McInerney, the house building group, which operates in Ireland, the UK and Spain, today reported pre-tax losses of €206.5m for 2008, after a profit of €58m in 2007.
The company reported a trading loss of €47m, but it also took a charge of €82.5m linked to the lower value of its land. There were also almost €10m in restructuring costs, and a writedown of almost €40m in the value of its UK acquisitions.
The company completed 1,359 homes last year, down from 2,414 in 2007. It said sales in the early months of this year continued to be slow, though it saw falling house prices and lower interest rates as having a positive impact in the medium term.
It also said it has negotiated new lending agreements with its bankers in Ireland and the UK to reflect the tougher market conditions. But it says talks with banks are continuing, saying it is confident that changes in these arrangements can be agreed if conditions deteriorate further.
Chairman Ned Sullivan, said: "Recent Irish and UK Government initiatives to increase liquidity have resulted in individual lenders announcing new first time buyer packages. Combined with historically low interest rates and discounted house prices, this should have a positive impact in the medium term on housing demand. Notwithstanding this, continued negative economic growth forecasts are being predicted for 2009 and the directors anticipate that this will continue to impact the group's operating activities."
Results detail
Goodbody analyst Matthew Cotter commented today: "McInerney has reported a pre-exceptional operating loss of €25.6m for the year to the end of December ‘08. This is behind our forecast of an €18.8m loss and reflects the extremely difficult trading conditions experienced during 2008. Total private completions were down 48% yoy (-50% in Ireland & -46% in the UK versus -45% and -37% in H108), which is in line with management guidance and our forecasts.
Housebuilding margins fell sharply yoy from 22% to -4% in Ireland and from 8% to -7.7% in UK. As indicated in its January trading statement, the continued deterioration in market conditions in the second half of the year has resulted in a “further material impairment” charge to the landbank of €82.5m. This brings the full year charge to €110m or c.22% of carrying inventory values and is similar to the level of write downs incurred by its peer group to date. As a result, FY08 NAV fell c.70% to 47c (also took non-cash charge of €39.7m to write off goodwill in full). On a more positive note, the successful conclusion of the UK refinancing negotiations in recent weeks has allayed short term fears over balance sheet security.
Net debt at the year end was €220m, which represents a significant reduction on the €267m reported in H108 and highlights the cash generative capacity of a housebuilder model when investment in land is constrained. The 2009 selling season in the UK has started on a uptrend with improved visitor levels and sales conversion rates. Ireland too has seen somewhat of an uptrend, however, it is slow and behind 2008 levels. Negative economic growth forecasts are likely to continue to impact the group in the short term. At first glance and subject to discussions with management, we do not anticipate making many material changes to our forecasts."
