Retirement home specialist McCarthy & Stone this week reported a 14% fall in pre-tax profit and warned of another “testing year ahead”
Keith Lovelock, chairman, said the drop was the result of “the most difficult trading conditions for housebuilders in the past 10 years”.
In the year to 31 August 2005 it sold 1983 homes, a 3.5% fall compared with the 2055 it sold the year before.
As a sign of resilience, however, the board recommended a dividend of 19.4p a share, up 12%.
Lovelock said: “Clearly the housing market is not showing any significant signs of improvement. So we anticipate another testing year ahead of us – but nevertheless the long-term attractions of our niche position remain strong.”
Average selling price during the year rose 6% to £163,500 and turnover rose 3% to £326m.
The company has a 65% market share of the retirement homes market and says that its niche specialism has the benefit of an ageing population, with 30% of UK households headed by someone aged 60 or more.
McCarthy & Stone is based in Bournemouth and covers the UK market from Inverness in Scotland to Penzance in Cornwall. It promoted Howard Phillips, who has worked at the company for 17 years, to chief executive in September. Lovelock remains executive chairman.
Shares in the company fell 35p or 5% to 615p when the results were announced, and brokers cut their forecasts.
Alastair Stewart, analyst at Dresdner Kleinwort Wasserstein, cut forecasts for both 2006 and 2007 “in light of reduced outlook for volumes prices and margins”. However, he added that the company’s long-term fundamentals remained strong.
On Monday, Stewart said performance had “continued to deteriorate for most housebuilders” in the past three months and that he had no positive recommendations for the majors.
Stewart offered a downbeat view of the market: “Although volatile, housebuilders’ share prices have held up. We believe this is a reaction to bid speculation as well as a perceived downward trend in interest rates. Although it is dangerous to rule out takeover offers, our view is that bidders would be taking big risks, given the current market outlook.”