John McCarthy helped to create arguably the most successful housebuilder in Britain, then left after a failed buyout and a row. Now sons Clinton and Spencer are hoping to repeat the trick – with a little assistance from dad, of course.
“There are wrens, herons, swans, eaglets and a kingfisher out there,” Charmaine coos, pointing out first the stream and then the lush green fields that stretch out to the woods in the horizon. “Isn’t it gorgeous?”
Ringwood, in the heart of the sleepy Hampshire countryside, would be an idyllic setting for any company. It seems an even more appropriate location for the headquarters of a specialist in building homes for elderly people.
Charmaine, the personal assistant to the chairman of Churchill Retirement Living, brings her boss, his brother and their father into the conference room that overlooks the grazing cows and sheep. Brothers Spencer and Clinton McCarthy, chairman and managing director respectively, founded Churchill a decade ago. It started life as “Emlor” – an amalgamation of the names of Clinton’s daughters, Emma and Laura – with just one tiny site in Salisbury, but is now the fastest growing retirement homes business in the country, with a turnover of £17.2m.
As any teenager knows, growth spurts can be daunting – so the McCarthy brothers have decided it is time for some fatherly advice.
At the start of this month, dad John, the co-founder of retirement homes giant McCarthy & Stone, was brought in as a non-executive director to help devise Churchill’s strategy for the next three to five years. John’s interest is unsurprising: the tens of millions of pounds he amassed in 40 years at McCarthy & Stone bankroll Churchill, by way of a family trust.
It is not the first time the trio have worked together. Last June, the sons approached McCarthy & Stone with an offer, believed to have been about £5 a share, to take it private. John was still non-executive chairman of the company, but was due to retire a few months later. The board rebuffed the bid, valuing it at closer to the £6 mark. Another bid was considered, but the family concluded that it would take too long to repay the banks if they upped the offer. Earlier this year, John ended his association with McCarthy & Stone, selling his final 13.5 million shares for £74m.
A pretty tidy result for John, but talking to the McCarthy clan, it is obvious how much the board’s rejection of their offer still rankles, and how it has brought them closer together. Churchill’s ultimate boss, Spencer – the more polished, talkative and, at 38, younger of the two brothers – confirms this. “The driving influence at McCarthy & Stone was our father, but now he’s joined us, so we’ll be a force to be reckoned with.” Thirty-nine-year-old Clinton simply says: “Their biggest mistake was not selling out to us. I think a couple of people feared for their positions.”
Bullish certainly, yet neither are quite as open as their father. John explains that his boys would have received their rightful inheritance at McCarthy & Stone once he had taken it private, although much of the existing board would have remained in place: “We would have kept all but two [of the board]. There would have been a new chief executive and a new finance director.” Presumably Spencer would have taken the top job and Clinton, who mainly chips in by quoting the profit and turnover figures at various stages of Churchill’s existence, would have sat on the board.
One of those sacrificed would have been Keith Lovelock, the joint chairman and chief executive of McCarthy & Stone. Lovelock has been chief executive of the company since 1993 and took over the joint role after John's departure last year. Despite his having worked closely with John to first save the company from the 1990s recession and then to turn it into a market-dominating cash cow, Lovelock appears to have become the McCarthy family's nemesis. Both brothers have previously worked at McCarthy & Stone, Clinton for three years during the 1980s and Spencer for 13 years until 1993. Spencer says of his departure: “I was working with Keith and left – shall we say? – because of personality clashes.”
Speaking to Building after the interview with the McCarthys, Lovelock rejects Spencer's recollection of a personality clash: “As far as I’m concerned there is no truth in that,” he says bluntly.
John agrees with Spencer’s account, but adds that this did not immediately lead to a rift of his own with Lovelock: “I had other things to worry about,” he says, referring to the dark days of the early 1990s. But it is clear he and Lovelock aren’t exactly best mates. “The age of the board is a bit over the top,” says the McCarthy patriarch pointedly. Lovelock, like him, is 64.
Lovelock counters his former colleague:
“I’m not at retirement age and we at McCarthy & Stone have a policy of not discriminating against age. There are succession plans in place, but we don’t want to disclose them yet.”
John’s version of events gets rather more personal when he suggests that Lovelock might have blocked the family’s offer over fear of losing his bumper pay packet – he earned about £900,000 in the company’s last financial year.
A lot of people used to talk to us about McCarthy & Stone. We are big enough now that we don't need to be concerned about them
Lovelock ripostes: “It was the unanimous decision of the board. It was the right thing to do.”
Although Lovelock will not confirm the price the board was offered, if it really was £5 a share then perhaps they made the right decision. The McCarthys correctly point out that this was a premium on the share price at the time, but the current price tops £5.50, which the incumbent management would no doubt argue vindicates its belief that the firm’s value would grow in the long term.
Right decision or not, the boys say they have got McCarthy & Stone out of their system. They explain that Churchill no longer needs to be judged against its great rival. The boys have built up a successful business of their own, which, with nearly 90 staff and 89 retirement units sold in the 12 months to November, is the clear second in its market. They are also planning to open a string of offices in areas such as Cambridge and Exeter.
Spencer and Clinton present their argument like tag team of wrestlers:
Spencer: “We used to have a lot of people talk to us about McCarthy & Stone. We are big enough now that we don’t need to be concerned about them.”
Clinton: “It is more the other way around now.”
Spencer: “The concern is coming from them.”
Fighting talk, but McCarthy & Stone probably isn’t quaking in its boots just yet: John’s three-year plan for Churchill is to hit 260 sales by 2006; McCarthy & Stone sold 1948 units in its last financial year.
Whether their great rival is out of their dad’s system is quite another matter: “Never say never,” is what he says when asked if he would consider another bid for McCarthy & Stone.
When the talk moves away from McCarthy & Stone, the three lighten up considerably, continually taking the McCarthy out of each other. The brothers insist that having their dad around is not a parental constraint they would rather do without. Yet when asked if John will be working one or two days a week, Clinton comes alive, smiles and exclaims: “One or two days a month, more like!” Spencer chuckles and adds: “The tough old man might come in after the odd game of golf.” John points out that “this old man” can still hit an impressive 84 strokes around the golf course before darkly muttering that he will ensure that his coffin is lead-lined, so that the boys do their backs in as pallbearers.
John says he tried to avoid being too dictatorial – as he grinningly concedes he was sometimes at McCarthy & Stone – at the first Churchill board meeting he attended earlier this month. “Not that these two would listen to me anyway.”
Indeed. Walking out to the decking that lies just above the stream for our photo shoot, John says his advice for the boys is never to take the firm public. In a quick aside, Spencer says that such a move could never be ruled out, particularly if the company continues to grow at such a rapid rate. At least one City analyst is known to have recommended that Churchill go public.
Although business talk is prevalent, the mood remains jovial, familial. The boys tell their father that when they built the headquarters, called Mill Stream House, the section 106 agreement contained a particularly odd clause. Any cow found dead in the stream blocking the water’s flow has to be removed by Churchill.
The McCarthys laugh – as well they might. It’s time for John to drive off to his golf game. And it’s time for his boys to go and look at more ways of investing the millions that their dad will be pumping into their business.
Champagne and spells in intensive care: The life of the clan McCarthy ...
"I really like Spence and Clint, but they inhabit a bit of a different world don’t they?" says one of their guests.
Spencer has hired a marquee at Windsor for the Cartier International Polo event. Champagne is delivered by the crate. John chomps on an immense cigar as he meets and greets the guests.
First match up is the Prince of Wales team, which includes Prince Harry; they are playing the Hurlingham Club. One of the event’s two commentators, a sort of posh John Motson, desperately attempts to bag himself a knighthood: “Go on Harry of Wales, you can do it, sir!” Unfortunately for the Motty-wannabe and royalists everywhere, Hurlingham edge the match.
Spencer explains the rules of the game to some of his more plebeian guests. He also explains the dangers of the sport. A New Zealand friend of his, on whose farm he and John stayed for a few weeks in the early 1990s, was killed playing polo earlier this month.
Once rated as one of the UK's top amateurs, Spencer gets on his horse and plays in his own team, Emlor, four times a week. Unsurprisingly, he has had several injuries of his own, including having broken fingers and the loss of his front teeth.
It was worse for John, though. A few years ago a polo fall came perilously close to ending his life – he was sent to intensive care with 12 cracked ribs, a broken shoulder and a punctured lung.
This has not stopped other family members from taking up the game. At lunch Clinton's 18-year-old daughter Laura explains how she made the England ladies' team last year, and sitting next to her is boyfriend Maurice, fully kitted out in his England under-21 uniform.
Laura wants to be a fashion photographer, but Clinton has tried to entice her into the family business. Already she has attended a sales and marketing meeting, but the suspicion remains that retirement housing is not her bag. Also at lunch is Spencer's wife, Bridget. She admits to a slight relief that the McCarthy & Stone deal did not come off last year, as her husband is already a workaholic: they go on holiday to the Maldives just about every January, where he spends much of his time trying to set up an internet link.
The second game is on, and it's the England national team versus Chile. The commentator appears to have drunk a few glasses of bolly during lunch. Bizarrely, he asks the ladies in the crowd to not remove their dresses during breaks in the game, and asks his New Zealand co-commentator to speak in an Australian accent.
Quite what the Queen – rumoured to be there drinking tea with the son of another great housebuilder, Tony Pidgley – makes of the commentator is anyone's guess. Chile win 10-8.
A different world indeed.