Mon 12 May 2008
Credit crisis hits retirement sector
The retirement sector has been in the spotlight again today, as Wren Homes released its action plan for the future after six months of no sales.The AIM-listed retirement home specialist announced that it has acquired 11 site options for extra-care retirement schemes, with one site already under option. The schemes, which will range from 50 to 75 units in size, are all located in the south-east.
Despite recently posting an interim loss after not selling a single home during the past six months, chief executive Paul Treadaway (pictured) seemed upbeat:
“This continued roll-out of extra-care schemes, and our vision of delivering and leading the introduction of this new innovative model into the retirement home sector is particularly exciting and satisfying,” he said. “Not only is it a sector that is significantly underdeveloped, but it is one that offers significant growth potential alongside good defensive qualities.”
Wren Homes had previously reported turnover of just £84,000 for the six months to 31 January. However, this turnover all came from a profit-share arrangement with another developer – Wren itself made a loss of £393,970.
The news comes just days after McCarthy & Stone announced that it is planning to make up to ten per cent of its workforce redundant.
The majority of jobs – around 110 in total – will go within construction, as the developer delays building work on new sites. However, some architecture and sales and marketing roles will also be axed.
The move is being blamed on the state of the resale market, as may of the retirement specialists elderly customers have been unable to sell their existing homes in order to buy a new property.
Debt in McCarthy & Stone, which was bought by HBOS and Scottish businessman Sir Tom Hunter in 2006 for £1.1bn, is currently trading at about 60% of its face value.
Retirement home company McCarthy & Stone is planning to make up to 10pc of its workforce redundant because its elderly customers are unable to sell their existing homes and buy a new one in the wake of the credit crisis.
The job losses, confirmed by McCarthy & Stone, demonstrate that the housing crisis has spread to all parts of the housing chain.
About 10pc of jobs, or 110 people, will go at McCarthy & Stone, which was bought by HBOS and Scottish businessman Sir Tom Hunter in 2006 for £1.1bn. The majority of jobs will go within construction, as McCarthy & Stone delays building work on new sites, but architecture and sales and marketing roles will also be axed.
The company had hoped it would be able to weather the economic downturn because its customers are older people - on average 76-year-old widows - who have retired and paid off their mortgages, and are not blighted by concerns over jobs and mortgage repayments. Until they free-up the money tied up in their existing home, however, they are unable to invest in a new one from McCarthy & Stone.
Chief executive Howard Phillips said he "very much regretted" the redundancies, but the company was taking "prudent steps" to deal with the effects of the credit crisis. "Demand for our retirement properties is as high as ever - in fact the number of enquiring customers exceeds last year's record numbers. But frustratingly, some are finding it harder to sell existing house in a slow market," he said.
Just three months ago he was in the process of mapping out expansion plans for the company. Mr Phillips told Building magazine that the company would return to those plans "as soon as the economy allows".
Debt in McCarthy & Stone is trading at about 60pc of its face value. In a further move to cut costs, McCarthy & Stone is scaling back its operations in north west and western regions.
Posted by Marc Da-Silva
in HBOS, Howard Phillips, McCarthy & Stone, News, Paul Treadaway, Sir Tom Hunter, Wren Homes on Mon 12 May 2008
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