Cairn Homes Plc: Results for the Six Months Ended 30 June 2023

Results for the Six Months Ended 30 June 2023

Guidance Upgraded and Record Full Year Housing Output Expected

Dublin / London, 07 September 2023: Cairn Homes plc (“Cairn”, “the Company” or “the Group”) (Euronext Dublin: C5H / LSE: CRN) today announces its interim results for the six months ended 30 June 2023.

Key Highlights

• Cairn has experienced our best period to date for sales agreed with a current closed and forward order book of 2,730 homes with a net sales value in excess of €1 billion.
• 535 new home sales closings, generated €219.5 million revenue and €29.6 million operating profit, and strong demand underpins our confidence in further upgrading FY23 guidance.
• Substantial ongoing investment in our ambitious growth with closing construction work-in-progress (“WIP”) of €419.2 million which will reduce in the second half of the year with more than 1,265 new homes sales completions forecast.
• Expect to deliver FY23 sales completions of at least 1,800 new homes, an 18% increase over FY22 and a corresponding increase in operating profit to between €110 - €115 million, generating an operating margin of c. 16.5%.
• Construction of our multi-year c. 5,500 new home mixed-tenure development at Seven Mills (Clonburris) is progressing very well, with c. 100 sales completions forecast in H2 2023. Construction will start on our second phase shortly, and in 2024 Cairn expects to start our first ultra-low energy Passive apartment scheme at Seven Mills, a significant milestone for the development and the Company’s decarbonisation journey.
• Interim dividend of 3.1 cent per ordinary share declared today.
• Current €40 million share buyback programme is today being increased to €75 million, which will result in committed shareholder returns of between €115 - €120 million for FY23.

Macroeconomic Backdrop

• Irish public finances are amongst the strongest in Europe. Tax revenues grew by nearly 7% in the eight months to August 2023 with a €10 billion Government surplus forecast for 2023, equating to 4% of GNI* (source: Department of Finance).
• Driven by record employment of 2.64 million, annual consumer spending growth of 3.7% in the year to June 2023 underpins Ireland’s continued economic growth, with household deposits at a record €152 billion in July 2023 (source: CSO, CBI).
• 30,546 new homes delivered in the 12 months to June 2023, up 23% year on year, with new home commencements down 5% in the same period to 28,369 homes highlighting the structural undersupply of new homes with annual demand estimated at between 42,000 and 62,000 new homes and supported by a population growing at ten times the EU average (source: CSO, Department of Housing, The Housing Commission, Eurostat).
• Mortgage market conditions remain positive. There were 3,742 first time buyer (“FTB”) mortgage drawdowns for new homes in H1 2023 valued at €1.2 billion, up nearly 7% in volume and 23% in value compared to H1 2022 (source: BPFI). Green mortgages are also available for A2 rated new Cairn homes at discounts of over 100bps on equivalent standard fixed rates.
• Essential Government supports continue to improve access to new homes for prospective homeowners, including Help to Buy where a record 22,045 applications were submitted by FTBs in the seven months to July, up 24% on the same period in 2022, and the First Home shared equity scheme with nearly 2,000 applications approved in its first year of operation. These supports are important in a higher interest rate and inflationary environment.
• The Government’s recent commitment to further increase funding for Approved Housing Bodies and the Land Development Agency will lead to new commencements on some of the many stalled apartment developments in main urban areas, which will deliver significant numbers of affordable rental homes.

Financial & Operational Highlights

• Achieved a 21.2% gross margin in H1 2023 off relatively flat sales pricing in the period with expected total build cost inflation for FY23 of c. 4% (c. €10,000 per unit).
• 1,000 new homes commenced in the period equating to over 7% of all national commencements. The Company expects to commence over ten new sites in the next 12 months, to support our growth ambitions for 2024 and 2025.
• Recognised by our peers as Developer of the Year at the National Property Awards 2023 and Residential Project of the Year (for our 385-unit Griffith Wood apartment development) at the 2023 Irish Construction Excellence Awards, highlighting our proven track record and commitment to delivering exceptional apartment developments in great locations.
• Placed in the Top 20 of the Large Category of Best Workplaces for the first time and retained our Great Place to Work certification.
• We are continually looking at ways we can support our employees with cost-of-living challenges. We introduced a number of supports during the first half of 2023, including a targeted one-off €3,500 cost-of-living allowance to support all employees below senior management level.

Upgraded FY23 Guidance and Increased €75 Million Share Buyback Programme

• Supported by the strength of our multi-year current €1 billion closed and forward order book of 2,730 new homes, the Company expects to deliver a year of record new home closings, revenue, cash and profit generation. As a result, FY23 guidance is upgraded as follows:

• turnover in excess of €675 million (previously in excess of €650 million) from at least 1,800 closed new home sales (previously 1,750 – 1,800 closed new home sales), including over 1,265 closed new home sales in H2 2023;
• core housebuilding gross margin unchanged at c. 21.2% (previously c. 21.0%);
• c. €110 - €115 million operating profit (previously €105 - €110 million) and an operating margin of c. 16.5%;
• progressive ordinary dividends, by way of both an interim and final dividend, of between 40 – 50% of FY23 profit after tax; and
• having invested heavily in our business during H1 2023, and returned almost €100 million to shareholders by the end of the year, we expect both year-end WIP and net debt to be c. €340 million and c. €130 million respectively.

• The Company remains in a period of significant cash generation and is committed to both continually reinvesting in our business to fund our sustainable multi-year growth and distributing surplus cash flow and capital to shareholders. All reinvestment in our operational activities, including accretive acquisitions, is subject to exceeding our internal returns hurdles. With the €35 million increase to our €40 million share buyback programme announced today for a total of €75 million, we have now committed more than €96 million in shareholder returns this year in advance of declaring a final FY23 dividend.
• The Company expects that FY24 will represent another year of significant growth in our annual housing output, with over 950 already forward sold, and progress towards a c. 15% return on equity (“ROE”) target as we exit 2024. More granular guidance for FY24 will be provided early next year.

Commenting on the results, Michael Stanley, CEO, said:

“In 2023 Cairn will deliver 1,800 energy efficient and quality-built new homes to our customers. Total housing output in Ireland is likely to remain unchanged at c. 30,000. Against this backdrop, we are pleased to be increasing our year-on-year delivery by nearly 20%. Seven Mills in Dublin 22 is Cairn’s largest development to date and was successfully launched for sale last weekend. We will invest over €2 billion in constructing this new town in the coming years, providing homes for over 25,000 people in this exceptional location.” 

For further information, contact:

Cairn Homes plc                  +353 1 696 4600

Michael Stanley, Chief Executive Officer

Shane Doherty, Chief Financial Officer

Declan Murray, Head of Finance and Treasury

Drury Communications                 +353 1 260 5000

Billy Murphy

Claire Rowley

Paul Clifford   

An analyst and investor call will be hosted by Michael Stanley, CEO, and Shane Doherty, CFO, today 7 September 2023 at 8.30am (BST). Please use the numbers below, quoting the access code 668386:

Notes to Editors

Cairn Homes plc (“Cairn”) is an Irish homebuilder committed to building high-quality, competitively priced, sustainable new homes and communities in great locations. At Cairn, the homeowner is at the very centre of the design process. We strive to provide unparalleled customer service throughout each stage of the home-buying journey. A new Cairn home is expertly designed, with a focus on creating shared spaces and environments where communities thrive. Cairn owns a c. 16,300-unit landbank across 35 residential development sites, over 90% of which are located in the Greater Dublin Area (“GDA”) with excellent public transport and infrastructure links.

Note Regarding Forward-Looking Statements

Some statements in this announcement are, or may be deemed to be forward-looking with respect to the financial condition, results of operations, business, viability and future performance of Cairn Homes plc and certain plans and objectives of the Company. They represent our expectations for our business and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events. We believe that our expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond our control, and which include, among other factors policy, brand, economic, financial, development, compliance, people and climate risks, our actual results or performance may differ materially from those expressed or implied by such forward-looking statements. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation that trends or activities underlying past performance will continue in the future. These forward-looking statements are made as of the date of this document. Cairn Homes plc expressly disclaims any obligation or undertaking to publicly update or revise these forward-looking statements, other than as required by applicable law.

CHIEF EXECUTIVE STATEMENT

SUSTAINABILITY AGENDA AND DISCLOSURES

Cairn’s Sustainability Agenda is central to our strategy for growth and our continually increasing output to the market of new high quality, energy efficient homes that our customers love, in locations where communities can thrive, is testament to this. Cairn has set ambitious and meaningful sustainability targets which are fully embedded into every aspect of our business and underpin our commitments to decarbonising the built environment; sustainable building practices; quality; health and safety, through our Better Ways to Build continuous construction improvement programme; and respect for the wellbeing and working environment of our people.

Our Sustainability targets and commitment to create a positive social impact are long-term in nature as evidenced by our scope 1, 2 (reduce absolute emissions by 46.2%) and 3 (reduce by 61% per square metre) decarbonisation targets out to 2030 which have been validated by the corporate gold-standard Science-Based Targets Initiative (“SBTi”) and conform with their Criteria and Recommendations (Criteria version 5.0). SBTi has classified our scope 1 and 2 target ambition as in line with a 1.5° Celsius trajectory. We published our second Sustainability Report in April 2023 in which the breadth and scale of disclosures highlighted the significant progress which our business has made in reporting our alignment to the standards and definitions set out by the IFRS SASB Standards, the Global Reporting Initiative (“GRI”) and the Task Force on Climate-Related Financial Disclosures (“TCFD”) in an open and transparent manner.

The Company’s focus for 2023 is to continue to look for better ways to build our new homes and communities, and key progress and highlights in the year to date across our Environmental, Social and Governance workstreams include:

• meeting our four annual sustainability performance targets across decarbonisation, biodiversity and people which underpin our €277.5 million Sustainability Linked syndicate loan facility, following external validation and assurance testing for the year ended 31 December 2022;
• being recommended for three important certifications from the NSAI ISO (International Organization for Standardization): ISO 9001:2015 (Quality Management Systems); ISO 14001:2015 (Environmental Management); and ISO 45001:2017 (Occupational Health, Safety and Welfare Management) in recognition of our organisational processes, product and service standards and demonstrating the quality of our management systems framework, our comm