The disposal of Peverel, which provides cleaning and repair services to 17,000 McCarthy flats, will cut pounds 20m from the company's pounds 50m debt and provide pounds 9m for land purchases. As well as the contract to manage the flats, Peverel is acquiring the right to collect ground rents from the leaseholders.
In the year to August Peverel made pre-tax profits of pounds 3.7m. Its net assets are estimated at pounds 28.7m.
John McCarthy, chairman, said McCarthy's banks supported his plan to add to the company's 1,300- plot landbank. 'We have seen a marked improvement in visitor flow and our average selling price has improved as incentives have been reduced.'
Mr McCarthy said the company had about 1,000 completed but unsold flats, a year's supply at current disposal rates. He warned that in the short term the shortfall in ground rents would be greater than interest saved.
Equity funding for the buyout has been provided by the development capital group Electra Kingsway. Roger Bannister, Peverel's managing director, said the group would be looking to acquire further management contracts from other developers.
McCarthy & Stone has been developing sheltered housing for the elderly since 1977. However, during the recession its supply of potential customers dried up as people found it increasingly difficult to sell their existing homes.
The company has not made a profit since 1989 and in the past three years aggregate pre-tax losses amounted to almost pounds 50m.
Yesterday's jump in the share price provided belated relief for shareholders after 36 per cent underperformance of the construction sector over the past 12 months. At their peak, in 1988, the shares traded at 400p.
(Photograph omitted)Reuse content