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Friday, May 16, 2008
MCINERNEY Holdings, the house builder active in Ireland, Britain and Spain, warned shareholders to prepare for a first-half loss in the current year.
Addressing the firm’s annual general meeting, chairman Ned Sullivan said: "We expect to record a profit for the year as a whole, with a loss in the first half of 2008."
Responding to questions from the floor, Mr Sullivan said the were a number of key issues undermining the outlook for house building.
He listed consumer sentiment; the availability of mortgages, particularly in Britain; the cost of houses and the over hang of housing stock as critical factors depressing hosing demand.
Mr Sullivan said it was difficult to predict when the market would pick up but a shift in consumer sentiment and mortgage availability will be critical to the upturn when it comes, he said.
He stressed the company has been cutting costs in the meantime and had stopped land purchases in late 2006.
The only deals completed, meanwhile, were those entered into before then, he said.
He added that the poor sentiment will not change overnight.
Judging exactly when is impossible, but he reminded those present that "the world hasn’t stopped and demand will re-emerge".
On the group’s Spanish exposure he said that was small relative to the overall size of the group.
But its land bank was good and would "realise significant value over time".
"Now is the time to batten down the hatches and contain costs," he said.
He remarked activity levels in Ireland from late 2007 have been exceptionally low with order books 18% less than the same period last year.
Lower output in Britain is also certain this year as activity has weakened "materially" due to the lack of availability of mortgages, he said.
It is difficult to say when demand will pick up, but both markets have an in -built requirement for new homes that will underpin demand once the current difficulties are resolved, he said.
"Our view remains that our business model offers several advantages when there is a resumption of steady market conditions in both our markets. This will allow the group to continue on a strong growth path in the medium term."
Merrion Stockbrokers yesterday slashed its 2008 and 2009 earnings per share forecasts by 63% and 69% "to reflect deteriorating Irish & UK housing markets".
But it said the 26% discount in the shares to the net asset value of the business was overdone.
They added the business was well positioned to take advantage of any upturn in the markets and has maintained its buy recommendation on the stock.
Shares in the group rose 3c to 94c yesterday.
They hit a high of 326c last year, before sentiment turned against the banks and building sectors.
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