Steady Irish housing market benefits Cairn

Irish housebuilder Cairn Homes (CRN) continues to benefit from an Irish housing market that is faring much better than the UK’s. While UK house prices have already fallen and are projected to fall further this year, Irish house prices are forecast to keep growing, albeit at a slower pace than in previous years.

It should come as no surprise then that Cairn had its best year on record for turnover, profit and delivery in its results for the last calendar year. This year, it expects to better last year’s record delivery numbers and match last year’s sales.

Conditions in the Irish property market are not perfect, however. Over the past year, Cairn said that build cost inflation was running at €20,000 (£17,699) per new home or around 8 per cent, although it expects that to fall to €10,000 per new home, or around 4 per cent, this year as inflationary pressures ease.

So far, these cost increases have been more than offset by surging sales figures. Its operating margin has been increasing over the past three years from a ratio of 9.33 in 2020 to 13.8 in 2021 and 16.7 last year. However, with house price growth slowing, it would take a herculean effort to repeat that trick next year even if inflation is cooling.

Still, these are minor points for a company that benefits from being one of Ireland’s only big housebuilders. As well as benefiting from operating in a market that is not heading into a downturn, Ireland’s housebuilders also don’t have to deal with the end of Help to Buy, post-Grenfell cladding costs, or yet another competition watchdog probe. With the shares changing hands at 10 times FactSet consensus earnings, we remain buyers. Buy.

Last IC view: Buy, 83p, 22 Sep 2022