McCarthy & Stone build 33% profit rise

BRITAIN'S most profitable housebuilder, retirement specialist McCarthy & Stone, produced strong interim results yesterday, reflecting both the buoyant housing market and the group's market-leading position in the retirement sector.

First-half pre-tax profits jumped by 33 per cent to pounds 12.1m, ahead of market expectations. Analysts increased forecasts for the full year to pounds 32m, compared with pounds 28.5m.

"It's a good mainstream market out there, which has obviously had a positive impact on the retirement sector," said Merrill Lynch construction and building analyst, Mark Hake.

There is a bullish expansion programme, with John McCarthy, the chairman, hoping to push housing completions to 2,000 a year. About pounds 20m of investment is planned in the North-east and West of England. McCarthy & Stone already has 63 per cent of the retirement housebuilding sector.

With pre-tax profit margins at 25 per cent compared to an average of 10 per cent for the housebuilding sector as a whole, McCarthy & Stone is in an enviable position. But industry experts added a note of caution, claiming that the group, which has a policy of not providing any affordable housing on developments, is on line for conflict with new government regulations.

Recent planning policy guidance, due to become law next year, emphasises that a proportion of affordable housing is required in all new developments of over 25 units in an effort to promote more mixed communities.

The average size of McCarthy & Stone's developments is 50 units. However, finance director Matthew Thorne emphasised: "We don't provide affordable housing at the moment and we won't in the future."

Nonetheless, enthusiasm for the stock remained undiminished by the potential conflict, with analysts saying it would not affect forecasts.

In a declining market, the shares closed down 3.5p at 203.5p. On upgraded full-year forecasts of pounds 32m the shares trade on a forward multiple of 10 - good value, say analysts.