Cairn Homes shares leap 4% as builder pledges higher returns for shareholders

Shares on Cairn Homes jumped 4% as the housebuilder continued to restore a tarnished reputation with investors, pledging a share buyback and a significant boost of other returns to shareholders.

Cairn, along with rival stock market-listed Glenveagh Properties, has been out of favour for some time despite it delivering into a market which cannot meet the demand for new homes.

With its shares sliding over 40% in 2018, Cairn was among the worst performing companies on the Iseq. But after climbing 16%, they are now among one of the market’s strongest performers since the start of the year.

In a trading update ahead of its full-year earnings, the housebuilder said it was now in a position to award shareholders with a “capital return policy, including the potential for share buybacks in addition to dividends” and has plans to boost other “distributable reserves”.

It said: “Cairn is now generating significant free cash flow and all profits generated from 2019 onwards will add to our distributable reserves.

The shares, which rose as much as 7% at one stage, value the builder at just over €1bn.

It said that its gross margin rose to 20.5% in 2018 from 18.2% in the previous year, while the average cost of units for first-time buyers rose to €312,000 from €301,000.

And it sold 804 homes in the year, with “a strong forward sales pipeline” of 344 units.

The builder was selling into a market which required 35,000 new homes a year to meet demand, the company said.

“The supply of new homes is less than 50% of annual demand and increasing capacity within the industry remains constrained by the lack of scaled homebuilders,” it said.

With debt falling, analysts hailed the company’s plans as “paving the way for special dividends”.

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