SHARES IN home-builder McInerney Holdings dropped as much as 36 per cent after the firm took a €156 million impairment charge on the value of its Irish and British landbanks, bringing the total devaluation of its holdings since last year to €266 million.
One of only two home-builders listed on the Irish market, the firm said in interim results that the cumulative writedown of its Irish landbank was 52 per cent per plot. In Britain the cumulative writedown was 41 per cent.
After falling to 16 cent from 25 cent in early trading, McInerney shares closed 8 per cent weaker at 23 cent last night.
Down 30 per cent in 12 months, the share price implies a market capitalisation of €46.38 million on the firm.
McInerney, which has net debts of €254 million, said non-cash impairments reflect an extrapolation of current sales rates and value against the lifecycle of all land assets.
“If current conditions continue there’ll be no further impairment,” managing director Barry O’Connor said.
The impairments bring the firm into negative equity with net liabilities of €80.71 million. It plans an egm in September to provide information on its position to investors.
The company declined to comment on analysis by Merrion Stockbrokers that said there was an increased likelihood that it would have to raise further equity at some point in the future.
“Our focus is on sales, debt reduction and achieving a revised banking facility structure,” it said.
The new impairments mean that the firm would have breached banking covenants if its lenders had not deferred measurement of its covenants. The firm is in discussions with Royal Bank of Scotland and Halifax Bank of Scotland to extend maturity of its UK debt to to 2011 from 2010. It is also in talks with Bank of Ireland, Anglo Irish Bank and IIB Bank to revise covenants and debt structures.
McInerney encountered a sustained deterioration in market conditions since last year, and it does not foresee any immediate improvement. Irish house prices continued to fall throughout the first half of the year, with sales since May “particularly weak”, while there was downward pressure on prices in Britain due to mortgage constraints.
Total unit completions were 342 for the first half compared to 423 in the first half of last year. In Ireland the number of completions fell to 63 from 142.
Revenue fell to €80.82 million from €142.2 million and the interim pretax loss widened to €170.91 million from €53.62 million. With exceptional charges rising to €158.14 million from €31.54 million, operating losses rose to €163.442 million from €45.07 million. Excluding write-downs, the net loss narrowed to €12.8 million from €22.1 million.
“The loss from operations for the first six months is primarily attributable to lower volume housing output and lower product prices in Ireland and the UK.
“This has been influenced in the main by lack of mortgage access for potential house buyers, lenders requiring an increased level of equity deposit to complete house purchases and generally poor consumer sentiment resulting from wider economic conditions.”
