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McCarthy & Stone gathering momentum

Solid growth is expected over the next couple of years
November 14, 2017

McCarthy & Stone (MCS) struggled in the wake of the referendum as the second-hand housing market stalled, and older people held back from moving into purpose-built retirement accommodation. However, there are signs of better times ahead, notably because of a tie-up with PfP Capital, the fund management business of Places for People. The partnership will allow it to access the growing rental market, via the bulk sale of 126 units in the year to August 2017.

IC TIP: Buy at 157.8p

In addition, around 80 new sites are planned for 2018, up from 52 a year earlier, nearly all of which are in the build stage. And 75 development sites have been added to the land bank, with sufficient land under control to deliver the strategic objective of selling 3,000 units a year.

After a weak start, legal completions finished slightly higher at 2,302, while average selling prices rose 3 per cent to £273,000. And while underlying operating margins fell from 17 per cent to 15 per cent, partly because of increased customer incentives, there was a strong recovery in the second half where margins rose to 17 per cent from 10 per cent in the first half. 

Analysts at Peel Hunt are forecasting adjusted pre-tax profit for the year to August 2018 of £115m, giving EPS of 17.4p (from £94m and 14.2p in 2017).

MCCARTHY & STONE (MCS)  
ORD PRICE:157.8pMARKET VALUE:£848m
TOUCH:157.4-158.6p12-MONTH HIGH:200pLOW: 144p
DIVIDEND YIELD:3.4%PE RATIO:11
NET ASSET VALUE:139pNET CASH:£30.7m
Year to 31 AugTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201548680.93.4-
201663692.913.94.5
201766192.113.85.4
% change+4-1-1+20
Ex-div:4 Jan   
Payment:1 Feb