McCarthy & Stone warn Brexit may impact targets

September 5, 2016 / Isla MacFarlane
McCarthy & Stone warn Brexit may impact targets

In a trading statement, McCarthy & Stone said that there has been evidence of some weakness in the secondary housing market since its trading update on 29 June. “Whilst website enquiries have increased, and we have continued to take new reservations, these have been at a lower level than we saw in the first nine months of the financial year and cancellations have been at higher levels,” the retirement housebuilder said.

“Whilst it is too early to judge what medium term impact we will see from the EU Referendum result and the Bank of England’s subsequent changes to monetary policy, prolonged housing market weakness, particularly in the secondary market, could affect our ability to deliver our targeted 15% volume growth previously indicated for the financial year ending 31 August 2017,” the trading statement said. “There has been some improvement in customer sentiment during the month of August, however, it is too early to predict at this stage whether these improving conditions will persist into the new financial year.”

Despite this, McCarthy & Stone forecast robust growth for its first year of trading as a public company; legal completions increased by 20%, net average selling price increased by 8% to £259k and revenue surged 31% to c.£635 million.

“We continue to capitalise on increasing demand for retirement housing driven by the UK’s rapidly ageing population and have delivered strong growth in completions, reservations and profit this year,” said Clive Fenton, Chief Executive Officer of McCarthy & Stone. “The investment made in new regions and additional operational infrastructure in the first half of the year is beginning to show benefit, with all nine regions delivering profit for the full year.

“As anticipated in our trading update on 29 June, we have required somewhat higher levels of incentives in order to deliver our volume out-turn. Despite this, we expect to announce at least a c.100 bp improvement in underlying operating margins in the second half of the year versus the first half, which should enable the Group to increase its underlying profit before tax1 by c.19%.

“Our continuing focus on operational excellence, through our three strategic initiatives to increase sales rates, reduce the time taken between securing land and starting on site and implement build programme efficiencies, have allowed us to deliver further improvement in our capital turn for the year ended 31 August 2016. Coupled with a more measured approach to the pace of investment in land and build over recent weeks, this has enabled us to sustain a strong balance sheet, with a net cash position, ahead of previous expectations.  This financial strength will allow us to respond flexibly as housing market conditions develop”.

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