Cairn Homes Plc: Results for the Year Ended 31 December 2022

Results for the Year Ended 31 December 2022

Company Beats 2022 Forecasts With Significant Growth in Housing Output in 2023 Underpinned by a Record Order Book

Dublin / London, 02 March 2023: Cairn Homes plc (“Cairn”, “the Company” or “the Group”) (Euronext Dublin: C5H / LSE: CRN), today announces its results for the year ended 31 December 2022.

Continued Growth and Progress in 2022

• Strong financial and operational performance with growth across all of our key metrics.
• Closed 1,526 new homes sales (2021: 1,120) delivering revenues of €617.4 million (2021: €424.0 million), with in excess of €610 million generated from core homebuilding activities.  
• Exceptionally strong second half of 2022 with 979 sales completions, total revenue of €377.0 million and €129.6 million of operating cashflow[3] generated.
• Strong demand across all of our expanding and multiple sales markets with over 1,600 new homes agreed for sale nationwide in the year, and a record forward order book into 2023. Our average sales rates were in excess of 4 new homes per week per active selling site during the year.
• Continued to reinvest in our sustainable multi-year growth and to take advantage of the exceptionally strong demand backdrop. Total work-in-progress investment of €469.3 million in our construction activities during 2022 with a strong bias towards increasing our apartment delivery.
• Ireland is facing a critical undersupply of apartments for Social & Affordable tenants and also apartments adjacent to areas of high employment to house Ireland’s growing working population. Cairn is responding to this demand as a clear market leader in this product segment.
• Build cost inflation (“BCI”) of €20,000 per new home built (2021: €15,000), with inflation moderating somewhat in H2. Notwithstanding this, our average selling price, excluding VAT, for our starter homes was €366,000 (2021: €350,000).
• Scope 1, 2 (absolute 46.2% reduction by 2030) and 3 (reduce by 61% per square metre by 2030) decarbonisation targets set, and awarded an upgraded A- CDP score (2021: B score).
• Disciplined approach to capital allocation, balanced between shareholder returns and ongoing investment in growing our business, which in tandem with an 87% increase in profit after tax to €81.0 million delivered an improved ROE of 11%.
• The Board is proposing a final dividend of 3.1 cent for a full year dividend of 6.1 cent per ordinary share, subject to shareholder approval at our AGM on 11 May 2023, for a total FY22 dividend of €42.0 million.
• Completion of a €75 million share buyback programme in October 2022 bringing total shareholder returns to €117.0 million for FY22 (FY21: €39.9 million).

Macroeconomic Backdrop

• Ireland entered 2023 from an economic position of strength, with near full employment underpinning consumer demand and driving record exchequer returns in 2022. Having recorded the strongest budget surplus in the EU in 2022, the Irish economy is forecast to continue to grow in 2023 at the fastest pace in the EU, albeit at a slower rate than 2022, and record another budget surplus even allowing for an €11 billion cost of living package in Budget 2023.
• Irish household debt levels remain at all-time lows and savings at record levels which somewhat mitigates against rising interest rates and the cost of living crisis.
• Mortgage market remains supportive following a 34% growth in gross mortgage lending in 2022 to €14.1 billion.
• Housing remains the number one political and societal priority for the Irish Government with supportive demand-side initiatives and ambitious, fully funded Social & Affordable housing targets for 2023 and beyond.
• New homes supply increased by 45% in 2022 to nearly 30,000 new homes, however industry commencements were down 12% (Cairn up 30% to c. 1,800 new homes).
• The Housing Commission, which was established under the Programme for Government, believes Ireland requires between 42,000 and 62,000 new homes every year until 2050 to meet demand.

FY23 Guidance

• The Company has continued our strong sales momentum and has a current closed and forward sales pipeline of 1,503 new homes with a net sales value of €534 million. From this strong base, the Company is guiding FY23 as follows:

• turnover in excess of €650 million from 1,750 - 1,800 closed new home sales, all of which have full planning permission, including over 800 Social & Affordable new homes nationwide;
• with cost of living factors and the rising interest rate environment impacting consumer affordability, pricing levels are expected to be relatively flat;
• cost pressures also still exist within our supply chain and we expect BCI of c. €10,000 (c. 4%) per new home in the year. Another year of significant growth in our housing output will however help Cairn, our subcontractors and supply chain partners to manage this inflationary environment;
• we expect to deliver a gross margin of c. 21% reflecting a slight change in mix over the prior year;
• continued growth in operating profit; and
• progressive ordinary dividends, by way of both an interim and final dividend, of between 40 – 50% of FY23 profit after tax.

• The Company remains committed to distributing surplus cash flow and capital to shareholders. Cairn also continues to explore specific returns accretive market opportunities which may result in increased profitability and enhanced shareholder returns in the medium-term, subject to meeting and exceeding our internal returns hurdles.
• Cairn expects to deliver annual growth in volumes, revenue and profitability into the future, supporting medium and long-term significant cash generation, and continues to make progress towards our 15% ROE target. 
• Cairn is today announcing a €40 million share buyback programme which will commence on 3 March 2023 as part of our ongoing shareholder returns programme. This will begin with an irrevocable, non-discretionary arrangement with Goodbody Stockbrokers UC and Numis Securities Limited to repurchase ordinary shares on our behalf.

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

“Given the social, economic and political primacy of resolving the housing shortage in Ireland, it is reassuring that Cairn has delivered a record 1,526 new home sales in 2022 and we will back that up with an even bigger delivery this year for private buyers and for a broadening number of State partners. Our improving profitability supports this by enabling increasing and sustained reinvestment in our housing output.    

“Momentum is gathering pace into 2023, with closed and forward sales currently at over 1,500 new homes. We expect full year delivery of up to 1,800 new homes, all of which have full planning permission.

“In terms of the wider sector challenges, it is clear that we suffer from a damaging undersupply of apartments adjacent to areas of high employment and to offer scaled solutions for Social & Affordable housing needs. Recently published research from Eurostat shows that at 10%, Ireland has the lowest percentage of its population living in apartments in Europe, where the average is over 50%. It also points out that the composition of our existing housing stock is massively biased towards large multi-bedroom houses, which are under-occupied.

“Location is as important as typology in addressing this imbalance. New, quality built and energy efficient affordable and private rental apartments in urban locations and on transport links are now critically important. Our FDI model, which has been a dominant driver of economic growth over the past decades, will also suffer in the absence of these additional homes. Cairn is actively responding to this dual imperative as a market leader in the accelerated delivery of well-designed and located scaled apartment developments.”

For further information, contact:

Cairn Homes plc                  +353 1 696 4600

Michael Stanley, Chief Executive Officer

Shane Doherty, Chief Financial Officer

Ian Cahill, Head of Finance

Declan Murray, Head of Investor Relations

Drury Communications                 +353 1 260 5000

Billy Murphy

Claire Rowley

Morwenna Rice  

An analyst and investor call will be hosted by Michael Stanley, CEO, and Shane Doherty, CFO, today 2 March 2023 at 8.30am (GMT). Please use the numbers below, quoting the following access code: 279233:

Notes to Editors

Cairn Homes plc (“Cairn”) is the leading 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. 16,800 unit landbank across 34 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

Following the publication of our inaugural standalone Sustainability Report in April 2022, the Company made considerable progress in setting ambitious and meaningful targets during the remainder of 2022 which underpin the significance and credibility of our Sustainability Agenda and the prominent role which our business is playing in promoting sustainable and attainable building in Ireland:

• We submitted our Greenhouse gas (“GHG”) reduction targets covering Scope 1-3 for verification to the corporate gold standard Science Based Targets Initiative (“SBTi”). Our targets will see our business reduce absolute Scope 1 & 2 emissions by 46.2% by 2030 from a 2019 baseline year (4.2% pa) and our Scope 3 by 61% per square metre (“sqm”) by 2030 versus 2019 (7% per sqm pa), all aligned with a 1.5° Celsius future.
• We continue on our path to Biodiversity Net Gain (“BNG”) across all of our developments and have increased this target metric within our 2023 remuneration frameworks in driving future performance and our ongoing focus in this critical area.
• We improved and evolved many ongoing initiatives connected to our people strategy, including our equality, diversity and inclusion (“ED&I”), our health, safety and wellbeing and our employee value proposition as demonstrated through consistently high scores in our employee engagement surveys (including an 82% culture score), ED&I surveys with 91% of our employees feeling Cairn is an inclusive workplace and the retention of our Great Place to Work certification. 

In addition to closing over 1,500 A-rated sustainable new homes sales in Ireland in the year, we also successfully completed a €277.5 million sustainability linked term loan and revolving credit facility. The sustainability linked performance targets underpinning these are linked directly to the achievement of our sustainability strategy across decarbonisation, biodiversity and people. We were delighted to have been awarded an A- for our 2022 Carbon Disclosure Project (“CDP”) submission, improved from our first submission in 2021 when we obtained a B rating.

IMPLEMENTATION OF STRATEGY

Cairn is a leading Irish home and community builder committed to building homes within sustainable neighbourhoods where people can thrive. Cairn’s corporate objective is to deliver sustainable new homes, including houses, duplexes and apartments, to our expanding and multiple markets at pace and scale, building communities that serve our country’s present and future needs. This can only be produced from a scalable operating platform, through established supply chain partnerships and on development sites from a historic low-cost c. 16,800 unit landbank. In our view, this is the most immediate, direct and delivery-focused way to make a real and meaningful impact in the Irish housing market.

Cairn’s historic approach to capital deployment, through a timely and well executed acquisition strategy together with the successful scaling of our business has resulted in more than 7,000 customers choosing a new Cairn home to date. These new homes are delivered on our current 34 site landbank which comprises suburban and commuter belt low-density housing sites (c. 12,600 units at an average historic site cost of c. €27,000 per unit) and city centre, suburban and commuter belt high-density apartment sites (c. 4,200 units at an average historic site cost of c. €64,000 per unit).

Cairn continues to invest in the capacity and capability of our business to support our growth strategy, set us up for scale and optimise our product delivery. This is delivered through a combination of:

• Regional Expansion: extending our development footprint beyond the GDA with new site commencements in Cork, Limerick and Kilkenny during 2022. This will be followed soon by further expansion in Galway and potentially other regional locations.
• The Strength of our Team: we are investing in our people and extending our capacity and capability. Our team grew by nearly 30% during 2022 across all areas of our business.
• Better Ways to Build: our dedicated continuous improvement programme, focusing on digital construction, innovation, productivity and scaled efficiencies to drive operational excellence and maintain our competitive and market advantage.

Our growth strategy allows us to respond to the continuing strong demand for new homes across all tenures across our multiple and expanding sales channels, including:

• Business to Customer: well located, energy efficient A-rated starter homes on multimodal transport links in areas of proven demand for our core first time buyer (“FTB”) market, into which we have sold in excess of 4,000 new homes since 2016, and the higher price point trade-up/down market;
• Business to Government: partnerships with the State, Local Authorities and Approved Housing Bodies (“AHB”) in delivering Social & Affordable homes. With Cairn’s scale, capability and low cost landbank, we will continue to explore opportunities where we can deliver high quality new homes at value for money for State agency housing partners across our sites, all of which are located in areas of high employment; and
• Business to Business: appropriately designed multi-family apartments for domestic and international institutional investors who are seeking a stable, long-term exposure to the Irish residential sector.

The Company’s strategic objectives are fully aligned with the Government’s “Housing For All” strategy with a target of delivering 300,000 new homes in Ireland by 2030, including 90,000 social and 54,000 affordable homes. The plan recognises the important role the private sector will play in the delivery of this much needed affordable housing for the 375,000 households in Ireland earning between €50,000 and €80,000 who cannot access social housing and have limited access to mortgage finance.

The innovative Cairn approach to customer-focused product evolution across houses, duplexes and apartments is now more important than ever. Many people view the family home as a place to both live and work, and want to live in communities that are in close proximity to recreational and amenity facilities, which informs our design-led approach to sustainability and innovation. We deliver this through our construction and placemaking activities, ensuring the strong foundations are laid for Cairn to be a scaled homebuilder in Ireland into the long-term.

FINANCIAL REVIEW

After two years of public health restrictions and construction sector lockdowns, 2022 marked our first year of full trading since 2019 and enabled us to deliver a record trading year. Revenues of €617.4 million (2021: €424.0 million) included €610.8 million from 1,526 closed sales (2021: €419.4 million from 1,120 closed sales) and €6.4 million from development site and other sales (2021: €4.2 million).