McCarthy & Stone revenue strong amid tougher market

The FTSE 250 company said that improvement was supported by a 3% increase in average selling prices to £308k, and total legal completions of 2,301 units, up from 2,134 last year.

Its underlying operating profit for the 14 month period was expected to be within the current analyst forecast range of between £64m and £71m, in line with the £67.5m it reported last year.

Underlying trading conditions remained challenging during the period, the board said, due to the impact of ongoing political and economic uncertainty on the secondary housing market.

Additional uncertainty over potential stamp duty changes also dented transaction levels, particularly in the south east, which resulted in higher discount and incentive levels compared to the prior year.

Those tougher market conditions were expected to continue throughout the new financial year.

Following a successful trial, McCarthy & Stone reported that its new rental offering was gaining momentum, achieving recent net reservation rates of seven per week, and with its new multi-tenure options now available across more than 70 developments nationally.

The group said it delivered 101 rental transactions during the gradual rollout period, together with a further 21 rent-to-buy and 47 shared ownership transactions.

It said the associated uplift to market value of the rental assets was recognised in its balance sheet and underlying operating profit.

The board also approved an increase in its in-house part-exchange capacity to 15% of total net asset value, from a previous 10%.

That continued to be a “key tool” in converting reservations to sales more quickly and cost effectively.

Strict part-exchange controls had been maintained, the board said, and properties had been resold in line with the group's pricing and timeline targets at an average period of around 12.5 weeks, down from 13.1 weeks year-on-year.

Year-end net cash was expected to be around £24m, up from £4m, notwithstanding the increased level of in-house part-exchange transactions and the seed portfolio of rental properties currently held on the balance sheet prior to onward sale to a strategic rental partner.

The group noted that it maintained its “industry-leading” levels of customer satisfaction, adding that it remained the only developer of any size or type to receive the full ‘five star’ rating from the HBF for 14 consecutive years.

“While the long-term demand for our products and services remains strong, we have continued to experience challenging conditions in the secondary housing market resulting from the ongoing political and economic uncertainty,” said chief executive John Tonkiss.

“The medium-term economic outlook will depend on how the UK's EU withdrawal is delivered, but our new strategy has positioned us well to deliver a solid trading performance in a difficult market and respond positively when trading conditions improve.

“We have a strong balance sheet, a continued focus on delivery of operational improvements across our business and an ongoing commitment to deliver high-quality developments and Five Star customer satisfaction.”

Tonkiss noted the company was also making “exciting progress” across its key strategic initiatives - particularly in rental, where initial pilots confirmed strong demand for renting in later life.

“This is a hugely positive step for the business as it enables our business model to become more resilient and ensures that we are in a strong position to capitalise on future market recovery.

“We are committed to finding a high-quality strategic capital partner to co-invest with us in this hugely underserved retirement rental space in order to develop our vision of creating even deeper and longer lasting relationships with our customers.”

McCarthy & Stone said it would report its annual results on 28 January.

At 1057 GMT, shares in McCarthy & Stone were up 0.57% at 140.3p.