Revenue soars at Cairn as developments come on stream

Homebuilding company Cairn Homes said 2018 saw a strong performance for the company, with revenues and operating profit soaring as the number of new homes it sold almost doubled.

The company is also paving the way to return cash to shareholders, signalling it would propose a capital reduction resolution to shareholders, as well as potentially starting to pay regular dividends.

Shares in Cairn rose 4.8 per cent on the trading update on Thursday and are now trading 21 per cent ahead of their all-time low towards the end of December.

Cairn said total revenue for the year was €337 million, compared with €149.5 million in 2017. Excluding non-core site sales, revenues from new homes was €294 million for the year, up from €131.5 million in 2017.

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The company said it sold 804 new homes in the year, almost double the 418 sold the previous year. Activity picked up in the second half of the year, with 511 homes sold.

Cairn said it expects full-year gross margin to be approximately 20.5 per cent, up from 18.2 per cent in 2017, and operating profit is anticipated to be in the region of €53 million. In 2017, operating profit was €14.5 million.

Closing net debt for the year was €140 million, down from €159.4 million in the prior year.

Performance

The average selling price for the year rose to €366,000, from €315,000 in 2017. A decline in the average price in the second half of the year was due to changes in the mix of housing, with duplex units on sale and the company delivering 68 Part V homes to local authorities, which has an average selling price of €207,000.

"Considering this was only our third full trading year, this performance illustrates the positioning and growing maturity of our business, the capability of our talented team and the depth of unsatisfied demand for new family homes in Ireland, " said chief executive Michael Stanley. "We look forward with real confidence to 2019 and beyond."

Cairn said it had a strong forward sales pipeline for 2019, with a sales value of €159.5 million. Among developments due to go on sale will be Donnybrook Gardens in Dublin 4, Mariavilla in Maynooth and Oak Park in Naas.

Cairn said it would propose a capital reduction resolution to shareholders this year.

“Our forward sales, the increasing number of active selling sites and the broadening of our product range continues to underpin our targets for 2019 and beyond,” the company said in a statement.

“As part of Cairn’s intention to implement a progressive capital return policy, including the potential for share buybacks in addition to dividends, the company intends to propose a capital reduction resolution to shareholders no later than our 2019 annual general meeting on May 22nd, 2019. The resolution will seek to convert a substantial part of our share premium account into distributable reserves.”

Philip O’Sullivan of Investec said the firm saw scope for special dividends “in due course”.