Cairn Homes revenues down but starter home prices edge up

Homebuilder Cairn Homes posted revenues of €80.6 million in the first six months of the year, down 58 per cent year on year. The company completed 207 new home sales during the six-month period, compared with 390 a year earlier, as restrictions aimed at slowing the spread of coronavirus shut down construction across the State.

Cairn remained profitable during the six-month period, despite the impact of the Covid-19 restrictions in April and May that curtailed activity significantly.

Operating profit for the six months is expected to be in the region of €5.6 million, down from €27.3 million in 2019, the company said.

Cairn said the average selling price for starter homes, excluding VAT, was €322,000 in the first half of the year, up €1,000 on a year earlier. It described this as a “price level where first-time buyers can get access to mortgage finance”.

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Buyers pay 13.5 per cent VAT on new homes, bringing the purchase price up to €365,470.

Half-year gross margin is expected to be 16 per cent, slightly lower than the 18.6 per cent recorded in the first half of 2019.

That figure takes into account the additional costs associated with the pandemic, as sites closed for two months and site management and preliminary costs increased.

“Assuming no further site closures occur relating to Covid-19, Cairn would expect that this negative impact on gross margin will not sustain into future periods,” the company said in a statement.

At the end of June, Cairn said it had €155 million in gross cash, and net debt of €187 million. It has €955 million in inventories, including €695 million of land held for development and €260 million of construction work in progress.

Encouraging demand

Looking ahead, the listed builder said it was encouraged by the level of underlying demand and sales since show homes reopened.

As of August 10th, sales closed since the end of June and the pipeline of ongoing transactions had grown to 763, with the Covid-19 shutdown meaning that 300 of its forward sales will now close in the first half of 2021.

Selling prices were broadly in line with pre-Covid-19 levels, the company said.

"Notwithstanding the impact of the pandemic on our operations, the resilience of the business has shone through in recent months," said chief executive Michael Stanley.

“We successfully reopened 15 residential construction sites in mid-May with new health and safety protocols and procedures. Sales interest has picked up appreciably in recent months, underpinned by strong demand for high-quality, energy efficient new homes in attractive locations,” he said.

“Our financial strength and liquidity enables us to continue to plan and deliver to meet market demand through 2020 and beyond.”

Formal guidance for the year remains withdrawn due to uncertainty, but Cairn said its business had recovered well and was ahead of expectations at the time of its May update.