- -----
Outstanding
at 31 August
-----------------------
2017 2016
Maturity GBPm GBPm
-------------------------- ---------------- ----- -----
Revolving Credit Facility May 2021 10.0 55.0
--------------------------- ---------------- ----- -----
The Group has in place a GBP200m revolving credit facility (RCF)
initially with a five-year term, maturing December 2019. In May
2016, an amendment was made to the RCF agreement to improve the
commercial terms and extend the facility's date from 19 December
2019 to 23 May 2021.
The nominal interest rate of the GBP200m RCF is 1, 3 or 6 month
LIBOR + 1.6% (2016: 1, 3 or 6 month LIBOR + 1.6%) depending on the
length of the drawdown. As at 31 August 2017, GBP10m (2016: GBP55m)
was drawn. The RCF is secured by a floating charge over the assets
of McCarthy & Stone plc, McCarthy & Stone Retirement
Lifestyles Limited, McCarthy & Stone (Developments) Limited,
McCarthy & Stone (Extra Care Living) Limited and McCarthy &
Stone Total Care Management Limited.
24. Net cash
2017 2016
GBPm GBPm
------------------------------------------- ------ -------
Loans 8.0 63.7
Add back unamortised issue costs 2.0 2.5
Cash and cash equivalents (40.7) (119.0)
------------------------------------------- ------ -------
Net cash (30.7) (52.8)
Add back land-related promissory notes - (11.3)
------------------------------------------- ------ -------
Net cash excluding land-related promissory
notes (30.7) (64.1)
------------------------------------------- ------ -------
Net cash is a non-GAAP measure and is calculated as cash and
cash equivalents less long-term and short-term borrowings
(excluding unamortised debt issue costs and land-related promissory
notes).
25. Share capital
The Company has one class of ordinary shares which carry no
right to fixed income. There is no limit to authorised share
capital.
2017 2016
Allotted and issued ordinary shares GBP'000 GBP'000
----------------------------------------- -------- --------
8p each fully paid: 537,329,434 ordinary
shares (2016: 537,314,069) 42,986 42,985
----------------------------------------- -------- --------
2017 2016
Number Number
Allotted of shares during the year '000 '000
-------------------------------------- ------- -----------
At 1 September 537,314 1,905,550
Issuance of new shares in relation to
the Management Incentive Plan - 43,707
Consolidation of share capital - (1,461,943)
Issuance of new shares in relation to
primary proceeds from the IPO - 50,000
Issuance to satisfy early exercises
under Sharesave plan 15 -
-------------------------------------- ------- -----------
At 31 August 537,329 537,314
-------------------------------------- ------- -----------
Issuance of new shares in relation to Sharesave (SAYE) plan
During the year 15,365 ordinary shares were issued to satisfy
early exercise of options under our December 2015 Sharesave (SAYE)
plan by seven "good leaver" employees. The shares were all issued
at 167.4p each, being the exercise price of the SAYE option granted
on 10 December 2015.
Dividends on equity shares
The interim dividend of 1.8p (2016: 1.0p) was approved by the
Board on 4 April 2017 and paid on 9 June 2017 to all ordinary
shareholders on the register of members at the close of business on
Friday 28 April 2017. The ex-dividend date was 27 April 2017. The
final dividend proposed by the Board is 3.6p (2016: 3.5p) per share
resulting in a total ordinary dividend for the year of 5.4p (2016:
4.5p). It will be paid on 1 February 2018 to those shareholders who
are on the register at 5 January 2018 subject to approval at the
Company's Annual General Meeting. The ex-dividend date is 4 January
2018. These financial statements do not reflect the final dividend
payment.
26. Share premium reserve
2017 2016
GBPm GBPm
-------------- ----- -----
Share premium 101.6 100.8
-------------- ----- -----
The share premium reserve represents the consideration that has
been received in excess of the nominal value of shares in
issue.
Movements in share premium are presented within the Consolidated
Statement of Changes in Equity.
27. Operating lease arrangements
2017 2016
GBPm GBPm
---------------------------------------- ----- -----
Minimum lease payments under operating
leases recognised as an expense during
the year 3.9 3.2
---------------------------------------- ----- -----
At year end the Group had outstanding commitments for future
minimum lease payments under non-cancellable operating leases,
which fall due as follows:
2017 2016
GBPm GBPm
------------------------------------------- ----- -----
Within one year 4.3 3.9
In the second to fifth years inclusive 6.9 8.7
After five years 1.1 2.8
------------------------------------------- ----- -----
Outstanding commitments for future minimum
lease payments 12.3 15.4
------------------------------------------- ----- -----
Operating lease payments typically represent rentals payable by
the Group for its office properties and cars. Rent reviews and
break clauses apply to leased property agreements.
28. Notes to the cash flow statement
2017 2016
Notes GBPm GBPm
---------------------------------------- ----- ------ ------
Profit for the financial year 74.4 73.5
Adjustments for
Income tax expense 11 17.7 19.4
Amortisation of intangibles 14 2.4 2.5
Share option charge 31 0.9 1.5
Depreciation of property, plant
and equipment 15 1.1 1.1
Interest expense 10 3.7 4.9
Interest income 9 (1.6) (2.7)
---------------------------------------- ----- ------ ------
Operating cash flows before movements
in working capital 98.6 100.2
---------------------------------------- ----- ------ ------
Decrease in trade and other receivables 0.1 2.2
(Increase) in inventories (85.9) (99.5)
Increase in trade and other payables 5.4 37.5
---------------------------------------- ----- ------ ------
Operating cash flows before interest
and tax paid 18.2 40.4
---------------------------------------- ----- ------ ------
Interest received 0.1 0.2
Interest paid (2.9) (4.1)
Income taxes paid (19.2) (18.2)
---------------------------------------- ----- ------ ------
Cash (used) / generated by operations (3.8) 18.3
---------------------------------------- ----- ------ ------
Net cash (outflow) / inflow from
operating activities (3.8) 18.3
---------------------------------------- ----- ------ ------
Cash and cash equivalents
-------------------------- ---- -----
Cash and bank balances 40.7 119.0
-------------------------- ---- -----
Cash and cash equivalents comprise cash and bank balances and
short-term bank deposits with an original maturity of three months
or less, net of outstanding bank overdrafts. The carrying amount of
cash and cash equivalents approximates fair value.
The increase in inventories comprises movements in inventories
(including part-exchange properties), offset by the repayment of
promissory notes.
The increase in trade and other payables includes the movement
in land payables.
29. Retirement benefit schemes
The Group operates a stakeholder defined contribution retirement
benefit scheme which is open to all employees.
Other than amounts that are deducted from employees'
remuneration and accrued pending payment to the benefit scheme, no
further obligations fall on the Group as the assets of these
arrangements are held and managed by third parties entirely
separate from the Group.
The benefit scheme charge for the period represents
contributions payable to the benefit scheme and amounted to GBP2.6m
for the year ended 31 August 2017 (2016: GBP2.1m). Unpaid
contributions amounted to GBP0.3m as at 31 August 2017 (2016:
GBP0.2m).
30. Financial risk management
The Group's financial instruments comprise cash, bank loans and
overdrafts, trade receivables, other financial assets and trade and
other payables.
2017 2016
Categories of financial instruments GBPm GBPm
------------------------------------------------------ ----- -----
Financial assets
Financial assets at fair value through profit or loss
Shared equity receivables 28.9 29.3
Loans and receivables
Cash and cash equivalents 40.7 119.0
Trade and other receivables 2.7 2.2
------------------------------------------------------- ----- -----
72.3 150.5
------------------------------------------------------ ----- -----
Financial liabilities
Amortised cost
Trade and other payables 77.2 92.0
Land payables 67.4 49.3
Loans 8.0 52.5
Land-related promissory notes - 11.3
------------------------------------------------------- ----- -----
152.6 205.1
------------------------------------------------------ ----- -----
Capital risk management
The Group manages its capital (being debt, cash and cash
equivalents and equity) to ensure entities within the Group have a
strong capital base in order to continue as going concerns, to
maintain investor and creditor confidence and to provide a basis
for the future development of the business while maximising the
return to stakeholders.
The revolving credit facility imposes financial covenants, which
is normal for such agreements, all of which the Group is compliant
with. The Group manages a robust internal forecasting and review
process to ensure it operates within these capital
requirements.
The Group does not routinely make additional issues of capital,
other than for the purpose of raising finance for the management of
the cost of capital of the Group or to fund significant
developments designed to grow value in future.
Share-based payment schemes allow senior employees of the Group
to participate in the ownership of the Group in order to ensure the
senior employees are focused on growing the value of the Group to
achieve the aims of all shareholders.
Financial risk management
The Group's finance function is responsible for all aspects of
corporate treasury. It co-ordinates access to financial markets and
monitors and manages the financial risks relating to the operations
of the Group through internal reports which analyse exposures by
degree and magnitude. The risks reviewed include market risk
(including currency risk, fair value interest rate risk and price
risk), credit risk, liquidity risk and cash flow interest rate
risk.
Housing market risk management
The Group's activities expose it primarily to macroeconomic
risks such as deflation and the cyclical nature of UK property
prices. A deterioration in the economic outlook could have a
significant impact on the Group's financial performance and the
Group has the following procedures which mitigate its
market-related operational risk:
-- The Group closely monitors industry indicators and assesses
the potential impact of different economic scenarios
-- Decisions to allocate new capital to land and build are
managed centrally through the Group Investment Committee,
membership of which includes the Chief Executive Officer, the Chief
Financial Officer, the Chief Operating Officer and the Land &
Planning Director
-- The Group aims to maintain a national and product spread of
developments to ensure that it is not reliant on one particular
location, development or product
-- The Group undertakes a weekly review of sales, reservations
and incentives at regional and Group level
The value of the Group's house price linked financial assets is
sensitive to UK house prices since the amount repayable is
dependent upon the market price of the property to which the asset
is linked. At 31 August 2017 if UK house prices were 5% lower for a
one-year period and all other variables were held constant, the
Group's house price linked financial assets would decrease in
value, excluding the effects of tax, by GBP1.1m (2016: GBP1.1m)
with a corresponding reduction in both the result for the year and
equity.
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group has a low exposure to credit risk due to the
nature and legal framework of the UK housing industry. As stated in
the Group's accounting policy for revenue recognition, a sale is
only recognised upon legal completion and this is accompanied by
full cash receipt in virtually all cases.
In certain circumstances the Group offers sales incentives
resulting in a long-term debt being recognised under which the
Group will receive a proportion of the resale proceeds of an
apartment. The Group's equity share is protected by a registered
entry on the title and usually represents the first interest in the
property. A reduction in property values leads to an increase in
the credit risk of the Group in respect of such sales.
The credit risk relating to shared equity receivables is deemed
immaterial as the value is recovered though subsequent disposal of
the related asset. As a result, management consider the credit
quality of these receivables to be good in respect of the amounts
outstanding, resulting in low credit risk. Exposure to house price
sensitivity is built into the fair value calculation.
Trade receivables consist of a large number of customers, spread
across different regions. Ongoing credit evaluation is performed on
the financial condition of trade receivables.
The Group does not have any significant credit risk exposure to
any single counterparty or group of counterparties having similar
characteristics. The Group defines counterparties as having similar
characteristics if they are related entities. There is no material
concentration of credit risk in respect of one individual
customer.
The carrying amount recorded for financial assets in the
financial statements is net of impairment losses and represents the
Group's maximum exposure to credit risk. No guarantees have been
given in respect to third parties. In addition, for contracted
rental agreements deposits or advances may be held to mitigate
risk. The Group also holds legal recourse and can exercise its
right to recover rental equipment from non-performing
customers.
Liquidity risk management
Liquidity risk is the risk that the Group will encounter
difficulty in meeting obligations associated with financial
liabilities. The Group's strategy in relation to managing liquidity
risk is to ensure that the Group has sufficient cash flow liquid
funds to meet all its potential liabilities as they fall due. The
Group produces cash flow forecasts to monitor the expected
requirements of the Group against the available facilities. The
principal risks with these cash flows relate to achieving the level
of sales volumes and prices in line with current forecast.
The maturity of the financial liabilities of the Group at 31
August 2016 and 2017 are as follows:
2016
---------------------------------------------------
Contractual
Carrying cash Within
value flows 1 year 2-5 years 5+ years
GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- ----------- ------- --------- --------
Loans 55.0 64.7 2.0 62.7 -
Other financial liabilities
carrying interest 11.3 11.4 11.4 - -
Financial liabilities
carrying no interest 141.3 141.3 141.3 - -
---------------------------- -------- ----------- ------- --------- --------
Total 207.6 217.4 154.7 62.7 -
---------------------------- -------- ----------- ------- --------- --------
2017
---------------------------------------------------
Contractual
Carrying cash Within
value flows 1 year 2-5 years 5+ years
GBPm GBPm GBPm GBPm GBPm
---------------------- -------- ----------- ------- --------- --------
Loans 10.0 15.2 1.4 13.8 -
Financial liabilities
carrying no interest 144.6 144.6 144.6 - -
---------------------- -------- ----------- ------- --------- --------
Total 154.6 159.8 146.0 13.8 -
---------------------- -------- ----------- ------- --------- --------
Other financial liabilities carrying interest are promissory
notes, which attract availability and discount fees. Financial
liabilities carrying no interest are trade and other payables and
land payables. The timing and amount of future cash flows given in
the table above is based on the year end position.
Interest rate risk management
Interest rate risk reflects the Group's exposure to fluctuations
to interest rates in the market. The risk arises because the
Group's RCF is subject to floating interest rates based on
LIBOR.
In the year ended 31 August 2017, if UK interest rates had been
0.5% higher or lower, as this is a reasonably possible change, and
all other variances were held constant, the Group's pre-tax profit
would decrease/increase by GBP0.5m (2016: GBP0.5m). Calculations
have been based on borrowing values at each month end.
Fair value of financial instruments
Valuation techniques and assumptions applied for the purposes of
measuring fair value
Fair value of financial instruments carried at amortised
cost
The Directors consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
Bank and other loans
Fair value is calculated based on discounted expected future
principal and interest flows.
Interest rate swaps
At each period end, the Directors appoint a valuer to perform an
external valuation of the fair value of each interest rate swap or
cap outstanding.
Valuation of Levels 1, 2 and 3 financial assets and
liabilities
-- The fair values of financial assets and financial liabilities
with standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market prices
(includes listed redeemable notes, bills of exchange, debentures
and perpetual notes)
-- The fair values of other financial assets and financial
liabilities (excluding derivative instruments) are determined in
accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current
market transactions and dealer quotes for similar instruments
-- The fair values of derivative instruments are calculated
using quoted prices. Where such prices are not available, a
discounted cash flow analysis is performed using the applicable
yield curve for the duration of the instruments for non-optional
derivatives, and option pricing models for optional derivatives.
Foreign currency forward contracts are measured using quoted
forward exchange rates and yield curves derived from quoted
interest rates matching maturities of the contracts. Interest rate
swaps are measured at the present value of future cash flows
estimated and discounted based on the applicable yield curves
derived from quoted interest rates
Fair value measurements recognised in the Consolidated Statement
of Financial Position
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value. The grouping into Levels 1 to 3 is based on the degree
to which their fair value is observable:
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs)
The financial instruments held by the Group that are measured at
fair value all relate to financial assets measured at fair value
through profit and loss ('FVTPL') using methods associated with
Level 3. The sensitivities are not material on assets held at fair
value.
2016
--------------------------
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
---------------------------------- ----- ----- ----- -----
Financial assets at FVTPL
Shared equity receivables - - 29.3 29.3
Total financial assets designated
at FVTPL - - 29.3 29.3
---------------------------------- ----- ----- ----- -----
2017
--------------------------
Level Level Level
1 2 3 Total
GBPm GBPm GBPm GBPm
---------------------------------- ----- ----- ----- -----
Financial assets at FVTPL
Shared equity receivables - - 28.9 28.9
Total financial assets designated
at FVTPL - - 28.9 28.9
---------------------------------- ----- ----- ----- -----
There were no transfers between Levels 1, 2 or 3 in the
year.
Financial assets comprise shared equity loans secured by way of
a charge on the property and an interest rate cap.
Financial assets are recorded at fair value, being the estimated
amount receivable by the Group, discounted to present day
values.
For shared equity receivables the fair value of future
anticipated cash receipts takes into account the Directors' views
of an appropriate discount rate, a new build premium, future house
price movements and the expected timing of receipts. These
assumptions cover a variety of different schemes and the range of
assumptions used are stated below. The assumptions are reviewed at
each period end.
Assumptions 2017 2016
---------------------- ------- -------
3.8 to 4.7 to
Discount rate 4.4% 5.1%
New build premium 5% 5%
0 to 0 to
House price inflation 5.75% 4.0%
5 to 5 to
Timing of receipt 14 yrs 12 yrs
---------------------- ------- -------
2017 2017
Increase Decrease
assumptions assumptions
by 1%/1 by 1%/1
Sensitivity-effect on value of other year year
financial assets (less)/more GBPm GBPm
------------------------------------- ------------ ------------
Discount rate (2.3) 2.6
House price inflation 2.3 (2.1)
Timing of receipt (0.4) 0.4
------------------------------------- ------------ ------------
The fair value of the shared equity receivable is based on the
external available data. The sensitivity-effect of a 1% change is
representative of our best estimate of a reasonably possible
change.
The Directors review the anticipated future cash receipts from
the assets at each reporting date and the difference between the
anticipated future receipt and the initial fair value is credited
to finance income.
At initial recognition, the fair values of the assets are
calculated using a discount rate appropriate to the class of assets
that reflects market conditions at the date of entering into the
transaction. The Directors consider at the end of each reporting
period whether the initial market discount rate still reflects up
to date market conditions. If a revision is required, the fair
values of the assets are re-measured at the present value of the
revised future cash flows using this revised discount rate. The
difference between these values and the carrying values of the
assets is recorded against the carrying value of the assets and
recognised directly in the Consolidated Statement of Comprehensive
Income.
The following tables present the changes in Level 3 instruments
for the years ended 31 August 2016 and 2017:
2016
-----------------------------
Shared Interest
equity rate
receivables cap Total
GBPm GBPm GBPm
------------------------------------------------------- ------------ -------- -----
Opening balance 28.0 0.3 28.3
Additions 0.5 - 0.5
Disposals (1.7) - (1.7)
Revaluation gains or (losses) recognised in the income
statement 2.5 (0.3) 2.2
------------------------------------------------------- ------------ -------- -----
Closing balance 29.3 - 29.3
------------------------------------------------------- ------------ -------- -----
2017
-----------------------------
Shared Interest
equity rate
receivables cap Total
GBPm GBPm GBPm
----------------------------------------------------- ------------ -------- -----
Opening balance 29.3 - 29.3
Additions 0.8 - 0.8
Disposals (2.7) - (2.7)
Revaluation gains recognised in the income statement 1.5 - 1.5
----------------------------------------------------- ------------ -------- -----
Closing balance 28.9 - 28.9
----------------------------------------------------- ------------ -------- -----
31. Share-based payments
Equity-settled share-based payment plans
The Group operates a number of share-based payment schemes as
set out below:
Long Term Incentive Plan ('LTIP')
The Group's LTIP is open to key management at the discretion of
the Board. Awards under the scheme are granted in the form of
nil-priced share options. LTIP awards will normally vest, and LTIP
Options become exercisable, on the third anniversary of the date of
the grant of the LTIP award to the extent that any applicable
performance conditions have been satisfied. LTIP Options will
remain exercisable for ten years after the date of the grant.
Awards are to be settled by the issue of new shares or acquisition
of shares in the market. The performance conditions for the 2016
and 2017 LTIP grants are earnings per share ('EPS'), comparative
total shareholder return ('TSR') and return on capital employed
('ROCE'). The TSR performance condition is a market-based
condition. In order to value the TSR performance conditions against
the FTSE 250 and peer group, a Monte Carlo simulation model is
required which can simulate correlation between companies.
LTIP Total
--------------------------- -------------- -------------- ----------
Date of grant 21 December 25 November
2016 2015
Options granted 1,933,352 1,930,524
Fair value at measurement
date* (GBP) 1.32 2.12
Share price on date of
grant (GBP) 1.56 2.32
Exercise price (GBP) - -
Vesting period 3 years 3 years
Expected dividend yield n/a n/a
Expected volatility 29.21% 26.07%
Risk free interest rate 0.23% p.a. 0.8% p.a.
Valuation model Black-Scholes Black-Scholes
and Monte and Monte
Carlo Carlo
Movements in the year:
Options at beginning
of the year - 1,816,636 1,816,636
Granted during the year 1,933,352 - 1,933,352
Exercised during the - - -
year
Lapsed during the year (57,143) (308,326) (365,469)
Expired in the year - - -
--------------------------- -------------- -------------- ----------
Options at the end of
the year 1,876,209 1,508,310 3,384,519
--------------------------- -------------- -------------- ----------
Exercisable at end of - - -
the year
--------------------------- -------------- -------------- ----------
* This is the average fair value of the fair
values for the three tranches of the LTIP awards
during 2017.
The weighted average of the average price for the LTIP award is
nil.
Expected volatility was determined by calculating the average
historical volatility over a period commensurate with the expected
life of the award for the LTIP based on the FTSE 250, which
McCarthy & Stone are a constituent of post-IPO.
Sharesave Plan ('SAYE')
The SAYE Plan is an all-employee savings related share option
plan. Employees are invited to make regular monthly contributions
to a SAYE scheme operated by Link Asset Services. On completion of
the contract period (three or five years) employees are able to
purchase ordinary shares in the Company based on the average
closing middle market price over the three days prior to the award,
less 20% discount. There are no performance conditions.
Weighted
average
exercise
SAYE Total price
---------------------- -------------- -------------- ---------- ----------
Date of grant 10 December 10 December
2015 2015
Options granted 2,912,247 1,197,514
Fair value at
measurement date
(GBP) 0.68 0.75
Share price on
date of grant
(GBP) 2.34 2.34
Exercise price
(GBP) 1.674 1.674
Vesting period 3 years 5 years
Expected dividend
yield 26.20% 28.16%
Expected volatility 26.07% 26.07%
Risk free interest 0.8% p.a. 1.2% p.a.
rate
Valuation model Black-Scholes Black-Scholes
Movements in the
year
Options at beginning
of the year 2,653,028 1,161,675 3,814,703 1.674
Granted during - - - -
the year
Exercised during
the year (15,365) - (15,365) 1.674
Lapsed during
the year (740,448) (234,829) (975,277) 1.674
Expired in the - - - -
year
---------------------- -------------- -------------- ---------- ----------
Options at the
end of the year 1,897,216 926,846 2,824,061 1.674
---------------------- -------------- -------------- ---------- ----------
Exercisable at - - - -
end of the year
---------------------- -------------- -------------- ---------- ----------
Expected volatility was determined by calculating the average
historical volatility over a period commensurate with the expected
life of the savings term for the SAYE options, based on the FTSE
250, which McCarthy & Stone are a constituent of post-IPO.
Share Incentive Plan ('SIP')
The SIP allows all employees to purchase partnership shares each
month from pre-tax pay, which are then held in trust. These shares
can be sold or taken from the SIP or be left within the trust for
as long as the plan remains open. All plan shares and any other
assets held by the trustees will be held upon trust for the
participants; there is therefore no impact to the Group's financial
statements in respect of this plan.
Annual and Deferred Bonus Plan ('ABP')
The ABP incorporates the Company's executive bonus scheme as
well as a mechanism for the deferral of bonus into awards over
ordinary shares. The Committee can determine that part of the bonus
under the ABP is provided as an award of deferred shares, which
takes the form of a GBPnil cost option. The maximum value of
deferred shares is 50% of the bonus earned. All employees
(including the Executive Directors) of the Group are eligible to
participate in the ABP at the discretion of the Board. At 31 August
2017 three Executive Directors were participating in the scheme.
For the year ended 31 August 2017, one-third of the bonus earned by
the CEO and COO in the financial year, totalling GBP0.1m, will be
deferred in the form of deferred shares for three years, during
which no performance conditions will apply. The amount deferred
will be recognised over the three year deferral period.
Total Share-based payment schemes
2017 2016
Analysis of the income charge: GBPm GBPm
-------------------------------------------- ----- -----
Equity-settled and cash-settled share-based
payments
Management Incentive Plan - 0.4
-------------------------------------------- ----- -----
Equity-settled share-based payments
SAYE 0.5 0.4
LTIP 0.4 0.7
-------------------------------------------- ----- -----
0.9 1.1
-------------------------------------------- ----- -----
0.9 1.5
-------------------------------------------- ----- -----
32. Subsidiaries
2017 2016
Principal Company Class
Name activity number of shares % %
-------------------------------- ---------------- -------- ---------- ---- ----
McCarthy & Stone (Developments)
Limited Holding Company 06622183 Ordinary 100 100
McCarthy & Stone Retirement
Lifestyles Limited Developer 06622231 Ordinary 100 100
McCarthy & Stone (Equity Property
Interests) Limited Investment 05663330 Ordinary 100 100
McCarthy & Stone (Home Property
Equity Interests) Limited Investment 05984851 Ordinary 100 100
McCarthy & Stone Investment Property
Properties No. 23 Limited* Investment 06496130 Ordinary 100 100
McCarthy & Stone (Total Property
Care Living) Limited* Investment 06069509 Ordinary 100 100
McCarthy & Stone (Alnwick) Property
Limited* Investment 07517819 Ordinary 100 100
McCarthy & Stone (Extra Property
Care Living) Limited Investment 06897363 Ordinary 100 100
McCarthy & Stone Total Property
Care Management Limited Investment 06897301 Ordinary 100 100
McCarthy & Stone Rental Property
Interests No. 1 Limited* Investment 06897272 Ordinary 100 100
McCarthy & Stone Management Development
Services Limited Management 07166051 Ordinary 100 100
McCarthy & Stone Lifestyle
Services Limited* Holding Company 07165986 Ordinary 100 100
McCarthy & Stone Financial Financial
Services Limited* Services 07798214 Ordinary 100 100
Keyworker Properties Property
Limited Investment 04213618 Ordinary 100 100
McCarthy & Stone Estates Property
Limited* Resale 07165952 Ordinary 100 100
YourLife Management Services Development
Limited Management 07153519 Ordinary 50 50
McCarthy & Stone Properties
Limited* Dormant 01925738 Ordinary 100 100
The Planning Bureau Limited* Dormant 02207050 Ordinary 100 100
Ortus Homes Limited* Dormant 08658235 Ordinary 100 100
McCarthy & Stone Resales Property
Limited* Resale 10716544 Ordinary 100 n/a
Linden Court Limited* Dormant 04322139 Ordinary 100 n/a
-------------------------------- ---------------- -------- ---------- ---- ----
* These UK subsidiaries will take advantage of the audit
exemption set out within section 479A of the Companies Act 2006 for
the year ended 31 August 2017.
The dormant companies have taken advantage of the section 394A
exemption from preparing individual accounts.
Each of the above shareholdings gives the immediate Parent
Company 100% voting rights, with the exception of YourLife
Management Services Limited where the parent has 50% voting rights,
but the power to appoint the majority of the Directors. Accordingly
this gives the Group power over the relevant activities of this
entity.
The registered address of all of the above subsidiaries is 4th
Floor, 100 Holdenhurst Road, Bournemouth, Dorset, BH8 8AQ.
33. Related party transactions
Balances and transactions between the Parent Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and other related parties are disclosed
below.
Remuneration of key management personnel
The key management personnel are the Executive Leadership Team.
The remuneration that they have received during the year is set out
below in aggregate for each of the categories specified in IAS 24
'Related Party Disclosures'.
2017 2016
GBPm GBPm
----------------------------------------- ----- -----
Short-term employee benefits 2.7 2.5
Social security costs 0.4 0.3
Share-based payments 0.4 0.9
Pension contributions 0.3 0.2
Termination payment - 0.4
----------------------------------------- ----- -----
3.8 4.3
----------------------------------------- ----- -----
Aggregate emoluments of the highest paid
director 1.0 0.9
----------------------------------------- ----- -----
In 2016, as part of the Management Incentive Plan shares
totalling 33,098,147 were issued to key management personnel, prior
to share consolidation. Note 25 details movements in share capital
within the year.
34. Events after the balance sheet date
There were no events after the reporting period that required
adjustment or disclosure in the financial statements.
Notes to Editors
About McCarthy & Stone
McCarthy & Stone is the UK's leading retirement housebuilder
with a c.70% share of the owner-occupied market(1) . The Group has
sold over 54,000 properties across c.1,200 retirement developments
since 1977 and is renowned for its focus on the needs of those in
later life. It re-joined the Main Market of the London Stock
Exchange in November 2015 and re-entered the FTSE 250 following its
quarterly review on 21 March 2016.
There is a growing need for retirement housing. There are
currently 11.8 million people aged 65 or over, rising to 17.3m by
2037, representing a 47% increase(2) . For those aged 85 or over,
the increase will be larger, from 1.6m to 3.0m, representing an 88%
increase. According to research by Demos, one in four over 60s are
interested in retirement living(3) , yet only c.157,000 units of
specialist retirement housing for homeowners have been built(4)
.
The Group has two established product ranges - Retirement Living
and Retirement Living Plus (formerly known as Assisted Living) -
which provide mainly one and two bedroom apartments across the
country with varying levels of support and care for older
homeowners. In late 2014, McCarthy & Stone launched its
Lifestyle Living (formerly 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.
The first Lifestyle Living development at Scarlet Oak in
Solihull won the Best Retirement Scheme at the annual Housebuilder
Awards in November 2015. At the same awards in November 2016, we
were pleased to again receive Best Retirement Scheme for Ramsay
Grange and Lyle Court, our combined Retirement Living Plus and
Lifestyle Living development in Barnton, Edinburgh, as well as Best
Customer Satisfaction Initiative for our approach to ensuring that
we deliver a Five Star service for our homeowners.
The Group was also pleased to win 15 awards at the 2017 NHBC
Pride in the Job awards and 7 Seals of Excellence, marking a 50%
increase in awards from 2016. The scheme is dedicated to
recognising construction site managers who achieve the highest
standards in housebuilding and has been instrumental in driving up
standards in the sector for 37 years.
McCarthy & Stone's commitment to quality and customer
service continues to be recognised by homeowners. In March 2017,
the Group received the full Five Star rating for customer
satisfaction from the Home Builders Federation for the twelfth
consecutive year - making it the only UK housebuilder, of any size
or type, to achieve this accolade.
All developments built since 2010 are managed by the company's
in-house management services team, providing peace of mind that it
will look after customers and their properties over the long term.
This is a key part of how McCarthy & Stone seeks to enrich its
customers' lives. McCarthy & Stone Management Services (MSMS)
provides management services in Retirement Living and Lifestyle
Living developments. YourLife Management Services (YLMS), which is
owned 50/50 by MSMS and Somerset Care Group, a leading
not-for-profit care provider, provides management services,
domestic assistance, catering, personal care and additional support
in Retirement Living Plus developments, and each development is run
by an Estate Manager and a team of staff delivering services 24
hours a day, 365 days a year.
www.mccarthyandstonegroup.co.uk
Forward-looking statements
Some of the information in this document may contain
forward-looking statements regarding McCarthy & Stone plc and
its subsidiaries (the Group). You may be able to identify
forward-looking statements by terms such as "expect", "believe",
"anticipate", "estimate", "intend", "will", "could", "may" or
"might", the negative of such terms or other similar expressions or
by discussions of strategy, plans, objectives, goals, future events
or intentions. These forward-looking statements include all matters
that are not historical facts. McCarthy & Stone plc (the
Company) wishes to caution you that actual events or results may
differ materially from those anticipated. The forward-looking
statements reflect knowledge and information available at the date
of preparation of this document and the Company undertakes no
obligation to update these statements to reflect events and
circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. Many factors could cause the
actual results to differ materially from those contained in
forward-looking statements of the Group, including among others,
general economic conditions, the competitive environment as well as
many other risks specifically related to the Group and its
operations. Past performance of the Group cannot be relied on as a
guide to future performance. Nothing in this document should be
construed as a profit forecast.
(1) Based on 4,778 registrations of cross-tenure properties
specifically designed for the elderly with the NHBC during 18 month
period ended 30 June 2017, of which 3,684 were registered by
McCarthy & Stone
(2) ONS (2017)
(3) ONS (2017, 2014 based figures)
(4) EAC (2017)
This information is provided by RNS
The company news service from the London Stock Exchange
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