Retirement housebuilder McCarthy & Stone PLC (LON:MCS) on Wednesday warned on the uncertainty surrounding the government’s plans to scrap controversial ground rents but left its full year outlook unchanged.
The government announced in December it will force developers to cut controversial ground rents to zero for new homes. McCarthy said it continued talks with the government to secure an exception to the proposed changes for retirement housebuilders given the ageing crisis facing the UK.
READ: McCarthy & Stone calls for exemption to government's plan to cut ground rents
“The government has given no formal indication as to the timeline for full implementation of the measures or the granting of exemptions and the group is therefore continuing to plan its strategy to mitigate the impact,” the company said in a trading statement for the 20 weeks to January 19.
“As outlined in our previous announcement, this is likely to include land price renegotiation, Section 106 (agreements with local authorities) contribution renegotiation and reviews of our pricing and management fee structure.”
Trading outlook unchanged
Despite concerns over the ground rent proposals, the group said the trading outlook for the 2018 fiscal year remains in line with market expectations.
It entered the year with £13.4mln of deferred revenue from freehold reversionary income (FRI) sales, reducing the potential impact of legislative changes on profits to about £15mln.
McCarthy has also exchanged contracts on its first half FRI sale for about £11mln.
The forward order book, including legal completions, stands at £366mln, compared to £323mln last year.
The company released 29 new sites in the first 20 weeks of 2018 and increased average selling prices.
McCarthy continues to expect 80 sales releases for the year, compared to 52 last year, and sees first occupations increasing more than 65 from 49.
Profits to be heavily weighted towards second half
However, first occupations will be heavily weighted towards the second half with 50 expected.
The forward order book is £43mln ahead of the prior year, though a large proportion of these sales relate to second half completions.
“As a result, the group's profits are likely to be more heavily weighted towards the second half than previously guided,” it said.
Paul Lester will begin as chairman on Wednesday, subject to shareholder approval, following the departure of John White.