McCarthy & Stone has plans to float

McCarthy & Stone, the UK’s largest builder of retirement homes, has hired investment bankers Moelis & Co as it prepares for a potential flotation early next year.

The company, which sold nearly 1,400 properties last year, said it was considering options including a sale of the business, flotation or a refinancing. The group has also appointed Mark Elliott, former head of Doncaster racecourse owner Arena Leisure, who joined as chief executive on November 1.

The housebuilder is one of a clutch of companies taken on by Lloyds, the bank that is 40 per cent owned by the state, at the height of the financial crisis. With housebuilders’ fortunes improving, the bank is moving to restructure its portfolio, which it inherited when it bought HBOS in 2008.

Last month McCarthy & Stone posted its strongest financial performance since 2007. It said annual sales grew 12 per cent to £257.7m and earnings before interest, taxes, depreciation and amortisation rose 10 per cent to a five-year high of £39.9m in spite of the difficult housing market.

The company, which employs 700 people, has built about 45,000 pensioner flats during the past 35 years.

McCarthy & Stone was taken private in a £1.1bn deal in 2006 by Sir Tom Hunter and billionaire brothers David and Simon Reuben. A debt-for-equity swap in 2009 left Lloyds holding a 25 per cent stake. The builder has £500m of debt due to mature in 2014.

The potential flotation comes as housebuilders return to stability after a slow recovery from the financial crisis. Almost all the larger listed housebuilders have restored their margins by building on cheap land bought during the recession, taking advantage of government measures to improve mortgage availability, and developing more lucrative, higher margin family homes.

That revival of fortunes has sparked a bout of takeover activity. Last month, Persimmon, the UK’s largest housebuilder by stock market value, paid £35.7m for Hillreed Homes in the southeast of England – the first big deal to be completed in the sector in five years. Steve Morgan, the founder and executive chairman of Redrow, also made an aborted attempt to take the company private.