Ireland’s largest publicly listed housebuilder Cairn Homes has announced plans to buy back shares and issue a dividend for the first time, saying Brexit was having no impact on the market for homes for first-time buyers.
Still, shares in Cairn fell over 5%, as weaker than expected margins overshadowed a 51% rise in operating profit for the first half of the year.
Analysts at Davy Stockbrokers and Investec said Cairn’s margins were lower than expected due to slowing price inflation, primarily at a prime Dublin apartment block Cairn sold to a private landlord in June.
Cairn, which became the first Irish housebuilder to float in almost 20 years in 2015 as a recovery from a real estate crash gathered pace, said it will pay a 2.5c interim dividend and begin a €25m share buyback.
First half revenues rose 48% to €192m and Cairn said it expects to generate about €500m — or 60% of its market capitalisation — in free cash over the next three years as it completes 5,250 new homes across 15 active sites.
House prices have begun to stabilise in recent months. Cairn CEO Michael Stanley said the starter home market it focuses on was not affected by the nervousness around a fallout from Brexit, which was holding back potential buyers of more expensive homes.
“It’s very obvious from our numbers on the sale side that that’s not filtering down in any way to first time buyers side or institutional capital when it comes to PRS [private rental sector],” Mr Stanley said.
“If you asked them what a backstop is at any of our show units this weekend, they’d look at you funny and say show me where the dishwasher is,” he said. “They’re just not focused on it.”
Mr Stanley said he saw an “average to poor” response to a lack of supply continuing, keeping rents sky high and maintaining the strong demand for Dublin-focused Cairn’s mid-priced homes as it grows at more than three times the market rate.
“It’s just going to take time and not going to happen in the next couple of years in my view because it’s just difficult for private housebuilders to scale up,” he said.