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Preliminary Results for 2006

McInerney Holdings PLC
26 February 2007

NOT FOR RELEASE, PUBLICATION, TRANSMISSION, OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, OR JAPAN.

 

McInerney Holdings PLC ('McInerney' or the 'Company')

Preliminary Announcement of Financial Results for the Year Ended 31 December 2006 Acquisition of Lancing Homes Limited and 1 for 5 Rights Issue at €13.00 per share


Ireland, Dublin: McInerney Holdings plc today provides a Preliminary Announcement of Financial Results for the year ended 31 December 2006, announces the acquisition of Lancing Homes Limited (‘Lancing') for £16.25 million (plus the assumption of £3 million of debt) and announces a 1 for 5 Rights Issue at €13.00 per share.

Barry O'Connor, Managing Director of McInerney, commented:

‘Our businesses in Ireland, the UK and Spain have performed well in 2006 and strong progress was achieved across all regions. The Group is well positioned going into 2007.

We now have a significant operational base in the UK as a result of our acquisition strategy, continued investment in our land bank and development of our senior management team. Operationally, we have achieved our objective of growing our UK home building division to a scale similar to that of our existing Irish operations.

The acquisition of Lancing further expands our land bank capacity and consolidates our position in the North East of England.

In order to facilitate our continued growth in the UK, we believe it is now appropriate to raise additional funds from shareholders to strengthen the Group's capital base.'

 

Financial Results for the Year Ended 2006

Key Highlights

  • Profit from operations up 22%
  • Pre tax profits up 16%
  • Basic earnings per share increased by 18%
  • Total dividend per Ordinary Share increased by 17%
  • UK unit output increased by 49%
  • Total private and contracting residential completions up 18%

The Directors are pleased to report an increase in basic earnings per share of 18% to 145.85 cent, as compared to 124.01 cent in 2005. Pre-tax profits increased by 16% to €58.0 million compared to the 2005 result of €50.1 million. Profit after tax for the year was €48.6 million compared with €41.1 million for the full year in 2005, an increase of 18%.

Dividend

The Board recommends a final dividend for the year ended 31 December 2006 of 18 cent per share (2005: 15 cent), up 20%, payable to all shareholders on the register at the close of business on 16 March 2007. Subject to confirmation at the Annual General Meeting on 9 May 2007, this final dividend will be paid to shareholders on 11 May 2007. This brings the total dividend for the year to 28 cent (2005: 24 cent), an increase of 17%. For the avoidance of doubt, New Ordinary Shares issued pursuant to the Rights Issue will not carry any entitlement to the final dividend for the year ended 31 December 2006. The dividend cover remains in line with the Group's stated target of 5 times basic earnings per share.

Operational Highlights

Strong sales and profitability were achieved across the Group's three core regions of Ireland, the UK and Spain. The Group completed a total of 2,372 private and contract residential units in 2006 as compared to 2,013 in 2005, an increase of 18%. In particular, the UK division's growth strategy gained significant momentum and operationally is now similar in scale to the Irish home building division. The Group undertook two acquisitions in the UK in 2006 which extended the division's regional spread in the North and Midlands of England. The Group's UK operations recorded a 49% volume increase in 2006. The Group has achieved a comprehensive regional spread of housing operations across Ireland and the UK. Both the Irish and UK markets continued to demonstrate strong demand for product consistent with McInerney's portfolio. Hillview continued to concentrate on its development plans in both the Irish and UK markets and achieved considerable success in the UK.

Ireland:

The Irish house building operation recorded a favourable result with turnover of €261 million and operating profit of €51 million. The increase was driven by an improvement in average unit pricing to €285,000 which offset the reduction in 2006 completions to 1,025 units (2005: 1,138). The Irish land bank comprised 4,788 plots as at 31 December 2006, of which 1,671 plots had full planning permission and a further 1,427 plots were in the planning process. The Group also held further land with potential for 1,240 units for development in the longer term.

The Group's commercial division, Hillview Developments completed 5,632 sq metres of industrial units in Ireland in 2006, achieving turnover of €11 million (2005: €21 million). This compares to 14,217 sq metres of industrial units in 2005.

The Irish contracting business secured significant growth in 2006 with turnover of €93 million achieved on 309 housing unit completions. The order book on hand is €156 million compared to €129 million a year ago.

UK:

Our objectives to scale up our UK operations and extend our presence across the North of England were realised in 2006. Operating profit of €22 million was achieved on turnover of €240 million. Substantial progress was accomplished in increasing unit output with some 980 private housing units completed, compared to 658 in 2005, representing an increase of 49%. Average unit pricing progressed by 8% to €206,000 (£140,000). As per the Board's stated growth strategy, the UK and Irish divisions are now of equivalent operational scale. The Group is an expanding home builder in the North of England and the capital raising announced today is intended to assist our UK business to achieve further growth going forward.

The acquisitions of Augusta Developments and Bowey Homes in 2006, gave the Group access to new regions and product specialities. Augusta's expertise in social housing gave the Group a presence in the South Midlands and access to a new market of housing demand. The acquisition of Bowey added to the Group's landbank and market presence in the North Eastern region. In addition, strategic organic expansions were undertaken through selected land purchases. In tandem, the senior management team was augmented to take best advantage of the Group's increased scale of operations and regional spread. The Group has a progressive land bank policy, controlling 3,644 plots in the UK as at 31 December 2006, of which 3,222 have detailed or outline planning. In addition, the Group held options on longer term strategic land with potential for over 900 units.

The commercial operations, Hillview Developments, also delivered a solid performance with the completion of 7,476 sq metres of industrial/commercial units in its UK operations compared to 1,122 sq metres in 2005.

Spain:

The Group's Spanish operations completed 53 units in 2006 compared to 35 units in 2005. Operating profit of €4 million on turnover of €30 million was achieved. Average unit prices were €505,000. Work has commenced on a new freehold site of 45 units at El Cortesin, a golf urbanisation adjacent to Estepona. A further site with planning permission for 80 units has recently been secured at La Cala, near Mijas.

Outlook

The fundamentals and dynamics affecting both the Irish and UK housing markets offer good potential for the Group going forward. Each division is strategically positioned with an advantageous geographic footprint and an appropriate housing portfolio for its target segment. Further benefits should arise from the full year impact of the businesses recently acquired. We look forward to continued progress in the year ahead.

Acquisition of Lancing

  • House builder specialising in affordable private homes in the Newcastle and Gateshead regions of North East England.
  • Immediately earnings enhancing.
  • Brings additional land opportunities in the region and diversifies product portfolio.
  • Recorded profit before tax of £1.5 million for the financial year ended 28 February 2006.
  • Consideration of £16.25 million payable in cash on completion, plus the assumption of £3 million of debt.
  • Expands land bank in the North East of England by 413 units across 4 sites.
  • Average price of units is £154,000.
  • Three of the four sites are already under construction and expected to contribute to Group unit completions and earnings from quarter one of 2007.

 

Rights Issue

  • Approximately €86.8 million (gross) to be raised through a fully underwritten Rights Issue.
  • 6,676,114 New Ordinary Shares to be issued at €13.00 per share, representing approximately 16.7%, of the enlarged issued share capital.
  • The Issue Price of €13.00 per share represents a discount of 22.4% to the closing price of €16.75 per Ordinary Share on 23 February 2007, the last dealing day prior to this announcement and a 21.5% discount to that closing price adjusted for the final dividend announced today.
  • Rights Issue fully underwritten by The Governor and Company of the Bank of Ireland.
  • IBI Corporate Finance is acting as sponsor and financial adviser to McInerney in relation to the Rights Issue.
  • The Executive Directors have each irrevocably committed to take up all their rights under the Rights Issue in respect of their beneficial interests in Existing Ordinary Shares over which they have control, representing approximately 11%, of the issued share capital.
  • Net proceeds of approximately €83.8 million to be used to acquire Lancing and to provide capital to expand the Group's land bank in the UK.
  • The Rights Issue is conditional, inter alia, upon: (a) the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms prior to Admission; and (b) Admission of the Nil Paid Rights having become effective by not later than 8.00 a.m. on 27 February 2007. Davy is to arrange the sub-underwriting of the Rights Issue.
  • A Prospectus containing full details of the Rights Issue and an accompanying Provisional Allotment Letter which sets out details of each Qualifying Shareholder's Basic Entitlement will be posted to Shareholders today.

 

Enquiries: Telephone:

 

IBI Corporate Finance Limited +353 1 637 7800
Tom Godfrey
Brian Farrell

Media:
Weber Shandwick +353 1 676 0168
Siobhan Molloy +353 86 817 5066

This summary should be read in conjunction with the detailed announcement which follows. Section 7 of the full announcement contains the definitions of certain terms used in this summary and the full announcement. This announcement does not constitute, or form part of, an offer to sell, or the solicitation of an offer to subscribe for or buy any of the New Ordinary Shares to be issued in connection with the Rights Issue.

The Directors of McInerney have taken all reasonable care to ensure that the information contained in this announcement is, to the best of their knowledge, in accordance with the facts and contains no omission likely to affect the import of such information.

IBI Corporate Finance Limited, a subsidiary of The Governor and Company of the Bank of Ireland (which is regulated in Ireland by the Financial Regulator), is acting exclusively for McInerney, as sponsor and financial adviser in relation to the Rights Issue and no one else in relation to the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to clients of IBI Corporate Finance or for advising any other person in relation to the Rights Issue or any other matter referred to in this announcement.

This announcement is not for release, publication or distribution, directly or indirectly, in whole or in part, in or into the United States, Canada, Australia, Japan or their respective territories or possessions or any other jurisdiction where it would be unlawful to do so ("Excluded Territories").

The New Ordinary Shares, the Nil Paid Rights and the Fully Paid Rights have not been, nor will they be, registered under the Securities Act or under the securities laws of any state of the United States or any other state, province or territory of the Excluded Territories and they may not, subject to certain limited exceptions, be offered or sold directly or indirectly within the Excluded Territories or to any persons in the Excluded Territories. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to buy or subscribe for, New Ordinary Shares, Nil Paid Rights or Fully Paid Rights in any jurisdiction in which such offer or solicitation is unlawful.

Prices and values of, and income from, shares may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

Certain statements made in this announcement constitute forward-looking statements. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Furthermore, these forward-looking statements speak only as of the date of this announcement.

The information and opinions contained in this announcement are subject to change without notice and the Company assumes no responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.

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