McCarthy & Stone shifting focus to bungalows and rental sector
Isabelle Fraser MCCARTHY & Stone, the retirement housebuilder, is betting on bungalows and rental properties as it struggles to sell its homes in a sluggish market.
Its pre-tax profit fell by 1pc in the year to Aug 31, in line with expectations, while revenue inched up just 4pc to a record high of £635.9m. Despite the lacklustre results, its share price rose 6.7pc to end at 157p.
It came as the troubled housebuilder Bovis said it was “making encouraging progress” in restructuring the business after a series of profit warnings, takeover offers and a new chief executive. Bovis said: “The demand for new homes continues to be robust across all our regions and customer interest remains good”.
Unlike other housebuilders, including Bovis, McCarthy & Stone does not benefit from any government policy, such as Help to Buy, and relies on the volatile secondhand market in order to sell its homes. Its customers largely must sell in order to downsize and buy McCarthy & Stone homes, and as the level of transactions has slowed, the company has suffered as a result.
Clive Fenton, the chief executive, said the market was “challenging”, adding: “Our full-year completion volumes were in line with the prior year despite company was working with housing association Places for People to help “diversify our model”, by building retirement homes for rent, which he identified as a “very big and under-supplied market”.
He also said that the company was trying to bring back bungalows, the supply of which has recently tumbled as it is difficult to be competitive when buying land for this type of housing.
Anthony Codling, an analyst at Jefferies, said: “McCarthy’s operational performance demonstrates that the market remains challenging without Help to Buy, but in our view McCarthy & Stone is rising to that challenge.”
He added that the results were “encouraging as we expect growth in construction and sales activity to outweigh challenges in the market”.
Bovis said its average sales rate inched up, with trading in line with expectations, adding that through disposals it would have £20m more cash at the end of the year than forecast. Its shares rose 2.7pc to £11.35.