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McCarthy & Stone sees profits slump and warns over first half hangover

By Holly Williams, PA Deputy City Editor

Retirement home builder McCarthy & Stone has revealed annual profits slumped by a quarter and cautioned that the election kept recent trading under pressure.

The group bemoaned a “challenging market and strategic structural changes” that left it nursing a 25% slump in pre-tax profits to £43.4 million for the 14 months to October 31.

Profits were knocked by around £17 million of one-off costs, including redundancy payouts as it cut around 200 jobs – close to 10% of its workforce – and closed offices in Scotland and the south-west of England.

It also booked costs for consultancy fees relating to its shake-up and on land that will now no longer be developed.

McCarthy said its woes had continued into the new financial year, with the start of its first half performance weighed down by uncertainty ahead of the December general election.

It said first half profits are set to be lower than a year earlier, but added that political uncertainty had eased since the Conservative Party win and stressed a better second half was expected to keep the full-year out-turn on track.

Last year, McCarthy unveiled a major cost-cutting drive as new chief executive
John Tonkiss looked to turn around the retirement specialist’s fortunes.

He has ordered a shift in focus from growth to increased returns on investment and improving profit margins, with a focus on the burgeoning build-to-rent market as more people rent later in life.

The group also swung the axe on jobs largely across its development businesses across the UK, but confirmed it is not expecting to make any more redundancies under the overhaul

Mr Tonkiss said the group is “making excellent progress across our key strategic initiatives as set out in September 2018, particularly rental, where our initial pilots have 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 we are in a strong position to capitalise on future market recovery,” he added.

Results showed with the one-off costs stripped out, underlying pre-tax profits rose 2% to £63.1 million.

Legal completions rose 8% to 2,301 and revenues lifted 8% to £725 million as average selling prices edged 3% higher to £308,000.

Julie Palmer, partner at Begbies Traynor, said: “The property sector has been particularly affected by the political and economic uncertainty over the past 12 months.

“Consumers are seemingly choosing to delay big-ticket purchases until post-Brexit, as well as the sale of their current properties – heightened by a lack of Government incentives for the retirement housebuilding sector.”