Interim Report 2010
Monday, 31st August 2009
MCINERNEY HOLDINGS PLC
(In Examination under the Companies (Amendment) Act 1990, As Amended)
('McInerney' or the 'Group')
Interim Report for the six months to 30 June 2010
CHAIRMAN'S STATEMENT
RESULTS
The Group recorded a pre exceptional loss before tax of €10.9m in the six months to 30 June 2010 compared to a pre exceptional loss before tax of €12.8m in the same period in 2009.
An exceptional charge of €5.9m was taken in the period. Of this €4.5m relates to the write off of our investment in Alanda Homes SL, our Spanish freehold apartment development division, which was placed into voluntary administration in May. The balance relates to costs associated with the proposed restructuring of the Group's debts.
No further impairment charge was necessary, reflecting the signs of stabilisation in our main markets.
REVIEW
Restructuring
The Groups Balance Sheet has negative net assets of €112.6m and the Group is not in compliance with its principal banking covenants. Banking facilities have been rolled on a short term basis and the Group depended on the continued support of its principal lenders for continued trading. As detailed below the principal Irish lenders ceased to be supportive during August.
On 30th March 2010, the Group announced that it was undertaking a review of its strategic alternatives including, inter alia, raising new capital and a restructuring of its current financial commitments. To this end Goldman Sachs International was retained as financial advisor to the Group. A restructuring or new equity raise will involve significant dilution of existing equity holders and there can be no guarantee of success in this process.
Goldman Sachs undertook a review of the Group's legal and financial structure in order to devise a strategy for the restructuring of the Group. This strategy included a process of contacting and selecting potential equity partners following which the Group identified a leading international investor with a firm interest in investing in the Group, provided appropriate revised financing arrangements can be secured. Progress to date in the UK on framing a revised capital and operating structure for that business has been positive.
In Ireland, similar progress has not been made and our syndicate lenders withdrew support from the Irish business. As a direct consequence of this, we petitioned the High Court on 26 August 2010 for the appointment of an Interim Examiner to the Company and to the principal Irish home building and contracting operations, and that appointment was made. A Court Hearing to confirm the appointment of the Examiner is currently scheduled for 7 September 2010. The Directors believe that the protection of the Court is necessary to give the Group time to engage in constructive negotiations with its creditors and the potential new capital provider identified, to facilitate survival of the Group as a going concern. Protection of the Court was sought to protect the Group, its employees, creditors and stakeholders in general.
Following the appointment of an Interim Examiner, it became necessary to suspend dealings in our shares.
Further updates on this process will be provided in due course.
Management
Group Managing Director Barry O'Connor was excused from executive authority on 8th April 2010, having indicated to the Board his intention to potentially purchase the Group's Spanish operations as part of the restructuring process. Enda Cunningham, Group Finance Director, assumed full executive responsibility for the Group's businesses in Ireland, UK and Spain from that date, reporting directly to the Board. Davy Corporate Finance was appointed to handle any potential sale of the Spanish business.
MARKETS
The UK market improved gradually over the past year but further forward progress is expected to be slow. However, our social housing business achieved considerable expansion.
The Irish market is showing signs of levelling off in good locations, albeit prices have fallen further in more secondary locations.
In both markets the Directors believe working capital constraints impeded a higher level of sales being achieved in recent months. Our output in 2010 will, therefore, be lower than earlier expectations.
OUTLOOK
Our focus remains on achieving a stable funding platform for the Group providing the working capital necessary to build and sell homes. The loss of the support of the syndicate lenders in Ireland was unexpected and caused us to seek Court protection for that business. However, progress has been made on the restructuring. Our main markets are no longer suffering decline and segments of both markets have shown signs of improvement. The future of the Group will largely depend on the outcome of the restructuring process, including the success of the Examination process in Ireland and the willingness of lenders to facilitate the raising of new capital. The Directors believe that a restructuring and recapitalisation should ensure the best recovery for all stakeholders.
Ned Sullivan
Chairman
ENDS
FOR INFORMATION:
Siobhan Molloy Tel: +353 1 6760168
Weber Shandwick or +353 86 256 84 29
Click here for full details: Interim Report for the six months to 30 June 2010 (PDF 147k)