Pre-tax profits plummet at McCarthy & Stone

Pre-tax profits at McCarthy & Stone fell by more than half in the six months to 28 February 2018, as fewer land exchanges and planning consents were secured by the company.

Despite revenue growing by 1% to £239.6m (2017: £238.2m), pre-tax profits dropped 52% to £10.5m, down from £21.8m in the same period last year.

Legal completions fell by 12% to 760 units, from last year’s 864, while the business secured 22 land exchanges and 21 planning consents during the six-month period (2017: 30 land exchanges and 34 planning consents).

Trading was ‘constrained’, said the developer, by quiet secondary market conditions and a pause on building following the EU referendum in June 2016.

In response to government proposals to scrap ground rents, McCarthy & Stone said it has taken a more ‘measured approach’ to land buying with negotiations taking longer as a result.

The company said it is consulting with the government to seek exemption from potential changes. Its half-year report said: ‘We believe that there is a strong case for a very specific exemption for the retirement housebuilding sector due to its unique viability model and the need to fund the construction of the shared areas, and we are seeking swift clarification on this matter.’

Despite the challenges, the developer said its underlying trading remained ‘resilient’ with forward sales plus legal completions running 13% ahead at £581m as of 6 April 2018, up from £512m in April 2017.

It has delivered 16 first occupations to the market and released 54 sites for sale since the start of its fiscal year.

Clive Fenton (pictured), McCarthy & Stone’s chief executive, said: ‘This provides continued confidence in our expectation that the full year outturn will be within the current range of analyst forecasts, albeit there remains some uncertainty created by the government’s announcement on ground rents.

‘The growing need for retirement housing caused by our rapidly ageing population also means the long-term prospects for our business continue to be positive. However, the UK remains woefully unprepared for these demographic changes and we are calling for a joined-up policy approach across all government departments to encourage the delivery of better housing options for older people.’

He added: ‘The current reviews of planning and social care policy provide an excellent opportunity to rebalance housing policy and help the millions of older people who want to downsize into properties better suited to their needs.’