Glenveagh shares tumble on CEO departure and industry outlook

Glenveagh shares tumble on CEO departure and industry outlook
New chief executive Stephen Garvey

Shares in Glenveagh Properties, one of the largest housebuilders in the State, slid by as much as 7% after it announced its chief executive has quit and said that the gap between supply and demand in the Irish housing market is likely to persist "for some years".

New chief executive Stephen Garvey said there has been no real wave of new houses hitting the market, with much of the commencements reported being apartments. He said there remained pent-up demand in the Irish market and lingering affordability issues.

Earlier this year, Mr Garvey said he was doubtful that the industry would meet the 20,000+ house-build target set for this year and may never deliver the longer-term 30,000-40,000 per year target some commentators see as being the necessary level in order for supply to meet demand.

Mr Garvey - up to this week the company's chief operating officer - has been appointed chief executive of Glenveagh with immediate effect, following the announcement that Justin Bickle - CEO since Glenveagh's formation two years ago - has left the company, and its board, to return to live in the UK.

Despite coinciding with a solid set of financial results for the first half of the year, the announcement of the CEO change sent Glenveagh's shares reeling.

Although initial losses were pared back, the stock closed the day down 4.3% in Dublin and by 5.8% in London.

Speaking at the presentation of the results, Mr Garvey said Glenveagh's share performance - the stock has dropped approximately 42% in value in the past 12 months - is less company specific and more of a sectoral issue, opining that investors may be wary of construction stocks due to Brexit uncertainty.

One of only three stock market-listed housebuilding firms in Ireland, Glenveagh's share price is now nearly 40% behind its 2017 IPO price.

Regarding property prices, Mr Garvey said falling house price inflation is heavily skewed by the inclusion of second hand homes in the measure. Taken alone, he said the price movement around newly built homes should move in line with wage inflation.

Glenveagh currently has a presence in Dublin and the Greater Dublin Area, Cork and Limerick. The company said it is currently selling homs from 13 sites with 800 houses sold as of last week.

For the first half of the year, Glenveagh reported a surge in revenue from €1.3m a year ago to €45.5m. Gross profit, it said, jumped from €300,000 to €7.5m and its net post-tax losses halved to €3.5m.

The company said it has 16 applications at various stages of the planning process, totalling in excess of 6,500 housing units. It said it will continue to make incremental land acquisitions, "on an opportunistic basis", now that its land portfolio has is reaching optimal size.

It said the vacant site tax is impacting the timing and extent of land supply into the market, however.

"A functioning and sustainable housing market requires the orderly supply of the right product attractive to owner-occupiers as well as institutional investors and the rental market," said Glenveagh's executive chairman John Mulcahy.

"Notably, the starter home market remained strong during the period and we saw no evidence of change to first-time buyer behaviour," he said.

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