McCarthy & Stone : Annual General Meeting and Trading Update

Press release, Wednesday 24 January 2018

McCarthy & Stone plc

Annual General Meeting and Trading Update

McCarthy & Stone (the 'Group'), the UK's leading retirement housebuilder, is today issuing a trading update for the 20 week period from 1 September 2017 to 19 January 2018. All comparatives are to the equivalent prior year period unless otherwise stated.

The Group is holding its Annual General Meeting today at 10am at the offices of Addleshaw Goddard, Milton Gate, 60 Chiswell Street, London EC1Y 4AG.

Current trading and forward sales

Current trading has remained resilient since the Group's full year results were announced on 14 November 2017 despite ongoing subdued conditions within the secondary market. The forward order book including legal completions currently stands at £366m (FY17:£323m) driven by 29 new sites released for sale during the first 20 weeks of FY18 (FY17:18) and increased average selling prices reflecting a continuing improvement in sales mix and quality of sites.

Government proposal on ground rents

On 21 December 2017, the Group issued an announcement following the proposal by the Department for Communities and Local Government (now Ministry of Housing, Communities and Local Government) to reduce ground rents on new long leases to zero, acknowledging the potential impact on the business and outlining the possible mitigating action that could be taken.

Since this announcement, the Group has continued discussions with Government in an effort to secure an exemption from the proposed changes to ground rents for the retirement housebuilding sector. While the Group is supportive of the overall direction of the Government's leasehold reform to safeguard consumers from excessive increases, there is a strong case for a very specific exemption for retirement housebuilders. We are seeking swift clarification on this matter. The Government has given no formal indication as to the timeline for full implementation of the measures or the granting of exemptions and the Group is therefore continuing to plan its strategy to mitigate the impact. As outlined in our previous announcement, this is likely to include land price renegotiation, s.106 contribution renegotiation and reviews of our pricing and management fee structure.

The Group entered the year with £13.4m of deferred revenue from freehold reversionary income (FRI) sales already on its balance sheet to be recognised in line with FY18 unit sales and has already exchanged contracts on its H1 FRI sale for c.£11m. This reduces the potential direct impact of any legislative change on the expected FY18 profit to c.£15m.

Outlook

Build activity and first occupations remain on track for the year with c.80 sales releases still expected for FY18 (FY17:52) and first occupations planned to increase to more than 65 (FY17:49). As previously stated, first occupations will be heavily weighted towards H2 in FY18 with only c.15 first occupations in H1 and c.50 expected in H2 (FY17 H1:19, H2:30). The forward order book is now £43m ahead of the prior year, although an increased proportion of these sales relate to H2 completions. As a result, the Group's profits are likely to be more heavily weighted towards H2 than previously guided.

Overall, the trading outlook for FY18 remains in line with market expectations albeit there is now additional uncertainty created by the Government announcement on ground rents.

Board changes

As previously announced, Paul Lester CBE joined the Board on 3 January 2018. Subject to shareholder approval at today's AGM, he will today take over as Chairman from John White whose retirement was announced on 9 November 2017.

Dividend

As previously announced, the Board is recommending a final dividend of 3.6p per share for FY17, which will result in a total dividend for the year of 5.4p per share. Subject to shareholder approval at today's AGM, the dividend will be paid on 1 February 2018 to shareholders that were on the register at 5 January 2018.

McCarthy & Stone will release a trading update for the half year ending 28 February 2018 on Tuesday 6 March 2018.

- Ends -

For more information, please contact:

McCarthy & Stone, [phone]

Clive Fenton, Chief Executive Officer

Rowan Baker, Chief Financial Officer

Paul Teverson, Director of Communications

Powerscourt, 020 7250 1446 / [e-mail]

Justin Griffiths

Nick Dibden

Notes to Editors

About McCarthy & Stone

McCarthy & Stone is the UK's leading retirement housebuilder with a c.70% share of the owner-occupied market¹The 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% increase². 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 living³, yet only c.157,000 units of specialist retirement housing for homeowners have been built⁴.

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 recognisingconstruction 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.