Boost in home sales drives Cairn Homes operating profit as high as €110m

Cairn Homes said on Tuesday it expects full-year operating profit to rise to between €105 million and €110 million, as increased home sales offset the effect of inflation on construction.

This would represent a 2-6.8 per cent increase on last year’s profit of €103 million.

The Dublin-listed company also said in a trading update that it continues to forecast turnover of more than €650 million this year as new home sales rise by as much as 20 per cent to 1,750-1,800 units, including 800 social and affordable units.

Cairn’s current closed and forward sales pipeline has grown by in excess of 300 new homes since its last market update on May 11th, to 2,230 new homes, with a net sales value of more than €800 million.

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All the company’s forecast new home sales for this year and almost 90 per cent of expected closings in 2024 have full planning permission, the company said.

The update, issued just four days after the end of the first half of its financial year, said that Cairn closed 535 new home sales during the period, generating core revenue of €215 million.

“Sales pricing levels were relatively flat in the period despite persistent, if moderating, build cost inflation which is expected to be circa €10,000 per unit in 2023,” said the company, led by chief executive Michael Stanley.

[ Cairn Homes seeks planning permission for 565-unit scheme at Clonburris ]

Turning to shareholder distributions, the company said it plans to announce a 3.1 cent per share interim dividend when it reports first-half results on September 7th.

Cairn is also more than halfway through a €40 million share buyback programme, having spent €22.5 million repurchasing its own stock since early March.

“Overall this is yet another strong update from Cairn Homes,” said Goodbody Stockbrokers analyst Shane Carberry. “The macroeconomic environment in Ireland remains vastly more positive than the UK and we believe Cairn Homes is best positioned to deliver against that.”

The analyst said that there is a “clear path” to Cairn achieving its key profitability target of net earnings reaching 15 per cent of equity that shareholders have invested in the business. The company’s return on equity was 11 per cent last year.

“All the while, the group will continue to generate significant levels of free cash flow and shareholders will benefit through substantial capital returns,” said Mr Carberry. “Indeed, the group will pay out just over €40 million in ordinary dividends this year [equating to a 5.4 per cent yield], and is just over halfway through a €40 million buyback, with further buybacks inevitable.”