Retirement housebuilder, McCarthy & Stone has confirmed it expects its full-year operating profit to fall by up to 32% for the year, following a decline in reservations and property prices
In a trading update, McCarthy & Stone said that annual results for the year to August, to be filed in November, would reveal operating profit down from last year’s £96m to around £65m-£73m, which is at the lower end of previous expectations.
McCarthy & Stone says it has dealt with what it called “continuing economic uncertainty and a slower secondary market”.
Back in June, the group warned its operating profit for 2018 could be a third lower than last year, following a decline in both reservations and property prices.
McCarthy & Stone, which will officially report its numbers for the year to the end of August 2018 on 13 November, said total legal completions fell 7% to 2,134 units.
It said volumes and operating profit had been constrained, “as expected”, by the heavy weighting of first occupations in the second half, continuing economic uncertainty and a slower secondary market.
The group also said prices had softened in the second half, particularly in the south of the country.
John Tonkiss, who became McCarthy & Stone’s interim chief executive, said it had been a tough year for the group with “ongoing adverse market conditions continuing to impact the business, and without the benefit of any additional government support for the retirement housing sector”.
In April the group had urged the government not to slap leasehold reforms on the retirement homes sector, following an earlier pledge from the then-communities secretary Sajid Javid to crack down on “feudal practices” within the leasehold system in England, including a ban on leaseholds for almost all new build houses.
Tonkiss added: “In light of the continuing challenging market conditions, the group began a review of its strategy in April. As previously announced, our strategic focus will be on pursuing a more measured trajectory and smoothing our workflow to create a more efficient business. This will naturally lead to a right-sizing of our cost base, with build cost savings being a key area of focus.
“Additionally, we are continuing to trial a number of strategic initiatives designed to increase customer appeal and offer a broader choice of tenure options, increased flexibility and affordability. We will provide the market with more detail on this at our strategy update later this month.
“We are continuing to engage with government in an effort to secure an exemption from the proposed changes to ground rents. We believe that there is a strong case for a specific exemption for the retirement housebuilding sector and we are awaiting clarification on this matter.
“Until this is received, we continue our planning to try and mitigate the potential impact on the business, including maintaining discipline around our cash position and adopting a more measured approach to securing land.”
