BOURNEMOUTH-based retirement housing giant McCarthy & Stone says it achieved a “solid” performance in a “difficult market”, despite a substantial drop in pre-tax profit.

The company spent £4million on redundancy payments as it began a three-year plan to raise profit margins and save £90million.

Revenue at the home builder was up eight per cent year-on-year to £725million in the 14 months to the end of last October, with gross profit unchanged at £104.9m.

But operating profit fell by almost a quarter to £48.4m. McCarthy & Stone blamed exceptional items, including redundancy costs of £4m, a net £7m for land which will no longer be developed, and consultants’ fees of £6m associated with the strategic review of the business.

Chief executive John Tonkiss said: “The group’s new strategy has driven a solid FY19 (financial year 2019) trading performance in a difficult market. We have a strong balance sheet, a continued focus on delivery of operational improvements across our business and an ongoing commitment to delivering high quality developments and five star customer satisfaction.

“We are also making excellent progress across our key strategic initiatives as set out in September 2018, particularly rental, where our initial pilots have confirmed strong demand for renting in later life. This is a hugely positive step for the business as it enables our business model to become more resilient and ensures we are in a strong position to capitalise on future market recovery.”

The year saw a new emphasis on offering retirement homes for rent as well as sale. The business says it has a “pipeline” of developments with the potential for a full ‘build to rent’ strategy.

Last July, the company took back the ownership of its care and services operation, making it one of the largest operators to offer housing with care. It plans to generate more than five per cent of its revenue from management services.

In an operational review attached to the results, Mr Tonkiss wrote: “Trading volumes remained resilient during the period, despite more challenging conditions within the secondary housing market, largely due to the continuing political and economic uncertainty, as evidenced by persistently low levels of national housing transactions and a declining consumer confidence index.

“Additional uncertainty over possible stamp duty changes, which were trailed as part of the government's plans over the summer, created further customer inertia and impacted transaction levels, making trading conditions more challenging. Despite this, however, the Group delivered 2,301 legal completions during the 14 month period (2018: 2,134).”