Retirement homes specialist McCarthy & Stone has reported a dramatic dip in profits, which it has blamed partly on higher construction costs.
Underlying operating profit fell 30% to £68m in the year to 31 August. The company said other reasons for the decline included “increased usage of part-exchange to counteract subdued market conditions, additional marketing activity to promote the high level of full-year 2018 sales releases, and increased operating costs in support for our previous growth strategy”.
The number of completions also fell by 7% to 2,134, although revenue increased by 2% to £671.6m and the average selling price also rose by 10% to £300,000.
The company is implementing a “new business transformation strategy”, which includes focusing on build cost reduction and developing a more efficient sales and marketing model.
Chief executive John Tonkiss said: “This new strategy represents a significant shift in the business mindset away from growth and towards increasing our return on capital employed and operating margin. Our focus now is on creating a more efficient business capable of delivering improved shareholder returns, while leveraging our longer-term strategic opportunities. This includes increasing customer appeal by offering a broader choice of tenure options, as well as increased flexibility and affordable offerings.
“Whilst it has been a challenging year for the group and we were faced with particularly difficult market conditions with the level of UK monthly housing transactions showing a decline of around 40% since 2015, we delivered full-year revenue of £672m (FY17: £661m) and brought 68 (FY17: 49) high-quality developments to market.”
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