Retirement home builder McCarthy & Stone has warned its first-half results will be hit by a fall in forward reservations.
The group - which has developments at Tam-worth, Droitwich and Balsall Common - said challenging trading conditions had not changed much since its annual results in November.
Despite a slight pick-up during November, the group has started the new financial year with forward sales of just 255 units, down from 440 in the comparable period last year.
At yesterday's annual meeting management told shareholders that 2005-06 will be "another testing year," especially in the first six months.
"Buyer interest is clearly evident, and we have continued to record reasonable visitor levels, but an apparent reluctance to commit in the current market has resulted in lower sale rates per site," the group said in a statement.
In November McCarthy & Stone saw profits fall 14 per cent to £127.4 million, on sales up 2.6 per cent at £325.6 million.
The group said the Midlands region accounted for 12 per cent of the year's sales, as in 2003/04.
Brokerage Merrill Lynch said it was expecting first half pretax profits to fall from £48.3 million to around £34.5 million, while for the full year to August 2006 it was looking for profits of £113.5 million.
This would compare to reported profits of £127.4 million in 2004-05, which were also some 14 per cent down on the previous year.
"Although visitor levels and inquiries are up on last year, conversion to reservations remains below normal, although November has seen a modest improvement on September and October," said Merrill Lynch building analyst Mark Hake. He is keeping a 'neutral' rating on the stock.
Bridgewell Securities is also retaining a 'neutral' stance on the stock. "The tough sales environment, alongside margin pressure, will lead to first half results being markedly lower than last year," the house said in an investment note.
"Overall, we continue to like the longer-term attractions of McCarthy & Stone, but in the shorter-term uncertainty over earnings estimates will leave us to keep our 'neutral' stance of the stock," the house added.
In a wide-ranging over-view of the housebuilding sector, Citigroup downgraded McCarthy & Stone from 'buy' to 'hold', based on earnings and valuation. ..SUPL: