Irish housebuilder Cairn Homes scraps dividend and freezes share buyback as part of Covid-19 defence

Irish housebuilder Cairn Homes has scrapped its shareholder dividend, frozen earnings guidance, and is suspending its current share buyback programme; news of which initially pulled the company’s share price down by over 3% before it recovered.

Ultimately, the Cairn stock – which has held up over the past week — closed the day up by over 2% despite the negative measures to guard against the worst economic consequences of the Covid-19 spread.

The company has also said it expects house sales activity to be negatively impacted over the near-term and possibly for “an indeterminate period of time”.

Cairn had intended to pay a final dividend of 2.75c per share for 2019 and has completed around €46m of its €60m share buyback programme.

It said it still expects to generate “significant excess cash” over the coming years and that its medium-term commitment to a progressive capital returns policy to investors “remains in place”.

“The company’s focus is on prudently managing the business in the long-term interests of all stakeholders through this unprecedented time,” Cairn said.

“Cairn has seen footfall to sites decrease materially over the last two weeks, although online engagement is up.

"The company has confirmed that 85% of its 853 forward sales are contracted, which will give it short-term comfort on revenue if construction can continue,” said Davy analyst Colin Sheridan.

Cairn said it cannot give any earnings guidance for this year while the Covid-19 situation remains so uncertain, but will do so “in due course”.

It said its balance sheet remains strong with total equity of nearly €764m, underpinned by €900m in inventories, including €204m worth of construction work in progress and €693m worth of development land.