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McCarthy & Stone completions to remain subdued

The retirement home provider impaired £60m in goodwill and brand value
July 15, 2020

The closure of sales and construction sites following the Covid-19 outbreak meant the volume of completions fell by almost half for McCarthy & Stone (MCS) during the first half. Management is not expecting any bounce back in trading this year, prompting the retirement home provider to record goodwill and brand impairments totalling £60m. 

IC TIP: Hold at 74p

Only 17 construction sites out of 44 are active and management does not expect to return to pre-pandemic building volumes until 2022. Given the market backdrop, chief executive John Tonkiss said the focus was on shifting its existing properties. "We don't really need to be bombing ahead to build the new stock," he said. 

The pandemic has compounded existing pressures on demand, which last year led to a strategic review aimed at scaling back its sales and marketing teams and the closure of its operations in the south west of England. However, further cost-saving efforts aimed at netting £4m a year have been implemented, including the scaling down of its management team.

House broker Peel Hunt forecasts an adjusted pre-tax loss of £9m and loss per share of 1.1p for the year to October, switching to a pre-tax profit of £11.6m and EPS of 1.9p the following year. 

MCCARTHY & STONE (MCS)   
ORD PRICE:74pMARKET VALUE:£398m
TOUCH:74.2-74.6p12-MONTH HIGH:160pLOW: 37p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE: 129pNET DEBT:9%*
Half-year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2019**2813.60.51.9
2020101-91.3-13.9nil
% change-64---
Ex-div:na   
Payment:na   
*Includes lease liabilities of £7.5m  **Refers to half-year ended 28 Feb