McCarthy & Stone profits hit by restructuring costs

FTSE 250 retirement homebuilder McCarthy & Stone reported a drop in first-half profit on Wednesday as it took a hit from restructuring costs.

In the half year to 28 February 2019, pre-tax profit slumped 66% to £3.6m even as revenue rose 17% to £280.5m, as the group was impacted by £14m of exceptional costs incurred in relation to the delivery of its new business strategy, including restructuring and redundancy costs.

Underlying profit before tax increased 64% to £18.9m, while legal completions rose 11% during the half to 845, with volumes supported by the higher opening stock levels carried over from 2018 and an increased use of in-house part-exchange transactions to create more liquidity in a more challenging secondary housing market.

Meanwhile, the average selling price pushed up 7% to £319,000 and the interim dividend per share was held flat at 1.9p.

McCarthy also said the forward order book as at 5 April was around 17% behind the prior year at £485m, with higher quality reservations now being held due to improved controls. The shortfall was put down to organisational design changes within the sales function, which have now completed, and a planned lower level of sales releases.

Chief executive officer John Tonkiss said: "During the first reporting period of our transformation strategy and against the backdrop of continuing uncertainty and challenging market conditions, we delivered encouraging results.

"We are making significant progress across our strategic objectives, which focus on optimising our operations to deliver strong financial performance and increasing our return on capital employed, margins and cash generation over the next three years. We are mindful of the economic and political uncertainty that all businesses are currently facing but are confident that our FY19 expected volume out-turn remains in line with the board's expectations with increased use of discounts and incentives, particularly part-exchange, now expected to continue into H2 to counteract more challenging secondary market conditions."