Cairn Homes Plc, the leading Irish homebuilding company, announces its interim results for the six months ended 30 June 2020.
Commenting on the results, Michael Stanley, Co-Founder and CEO, said:
“I’m proud of the resilience and extraordinary professionalism that my colleagues and all of the people working across our sites have demonstrated in spades during the first half of the year. The fact that Cairn was profitable in the first half, when our sites were closed for two months due to Covid-19, is testament to their flexibility and commitment to getting the job done to a continually high standard in a safe working environment.”
“As we look forward, I am not surprised by our sales momentum over the summer months which has carried through into the autumn selling season, with our current forward sales pipeline valued at €237 million. The underlying pent-up demand for home ownership in Ireland has increased as a consequence of the lockdown. This experience has definitely changed people’s priorities and owning their own space in a well-designed, energy efficient A-rated new home has become paramount to many.”
“I’m pleased to see the Government’s commitment to put home building at the heart of its policy programme, particularly their emphasis on affordable housing and supporting aspiring home owners more generally.”
“Despite the lingering uncertainty surrounding Covid-19, we look forward with confidence given the scale and responsiveness of our platform, the quality of our new homes and the sustained interest of buyers.”
• €5.8 million operating profit realised in spite of Covid-19 related site closures and costs.
• Construction productivity now back to c. 85% of pre-pandemic levels.
• Primary focus on operating safe environments across 15 sites.
• Summer sales momentum has carried through to key Autumn selling season.
• 1,030 closed and forward sales and current value of forward sales pipeline is €237 million.
• Despite disruption, guiding modestly in excess of 700 closed sales, a gross margin of c. 16.3% and an operating profit of c. €20 million for FY20.
• Company ambitious for future prospects.
Financial Highlights €’m
6 months ended June 2020
6 months ended June 2019
Earnings per share
As at 30 June 2020
|As at 31 December 2019|
• Our primary focus has been on operating and maintaining safe environments for our employees, subcontractors, suppliers, customers and the communities in which we live and work. All site based staff have been fully remobilised. Despite qualifying for funding support, the Company decided not to avail of Government pandemic-related support during the period.
• At half year, we are active on 15 sites, including three new 2020 site commencements supporting over 2,000 full-time jobs. All residential construction sites, which closed on 27 March 2020 in line with Irish Government guidelines, reopened on 18 May 2020. Two new site commencements are scheduled to commence in Q4 2020.
• We are now achieving c. 85% of pre-pandemic productivity levels and driving further efficiencies as capacity levels have increased in response to the level of demand for our new homes and growth plans.
• Closed 207 new homes sales and generated total revenues of €80.9 million in the first half of the year. Sales have gathered momentum over the summer months and our year to date closed sales and current forward sales pipeline is now 1,030 new homes as at 09 September 2020, of which 350 are expected to close in 2021.
• We enter the second half of the year with a platform and increased construction work in progress (“WIP”) investment to be able to respond to all demand this year and into 2021. This is illustrated by our current forward sales pipeline which has a sales value of €237.0 million, despite three months of very limited sales activity due to the shutdown. International institutional capital is still viewing Ireland as a good investment location for multifamily private rental sector (“PRS”) investment.
• Approach to customer-focused product innovation has intensified through continually advancing and improving design and construction methodologies as customers now view their family home as a place to both live and work in close proximity to recreational and other amenity facilities.
• Revenue of €80.9 million (H1 2019: €192.4 million), including €69.7 million revenue from new homes sold (H1 2019: €175.3 million). 207 closed sales in the half year at an average selling price (“ASP”) of €337,0001 (H1 2019: 390 closed sales at an ASP of €449,000). Our starter home ASP in the period was €322,000 (H1 2019: €321,000).
• Gross profit of €13.0 million (H1 2019: €35.7 million) delivering a gross margin of 16.1% (H1 2019: 18.6%). Reduced gross margin includes additional costs associated with the pandemic with residential construction sites closed for two months, increased site management and preliminary costs from extended construction programmes and product mix impacts.
• Operating profit of €5.8 million (H1 2019: €27.3 million) and an operating margin of 7.1% (H1 2019: 14.2%) after operating expenses of €7.3 million (H1 2019: €8.4 million). With a disciplined approach to cost and cash management, we maintained profitability despite production and sales constraints faced during and after two-month site closures in H1 2020.
• Strong, well-capitalised balance sheet with inventories of €957.7 million. Our continued investment in WIP in H1, which increased by €56.8 million in the period, underpins management’s confidence and ambitions for the future of the business.
• Net debt of €186.8 million (31 December 2019: €91.2 million), reflecting investment in our growth strategy. During the period, we also allocated €23.8 million to the share repurchase programme (which was suspended in March) and made a €20.0 million land investment in the adjoining Clonburris site acquisition announced on 28 November 2019.
• Our business also maintains an advantageous liquidity position with gross cash at 30 June 2020 of €155.6 million (31 December 2019: €56.8 million) to fund the expansion of the business into 2021 and beyond. A number of cashflow mitigation measures were implemented during H1 2020, including the suspension of ordinary dividends and our €60.0 million share buyback programme, while Executive Directors will forgo any cash bonuses which may have been payable in respect of our performance in 2020.
• While remaining focused on managing our cash and liquidity position, the Company is also investing in growth as evidenced by our H1 WIP investment and the announcement released separately today in relation to the proposed acquisition of the Esmonde Motors site which adjoins our existing Blakes site in Stillorgan (Dublin).
• The supply of new homes into the Irish housing market is likely to be impacted in 2020 and into 2021 as the broader industry reacts to the pandemic, exacerbating the housing crisis. Cairn has reopened all 15 active residential construction sites and continues to invest in site commencements which will deliver growth into 2021 and beyond. The robust level of demand witnessed since lockdown was expected, particularly from first time buyers for our competitively priced starter homes, and our forward sales pipeline will be enhanced by the ongoing Autumn selling season, including three new sales launches scheduled in September and October 2020.
• Despite the significant disruption to our construction and marketing activities in H1, Cairn is guiding modestly in excess of 700 closed sales, a gross margin of c. 16.3% and an operating profit of c. €20 million for the full year. This guidance is presented on the assumption that our construction and sales activities can continue to operate in a safe manner for the remainder of the financial year. While there remains some uncertainty given Covid-19 and the economic backdrop, we have a healthy level of contracted forward sales into 2021.
• We remain positive for the future prospects of our business and determined to successfully navigate any uncertainty and to deliver growth and increasing sustainable returns over the medium term. This is supported by our agile business model, mature operating platform across low and high density new homes, strong balance sheet, established subcontractor relationships and the strengthening of our talented team and workforce with a number of key appointments since the start of 2020. Cairn has the relative advantage of a strong liquidity position to continue to invest in our growing construction activities and leverage the opportunities which our scale and strategic positioning will present in the coming years. This will ensure we return to being a significantly cash generative business with growing profitability and a clear focus on a sustainable, long-term future.
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