McInerney to cut EUR30m in costs amid downturn

HOUSE BUILDER McInerney Holdings is cutting €30 million in costs in a move to combat the construction downturn.

The company told shareholders at its annual general meeting in Dublin yesterday that it expects to make a loss in the first half of this year, but that 2008 as a whole will be profitable.

Chief executive Barry O'Connor and finance director Michael Shakespeare revealed after the agm that McInerney is cutting €30 million from its costs.

Mr O'Connor said the axe will fall mainly on its British operations, which the company had primed for growth before the credit crunch struck last year. He stressed the cuts will be "immaterial for Ireland".

He confirmed the company intends to reduce its core workforce in Britain, but did not say how many jobs would be lost. The programme will also involve cutting back on administration.

The executives said the €30 million figure was gross of expenses. Mr Shakespeare added that the company had been engaged in the cost-cutting programme for some time. "This is ongoing," he said.

Mr O'Connor stressed the house building group needed to balance cutbacks with ensuring that it would be ready to meet demand when the market recovers.

Chairman Ned Sullivan told shareholders at the meeting that British banks are slow to issue mortgages, which has led to a deterioration in the market there since the company published its 2007 results in March.

"In tandem, Ireland is beginning to experience a tightening of mortgage availability for the first time in many years," he said.

Mr Sullivan said McInereney's sales in Britain are 17 per cent down on this time last year. At the same time, its Irish order book is 18 per cent behind what it was at this point in 2006.

The company believes that house building is trailing underlying demand in both countries, and that the market will "re-emerge" once the squeeze on credit eases.

McInerney's news came as stockbrokers Merrion released a survey showing Irish builders believe the housing slowdown will last another year.

The study shows over half of builders have stopped building new homes, and 50 per cent of those will not restart until next year.

Over three-quarters of them have unsold stock. Around 30 per cent of these companies believe that it will take up to a year to clear their backlogs.

The others believe it will take up to six months.