John Tonkiss has been appointed Chief Executive Officer of McCarthy & Stone plc with immediate effect.
Since McCarthy & Stone’s IPO in November 2015 the business has faced a number of market headwinds including political uncertainty following the outcome of the vote to leave the European Union and a lack of Government support for the retirement housebuilding sector.
These headwinds have resulted in a challenging economic backdrop, lowering consumer confidence and consequently reducing volumes in the secondary housing market with UK housing transactions showing a decline of c. 40% since 2015.
The Board announced earlier this year that it would be undertaking a strategic review and has now announced the results of that review which it says will position the business to succeed in this more challenging market environment.
Key highlights of the transformation include:
- Shift in business mindset from growth to increasing ROCE and margins;
- Realigning the workflow and rightsizing the operational cost base to deliver steady state volumes of c.2,100;
- Change of year end to 31 October 2019 to decouple from peak holiday season;
- Focus on two core products, Retirement Living and Retirement Living Plus (formerly Assisted Living);
- Improved offering through increasing affordability, flexibility and choice for our customers.
It also said it would optimise its operations for strong financial performance across four fundamental pillars:
- Workflow realignment – generating a stable monthly flow of land exchanges, build starts, sales releases and first occupations – fundamental to operational efficiency;
- Rightsizing the business – rightsizing the operational cost base to reflect steady state volumes;
- Efficient sales and marketing model – a reorganisation of the sales teams and a centralised approach to the Group’s marketing function;
- Build cost reduction – utilising standard, more efficient designs and optimising subcontract procurement practices.
As part of its new strategy, the Group is also announcing a new long-term vision for the business to leverage the strategic opportunities in its services and product offering. The business will aim to create even deeper and longer relationships with customers to increase its appeal, diversify its revenue streams and reduce its exposure to market cyclicality. The long-term aim will be to create retirement communities that enrich the quality of life of its customers and their families and to become the UK’s leading developer, manager and owner of retirement communities.
The Group’s proposition is underpinned by three key principles:
- Flexibility within its services to respond to evolving customer needs and increase revenue. This will include the introduction of a new tiered service for new and existing homeowners, expanding its care offering, opening up new developments for wider community use and integrating technology enabled services (e.g. motion monitoring, medication control sensors and home automation);
- Choice of ownership through multi tenure options, including outright ownership, shared ownership and rental;
- Affordability – the business will seek to maximise its mass market appeal by increasing the affordability of its products. This will be achieved by reducing build costs, increasing efficiencies and introducing new contemporary and compact designs.
John Tonkiss said, “As the new Chief Executive Officer of McCarthy & Stone, I am pleased to announce our new strategy which represents a shift in business mindset from growth to increasing our return on capital employed and margins. We are positioning the business to succeed in the current challenging market environment and over the next three years, we will be focusing on increasing shareholder returns by optimising our operations to deliver strong financial performance. In parallel, we will also aim to leverage our longer term strategic opportunity to increase our customer appeal, diversify our revenue streams and reduce our exposure to the market cyclicality.
“I believe that our new strategy will further build upon the strong fundamentals in the business, which include an expected c.88% increase in the number of people aged 85 and over by 2037, our significant share of the owner-occupied retirement market, and our industry-leading levels of customer service and build quality.”