McInerney to raise €84m to fund UK expansion

Listed housebuilder McInerney Holdings is to raise €84 million from shareholders to fund further expansion in Britain.

The company yesterday said pretax profits grew 16 per cent last year to €58 million from €50 million the previous year. Basic earnings per share (eps) grew at a similar rate to 145.85 cent from 124.01 cent.

McInerney also announced that it was planning to buy Lancing Homes, a housebuilder in the Newcastle/Gateshead area of northeast England, for €24 million. It said it believed the purchase would boost earnings this year.

To pay for this and for further expansion in Britain, it is planning a rights issue, offering shareholders one new share for every five they hold. The new shares will be priced at €13, a discount of 22.4 per cent to last Friday's closing price of €16.75.

McInerney intends to issue almost 6.7 million new shares. The rights issue will raise €83.8 million net of expenses. Bank of Ireland has pledged to underwrite the issue and IBI Corporate Finance is acting as adviser to the group.

McInerney said yesterday it intended using this cash to pay for the Lancing purchase and to expand the group's landbank in the UK, where it spent €54 million buying two companies - Augusta Developments and Bowey Homes - last year.

Managing director Barry O'Connor said yesterday that the cash raised would "top up" the resources on which McInerney could draw to maintain its expansion in the UK. He added that the company received a 50 per cent return on the investments it made last year. He also said the company had reached "critical mass" in Britain, pointing out that operating profit there grew 32 per cent to €22.6 million in 2006, while it advanced by 24 per cent in Ireland, to €55.6 million.

Operating profit in Spain, its third territory, dropped 17 per cent to €4.2 million last year. Mr O'Connor blamed this on planning difficulties the company has been encountering there. These have stopped it from reinvesting in the country. "We took capital out of Spain; we have not been buying back in any further."

Revenues in 2006 grew 31 per cent to €630 million, from €489 million the previous year. Britain contributed €239.6 million of McInerney's revenues last year, compared with €157 million in 2005. Ireland added €390 million, compared with €368 million.

The board will recommend a final dividend payment to shareholders for the year of 18 cent a share, up 20 per cent from 15 cent it paid in 2005. If shareholders approve this, the total dividend will come to 28 cent, an increase of 17 per cent.

McInerney specialises in building houses for the first-time buyer and those trading "one step up" from that level.