Slowdown dents McInerney’s profits

BUILDING group McInerney Holdings has reported first-half profits well below market expectations.

Shares in the group, which is exposed to the Irish housing market, lost 20% of their value by mid-afternoon and were down 37 cent to €1.45.

House completions in Ireland were down by 40% from 362 homes built in the first half of 2006 to 257 for the period under review, a fall of 105 year on year.

McInerney in a statement warned that unit completions would fall short of 2006 levels and would also fail to meet its full-year 2007 targets.

Profit for the first half before tax came in at €9.2m against €11.2m for the corresponding period last year, with profits from private housing activities in its two core markets up year on year.

Earnings Per Share were down from 5.4 cent to 4.11 cent, reflecting the poorer profit performance.

Analyst Peter Gunn of Goodbody Stockbrokers said he had forecast a pre-tax profit figure of €15.2m.

Sales of €238m were 9% behind the Goodbody forecast of €261m. Its operating margin of 7.3% was behind its 9.6% forecast.

The group has proposed a dividend of 3 cent a share, an increase of 50% which underpins “management’s confident outlook” for the group, said Mr Gunn.

McInerney chief executive Barry O’Connor said he was confident of another good year despite the slow down in the Irish housing market. Overall he said the “fundamentals” of the Irish economy remained strong.

From a group perspective the shift in focus to the north east and midlands of England will pay dividends long term, he said.

Housing completions in Britain rose from 268 in the first half of 2006 to 446 in the period under review.

That strong first half momentum has continued into the current six months, said Mr O’Connor.

Moves by British Prime Minister Gordon Brown to build more houses annually will offer significant opportunities to McInerney’s going forward, he said.

In the push to build more houses the group also expects to get a bigger slice of the social and affordable housing markets that Mr Brown is promoting.

The plan is to boost house completions form 170,000 to 250,000 per annum and planning permissions have been put in place to ensure that will happen.

In an Irish context, Mr O’Connor said would welcome a return to “a more normal market” where annual output fell to 65,000 houses or less.

“Operationally our UK business is now the largest component of the group and this growth pattern is expected to continue,” he said.

It is also a reflection of the 2001 decision by the group to diversify beyond Ireland and to invest significantly in the British market.