(Alliance News) - McCarthy & Stone PLC said Wednesday the increase in Covid-19 infections in the UK ensures the retirement housing market will "remain difficult".
The developer and manager of retirement communities said it has completed 832 units in the financial year ended October 31, down sharply from 2,402 the year before.
"The Covid-19 pandemic caused significant disruption to the business during this financial year resulting in nationwide closures of construction sites and sales offices during the first lockdown," the company said.
McCarthy & Stone said its underlying operating loss for the period was in line with its own expectations and expects to report revenue of about GBP197 million down sharply from GBP725 million the year before.
"Protecting our homeowners and employees throughout this challenging period remains our absolute priority. Our retirement communities have proven to be a safe haven for homeowners throughout the pandemic, with infection rates across our developments continuing to trend significantly below that of comparable age groups in the wider UK population. This is a major endorsement of independent retirement living," Chief Executive John Tonkiss said.
McCarthy said it saw some benefit from improved liquidity in the secondary housing market during late summer and early autumn driven by pent-up demand and Stamp Duty holiday, but the pandemic remains a headwind.
"New sales leads and net reservation rates improved gradually as the group emerged in June from the first Covid-19 lockdown. However, sales have remained subdued as the behaviour of our customer base, which has an average age at the time of purchase of 79, has been more cautious than the broader population due to the risks associated with Covid-19, and our ability to facilitate marketing events has been constrained," the company said.
McCarthy & Stone also noted it has seen fewer new sales releases in the year due to the disruption caused by Covid-19. As a result, its average total net reservations level for the quarter ended October 31 was at 22 per week, which is 40% below the same period last year.
Tonkiss continued: "Longer-term, we remain excited by the significant market opportunities open to us as we deliver on our multi-tenure and service-led strategy working in partnerships with others, such as Anchor Hanover. The demand for retirement communities is also underpinned by the need to address the structural undersupply of appropriate housing for older people as well as more supportive government policy."
He added: "However, with national Covid-19 infection rates rising and lockdown measures in place, the retirement housing market is expected to remain difficult. As a result, the group will continue to cautiously and actively manage cash flow balancing investment in land and development to support future sales with the need to preserve headroom in order to enable the group to navigate the short-term risks.
"It is against this backdrop that the board believes the 115p cash offer from Lone Star Real Estate Fund represents fair value reflecting both the future opportunities and risks facing the business."
McCarthy & Stone noted it, in mid-October, agreed to a GBP630 million takeover from Mastiff Bidco, a subsidiary of Lone Star Real Estate Fund VI. Lone Star Real Estate Fund VI, a part of US-based private equity firm Lone Star, has received irrevocable undertakings to vote in favour of the merger in respect of 17% of McCarthy & Stone's share capital.
Shares in McCarthy & Stone were 0.5% higher in London on Wednesday at 116.80 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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