McCarthy & Stone MCC is yet another housebuilder hoping that the warning signs of a pending slowdown in the housing market can be ignored and, like all the others it seems to be living in the hope that good times can and will go on for ever. For the year to the 31st August, its first as a public company, it enjoyed robust growth, with a revenue rise of 31%, legal completions up by 20% and £52m cash in the bank at the year end. It credits its success on its continued focus on operational excellence and concentrating its efforts on the demand for retirement homes. Its net average selling price rose by 8% because of what it claims was increased quality.
That is now history and the future presents a more gloomy prospect.
The order book is down some 12% on a year ago. Incentives are back and you have not heard much of those in the house building industry for many a year but in recent weeks their use has become necessary to ensure that the volume growth target can be met. Since the company’s last update as recently as the 29th June, weakness in the secondary housing market has become apparent. Perhaps worst of all, cancellations have risen and there is now a fear that continued market weakness could lead to a failure by the company to achieve its 15% planned growth target.
Eckoh plc ECK has been forced to issue a surprise profit warning as management appears to have bitten off more than it can chew, with the disastrous acquisition of Product Support Solutions which has a significant presence in the US and which has suffered from cost over runs on a large, complex, fixed price contract which is expected to lead to losses of £700,000 for that division alone. PSS is now to be closed down and as it was acquired less than a year ago in November 2015, questions must be raised about the effectiveness of Ecko’s management at the time and the due diligence it performed on PSS. Perhaps not surprisingly, today’s update remains silent on the point.
To add to the damage Eckoh has changed its pricing formula thereby leading to a fall in short and medium term margins. The result of all this, is that pre tax profits for the current year will be below market expectations and probably in line with last years results.
Ryanair RYA happily announces that its great success continues, with August traffic up by 11% or 16% on an annual rolling basis. Load factor again rose, by 1% and customers will be pleased to know that average fares over the next 6 months are expected to fall by some 10 – 12%