STOCK WATCH: Red pens come out for retirement home builder McCarthy & Stone
There was good news last week for developers when it emerged that Chancellor Rishi Sunak was poised to suspend stamp duty on properties worth less than £500,000.
The efforts to turbocharge the housing market were cheered loudly by John Tonkiss, chief executive of FTSE250 member McCarthy & Stone, when they were confirmed by the Chancellor on Wednesday.
McCarthy & Stone, which builds retirement homes, needed a lift more than most, with older buyers less likely to be moving home during the pandemic.
Retirement home developer: McCarthy & Stone needed a lift more than most, with older buyers less likely to be moving home during the pandemic
While the measure helped, there were none aimed at encouraging people to downsize.
On Wednesday, the company releases its first-half results, which will underline the problem.
Analysts at UBS and Peel Hunt have pulled out their red pens and predict a small loss for the six months ended April after business ground to a halt in March. They reckon this has been caused by a drop in revenues of around 40 per cent.
The firm was on the verge of signing an investor to fund £300million of new rental properties for pensioners, but the deal fell through. Any news on finding new backers could help put a floor under the battered shares.
Job losses are racking up by the day, with fears that the economy is on the verge of a major recession.
But perhaps we’re all being too gloomy.
Thursday’s trading update from recruitment firm Hays could prove us all wrong.
That’s according to analysts at UBS, who are expecting it to have experienced a pick-up in business in June.
‘While uncertainty is high and consensus is wide, we believe current trading and exit rates will point to a slightly less severe 2020 downturn than expected,’ they said.
If that turns out to be true, then shares in Hays and other recruiters are likely to bounce.
As with so many companies that are reporting their results at the moment, the trick is to work out just how bad business has been during the lockdown.
That certainly goes for home furnishings company Dunelm, whose sales will have plunged between April and June, the last three months of its financial year.
Analysts at Peel Hunt have pencilled in a fall in sales of around 58 per cent in that period compared to the same quarter last year, even after a jump in online sales.
But the scribblers also say that they reckon there’s a chance Dunelm might actually beat its forecasts and do better than expected – or should that be less badly?
Now is the time for the private equity firms to start circling beleaguered companies with an eye on snapping them up on the cheap.
This newspaper revealed four weeks ago that Advent, the US firm that bought Dorset-based aerospace and defence giant Cobham earlier this year, eyed a bid for Clinigen, the AIM-listed drugs company that has grown into a £1 billion business.
Clinigen’s shares have come under pressure and the bid talk did little to help them recover.
But perhaps an upbeat trading update tomorrow could provide the ammo needed. Even if it doesn’t, a further share price fall could lure in more prospective bidders.