Opening Quote: McCarthy’s building slows, Galliford downs tools

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For new customers of McCarthy & Stone, builder of retirement homes, last year’s Brexit vote should have been cause for more than just a housewarming celebration — judging by the strong preference of Britain’s over 65s for “taking back control”. But, for the company, there was a terrible hangover: it says it took until November for trading to normalise. Why? Because its buyers relied on selling their existing homes, which can involve long property chains — chains containing gloomy Remoaners. McCarthy had to offer “higher incentives” to get the chains moving.

This morning, it said some of this post Brexit effect was still being felt in the six months to February 28. Trading was constrained by a lower forward order book “as a result of the market uncertainty following the EU Referendum”, as well a weighting of completions to the second half of the year. Sales were completed in the period on 866 units, compared with 923 units in the same period a year ago. But the gross average selling price rose a little, from £257,000 to £260,000.

As a result, statutory profit before tax fell by a quarter to £21.8m and underlying profit before tax was down 40 per cent to £22.8m.

Still, the group says lead sales indicators – the number of enquirers, sales leads and visitors – are well ahead of the previous year, and performance has improved in the last five weeks. Legal completions have therefore caught up, and are running only about 1 per cent behind the prior year at £496m at end of March 2017.

Full year guidance remains in line with market expectations. Chief executive Clive Fenton said:

We have made solid progress during this half year despite the headwinds created by the lower forward order book… We have sufficient land under control, much of which already has detailed planning consent, to deliver our strategic growth plan of building and selling more than 3,000 units per annum.

Some new houses aren’t going to be built, however, as construction group Galliford Try has abandoned its takeover talks with Bovis Homes.

Galliford’s first bid for Bovis was rejected, but the two companies held further discussions in an attempt to agree the first large-scale merger of UK housebuilders sector since the financial crisis.

This morning, though, Galliford said it was “no longer considering a combination”, as it became clear it was not possible to secure the support of the board of Bovis “on terms that represent the best interests of Galliford Try shareholders”. In other words, price.

Housebuilding group Redrow has also been interested in a deal, but its offer was rejected by Bovis without further talks.

Bovis must now attempt to implement its own turnaround plan under newly announced chief executive Greg Fitzgerald – ironically formerly chief executive of Galliford Try. His job will be to address a failure to meet construction targets – which resulted in the company trying to pay customers thousands of pounds to move into unfinished homes.

One housebuilder doing rather better is – surprise, surprise, London-centric Telford Homes. It said this morning it expects record revenues and profits for the year to March 31, which are likely to beat forecasts.

Pre-tax profit is likely to come in at £40m, with more than 80 per cent of the gross profit for that year already secured. And it is thanks to the seemingly unending demand in the capital:

In the last few months the non-prime London housing market has remained robust, despite economic and political uncertainty, underpinned by a chronic imbalance between the supply and demand for new homes, particularly at the Group’s typical price point.

And, finally, HSS Hire, lender of equipment to the building industry, will be hoping the demand continues – has just invested heavily in a new distribution network structure. As a result, it reported a full-year loss before tax of £17.4m, after booking exceptional costs of £17.0m.

However it says its new model will help make kit available ‘anytime, anywhere’, significantly strengthening sales opportunities. This morning it said revenue had grown 9.6 per cent in the year to December 31, with its Irish business continuing to take market-share.

FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.

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