Higher selling prices helped revenues edged higher, but profits fell by a third as a result of a rise in build costs, increased use of part-exchange and additional marketing activity () disappointed with its outlook as it posted a sharp fall in annual profits, sending shares in the retirement housebuilder lower. Unlike traditional housebuilders, McCarthy & Stone has not benefited from government schemes such as Help to Buy in recent years. Instead it has seen demand weaken as older people struggle to sell their properties in a stagnant market before moving into one of its retirement communities. To try to counteract the “subdued market conditions”, the company has upped its use of part exchange but that, along with a rise in build costs, ate into its pre-tax profits, which fell more than a third to £58.1mln in the 12 months ended August 31 (2017: £92.1mln). That was despite a 2% rise in revenue to £676.1mln (2017: £660.9mln), with a 10% rise in average selling prices offsetting a 7% fall in completions during the year. Shareholders had already been warned in September by new boss John Tonkiss that trading in recent months had been “tough”, so eyes were on the outlook and the implementation of the recently unveiled business transformation strategy. Back in that September update, McCarthy & Stone said the year end forward order book was 23% ahead of the prior year at £174mln. But things have slowed down of late, with the order book at the beginning of November 4% down on 2017 at £267mln (£277mln), although management said this was in line with expectations. As for recent trading, that has been “impacted” by the initial changes implemented as part of the new strategy. Still, McCarthy has left its 2019 guidance unchanged. “Whilst it has been a challenging year for the group and we were faced with particularly difficult market conditions with the level of UK monthly housing transactions showing a decline of around 40% since 2015, we delivered full year revenue of £672mlnln and brought 68 high-quality developments to market,” said Tonkiss. He added: “During the year, we conducted a full strategic review of the business and in September 2018 announced our new transformation strategy. “This new strategy represents a significant shift in the business mindset away from growth and towards increasing our return on capital employed and operating margin.” Shares were down 1.8% to 133.4p, although they have rallied since July when they were below 100p.
Retirement housebuilder McCarthy & Stone has reported a fall in pre-tax profits of 2% to £58.1m ($75.1m) for the year to 31 August 2018, citing weaker demand as older people encounter difficulty in selling their home to move to a retirement property. An increase in building costs and the use of part-exchange were also contributing factors. Revenue for the year rose more than 33% to £676.1m. The company unveiled a transformation strategy in September, moving the business focus away from growth and towards return on capital employed and operating margins, said new CEO John Tonkiss.