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McCarthy & Stone axes CEO and reviews strategy as profits disappoint
Retirement housebuilder McCarthy & Stone's chief executive has been pushed into early retirement of his own after the company issued a profit warning on Tuesday amid increased caution from potential customers.
An anticipated strong spring selling season failed to materialise and the FTSE 250 company said it now forecast 2,100-2,300 sales for the financial year ending 31 August, from the 2,302 last year, meaning profits could fall between 17% to 32% to an expected operating profit range of £65-80m.
A £706m forward order book, including legal completions, is £67m ahead of the prior year but and thought to be sufficient to deliver within the new guided profit range, with incentives and discounts expected to remain roughly in line with the prior year.
Since reporting a good response to the opening of its new sales outlets in mid-April, McCarthy has been hit by a "noticeable decline" in reservation rates, citing the reason as potential customers having "exercised more caution due to ongoing economic uncertainty", while also pointing to a slower secondary market and a softening of pricing, particularly in the South East.
This led the board to announce that chief executive Clive Fenton will retire at the end of August, with the search to identify a successor already underway, and chairman Paul Lester has launched a strategy review.
The search for a new strategy has been launched "in light of the ongoing difficult market conditions, and without the benefit of any additional government support for the retirement housing sector", with Lester, former boss at Balfour Beatty and VT Group, focusing on ways to improve margins and achieving mid-teens return on capital employed over the short to medium term together with a more balanced workflow.
"This will naturally lead to a more measured growth trajectory and a right-sizing of the group's cost base, with build cost savings as an additional key area of focus."
McCarthy will also be trialling different ways of increasing customer appeal of its homes and broadening the choice of tenure options, including rental and part ownership.