34 Ageing population creates opportunity
McCarthy & Stone is Britain’s leading builder of retirement apartments, eighth on the new Solent 250 list, and responsible for the construction of more than 40,000 homes for in excess of 45,000 residents. Executive land and planning director Gary Day spoke to Sue Hughes
McCarthy & Stone is very optimistic when it views the prospects for the next three to five years – and no wonder, because with an ageing population, the market opportunities are excellent. “The housing and housebuilding market will improve as finance becomes available to the consumer again,“ says Gary Day, “however there are two challenges. The first is land availability and planning. Planning is getting more difficult, not easier, and policies and regulations are choking land release. The other is mortgage availability. Our customers rarely need financial assistance. They’re mortgage-free and downsizing, but may be stuck in a chain where younger buyers and families cannot obtain the finance to move forward.“
Working with part-exchange agencies helps customers, but being aware of this pent up demand for its apartments, Day believes the Government needs to do more to assist first- time buyers and what he calls ’second steppers’.
Renowned for its focus on the needs of people in later life, McCarthy & Stone, based at the striking Homelife House in Bournemouth, is not planning any acquisitions or disposals in the forthcoming year. It has sold its landmark HQ and while renting space for two more years, one task for newly-appointed CEO Mark Elliott, will be to look at possible relocation.
Overseas expansion may crop up too; after a brief foray in the 1980s, aimed primarily at the ex-pat market in Spain, potential customers are selling up villas to return to the UK 20 years on, because there is nothing in Spain which compares to developments here. “It’s not part of the current business plan, but we could revisit it,“ Day says.
A ’nameless as yet sector’ is an emerging market comprising people in their 50s and 60s, the baby boomer post-war generation, not quite ready for McCarthy & Stone’s two core products: Later Living, akin to sheltered housing, one or two-bedroom flats with a range of communal facilities (the typical resident is aged 78-79, mostly single, relatively active and predominantly female); Assisted Living, extra care housing, typically a block of self-contained one or two-bedroom flats with a restaurant on site and provision for domestic and personal care (the typical buyer is an 84-year-old widow who is more frail).
“There’s some longevity in these types of development, but that ’nameless sector’ has different expectations and needs, which we
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schemes aligned around key business objectives. There is also an attractive company pension scheme.
Claridge House, Littlehampton
are researching in order to ensure that we plan ahead for future markets. Their aspirations will be different. They are more likely to choose a downsize move and lifestyle change before requiring the type of housing that we currently provide, so we’re looking into their demands. Our existing products may suit them later, but not for that initial move to a smaller home. They may choose to move to a city or town centre offering cafe culture, just one of the aspects we need to learn about. We suspect they want to be with likeminded people, but not necessarily in large communities.“
McCarthy & Stone is sponsoring a RIBA competition, inviting architects to submit designs for a new site at Bishops Waltham and with that younger ’nameless sector’ in mind, is keen to see what comes up.
In the year to August 31, 2012, McCarthy & Stone generated 1,370 sales, delivering 12% growth in revenue to £257.7 million and 10% growth in EBITDA to a five year high of £39.9m, in spite of the continuing difficult housing market. Trading cashflow before reinvestment in land acquisition and construction grew to £196m. A 70% market share is an obvious success, yet Day states: “We lead the way in our sector for innovation and design, but see ourselves as middle market, and as I’ve said before, 70% is great for us but somewhat unhealthy for the growing older persons’ market, in terms of delivering housing choices.“
Self-funding, money generated from sales provides the finance for new land and construction. The headcount has increased to 879 as new sites are developed, and there is a range of incentive schemes for everyone, based upon grade and function, these being annual bonus
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – DECEMBER 12/JANUARY 13
Day regards health and safety regulations as a good thing and ’not a burden’ but cites planning as the issue which holds the business back most: “It’s the sheer frustration and risk of gaining consent – as a result, it’s difficult to secure land on a subject to planning approval basis.“
The company has also
diversified in a practical manner complementary to its core business, entering the world of financial services (with partners), bringing management of its developments back in house, and by offering property resales, coach trips, wills/lasting power of attorney and funeral planning, with other services in the pipeline.
Day’s business goal is ’to help secure a successful future for the company and our shareholders’, but he has a highly personal lobbying commitment – to encourage the Government to deliver better housing for all older people.
“The cost of health and social care to the public purse is a hidden time bomb. I really believe the Government needs to proactively plan better housing for all older people, not just those who can elect to live in our homes.“
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