McCarthy & Stone’s profits have been hit by restructuring and redundancy costs, resulting in a 66% tumble in profits. The retirement housebuilder’s shares were down 1.98% this morning on the news.
However, the financial results for the six months ended 28 February 2019 showed that underlying profit before tax increased by 64% to £19m – a positive indication of its new strategy.
John Tonkiss, Chief Executive Officer 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. Our half year revenue increased to £281m (2018: £240m), representing progress towards a rebalancing of our workflow and we brought 15 (2018: 16) high-quality developments to market. This revenue increase, together with margin improvement activity in line with our new strategy resulted in a 47% increase in underlying operating profit for the period.
“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.”
| H1 2019 | H1 2018 | Change | |
| Legal completions1 | 845 | 760 | 11% |
| Revenue | £280.5m | £239.6m | 17% |
| Average selling price2 | £319k | £298k | 7% |
| Gross profit | £39.0m | £32.0m | 22% |
| Underlying operating profit3 | £21.3m | £14.5m | 47% |
| Operating profit | £6.0m | £13.5m | (56%) |
| Underlying operating margin | 7.6% | 6.0% | 1.6ppt |
| Operating margin | 2.1% | 5.6% | (3.5ppt) |
| Underlying profit before tax3 | £18.9m | £11.5m | 64% |
| Profit before tax | £3.6m | £10.5m | (66%) |
| Underlying basic earnings per share3,4 | 2.9p | 1.7p | 1.2p |
| Basic earnings per share | 0.5p | 1.5p | (1.0p) |
| Net debt5 | £57.2m | £75.9m | £18.7m |
| Return on capital employed6 (ROCE) | 10% | 12% | (2ppt) |
| Interim dividend per share | 1.9p | 1.9p | – |
Revenue increased by 17% to £281m (2018: £240m) reflecting 11% increase in volumes to 845 legal completions (2018: 760) together with a 7% improvement in the average selling price to £319k (2018: £298k), reflecting improvements in the quality and locations of our developments as well as a change in geographic and product mix.
Underlying operating profit increased by 47% to £21m (2018: £15m) driven by increased volumes and ASP profile together with planned margin improvement activity in line with the Group’s new strategy, partially offset by increased use of discounts and incentives, particularly part-exchange, to counteract a more challenging secondary market.
Underlying profit before tax increased by 64% to £19m (2018: £12m) and statutory profit before tax decreased by 66% to £4m (2018: £11m) impacted by £14m (2018: nil) of exceptional costs incurred in relation to the delivery of the Group’s new business strategy including restructuring and redundancy costs, realignment of land bank to deliver steady state volumes and consultancy fees (£6m cash impact from exceptionals in H1).
