For the six months to 28th February 2019, McCarthy & Stone’s pre-tax profit fell 66% to £3.6m (2018 H1: £10.5m) despite a 17% rise in interim revenue to £280.5m (2018 H1: £239.6m).
Operating profit was down 56% to £6.0m (2018 H1: £13.5m).
The revenue increase reflects an 11% increase in volumes to 845 legal completions (2018: 760) together with a 7% improvement in the average selling price to £319,000 (2018: £298,000).
Profits were impacted by £14m of exceptional costs during the period, primarily due to restructuring and redundancy costs. The southwest regional business has been closed and the Scotland business is being wound down and closed over the next 12 months.
As McCarthy & Stone’s customers are rarely first-time buyers, it does not get the same boost from government schemes from which other house-builders benefit.
To cut overheads McCarthy & Stone has initiated a build cost reduction programme, involving increasing standardisation, more efficient designs and new subcontract procurement practices.
Chief executive John Tonkiss said: “We have completed design reviews of all FY19 and FY20 schemes, identifying savings in build costs and margin improvements. Any new schemes brought forward are now significantly more compliant with our design standards.
“We have rolled out a standard construction programme, preliminary schedule and agreed Wave 1 (of four) of framework/specification value improvements for materials. A programme for competitive tendering of subcontract packages has also been launched.”
However, he described the financial results as ‘encouraging’ as underlying operating profit was up 47% to £21.3m.
"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,” he said. “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."