Cairn Homes Plc · LSE:CRN
Cairn Homes — Investor Day (November 2018)
81 slides from Cairn Homes's investor day presentation, Nov 17, 2018
Slide 1: Capital Markets Day
Capital Markets Day 17 November 2018
Slide 2: Agenda
Agenda Page 01 Opportunity 2 02 The Questions Investors Are Asking 7 03 Presentation from David Hammond, 39 Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, 41 Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 43 06 Q&A 45 2 © Cairn
Slide 3: Opportunity
Opportunity The opportunity Fastest Growing Massive Undersupply Demographics Dublin & GDA Growth Economy in the EU Likely to Continue Growing addressable Significant growth in Average annual GDP Supply – 12,500 excl. market – 483k couples employment, Brexit job 9.5% since 2013 one off houses and 165
Slide 4: Our vision, mission and strategic pillars
Our vision, mission and strategic pillars Vision Mission Building in great locations to create places and homes Be the most trusted and respected home builder in Ireland where people love to live Strategic Pillars People Homes Customers Places Operational excellence Continue to attract and Design an
Slide 5: Our 1000th Customers
Our 1000th Customers We were delighted to welcome Jenny and Colin to their new home in Shackleton Park as our 1000th customers in October 2018 5 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 6: Our active and upcoming schemes
Our active and upcoming schemes Upcoming sites: Montrose, Donnybrook - Griffith Avenue, Dublin 9 - Newcastle, Dublin - Citywest, Dublin - Farrankelly, Delgany 6 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 7: Agenda
01 Opportunity 02 The Questions Investors Are Asking 03 Presentation from David Hammond, Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 06 Q&A 7 © Cairn Homes plc 2018. www.cairnho
Slide 8: The questions investors are asking
The questions investors are asking 1. What is the likely level of demand for new homes for the next 3 – 5 years? 2. What does affordability look like for the next 3 – 5 years? 3. Can these potential customers obtain mortgages? 4. What is the profile and outlook for our market segments? 5. Does Irela
Slide 9: What is the likely level of demand for new homes?
The questions investors are asking What is the likely level of demand for new homes for the next 3 – 5 years? 9 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 10: Strong population growth driving 35,000 unit annual demand
Strong population growth driving 35,000 unit annual demand There are various estimates of national and GDA housing demand ranging from 30,000 to 55,000 units nationally and 15,000 to 25,000 units in the GDA. We estimate national demand at 35,000 and GDA demand at 20,000 units Population of Ireland B
Slide 11: Demand underpinned by one of the youngest populations in the EU
Demand underpinned by one of the youngest populations in the EU f f Ireland at 33.3% is 6.8% above the EU average % of all houses 1.05m 1,200 35% in Ireland owned 1,000 30% by people aged 800 25% < 39 20% 600 15% 400 10% 16% 200 5% 0 0% 0-14 15-24 25-39 40-49 50-64 65-79 80+ Ireland France UK EU - 2
Slide 12: What does affordability look like?
The questions investors are asking What does affordability look like for the next 3 – 5 Years? 12 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 13: Breaking down our addressable housing market for FTB's and Traders
Breaking down our addressable housing market for FTB’s and Traders What would a couple have to earn to afford a new home: What would an individual have to earn to afford a new home: Maximum Can Afford a Maximum Can Afford a Joint Income (€) Mortgage (3.5x House at this Price Income (€) Mortgage (3.5
Slide 14: Positive outlook for affordability
Positive outlook for affordability Wage inflation outstripping Consumer Price Index Strong labour market 4.0% 3.5% e c. 400k new jobs created in Ireland since 2012 3.0% 2300 18.0% 2.5% 2200 16.0% 2.0% 2100 14.0% 1.5% 2000 12.0% 1.0% 1900 10.0% 0.5% 1800 8.0% 1700 6.0% 0.0% 1600 4.0% -0.5% 2007Q1 200
Slide 15: Outlook for house price inflation (HPI)
Outlook for house price inflation (HPI) HPI was 8.2% nationally as at 30 September 2018, and Irish HPI have been driven by an illiquid second hand market with only 25.0% c. 17% of all residential property transactions over the past 3 years relating to new homes completions. HPI specific to new 20.0%
Slide 16: Can these potential customers obtain mortgages?
The questions investors are asking Can these potential customers obtain mortgages? 16 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 17: Mortgage market conditions
Mortgage market conditions New entrants making the market more competitive Mortgage volume growth is driven by FTB’s Current New Entrants Mortgage Drawdowns Volumes (Q1-Q3 ) 10 9 8 7 6 '000 5 4 3 2 1 ? - New Secondhand New Secondhand New Secondhand FTB Mover BTL ? 2016 2017 2018 Size of mortgage mar
Slide 18: What the banks are saying
What the banks are saying “Our market share of mortgage drawdowns in the first half was 32% and our strong trend in applications and sanctions continues. Based on market leading shares in key segments, we are well positioned for further growth” – 2018 Interim Results, 27 July 2018 “24% increase in n
Slide 19: Profile and outlook for our market segments
The questions investors are asking What is the profile and outlook for our market segments? 19 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 20: Market segments: First Time Buyer, Up-sizer, Down-sizer
The First Time Buyer The First Time Buyer The Up-sizer The Down-sizer • Individuals earning in excess of €70k (or • Seeking a 4 or 5 bedroom house to • Empty nesters downsizing from houses combined for couples) with a preference for 3 accommodate expanded families purchased in the 1970’ - 1990’s con
Slide 21: Market segments: Young Professional and Investors
The First Time Buyer The Young Professional Individual Investors Institutional Investors • Individuals earning in excess of €80k, city • Generally cash purchasers seeking 2 or 3 • International institutional investors, PRS centre location focused - want to live near bedroom apartments for onward ren
Slide 22: The outlook for the CBD looks particularly strong (FDI / Brexit)
The outlook for the CBD look particularly strong (FDI / Brexit) Recent office lettings in the Dublin CBD: 870,000 sq ft 500,000 sq ft 153,000 sq ft 58,000 sq ft 100,000 sq ft Bank Centre, Spencer Dock, Wilton Terrace, No. 1 Grand, Dublin Landings, Ballsbridge, Dublin 1 Dublin 2 Canal Quay, Dublin 2
Slide 23: Does Ireland have a housebuilding industry to meet demand?
The questions investors are asking Does Ireland have a housebuilding industry to meet this demand? 23 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 24: GDA supply response will continue to lag demand
GDA supply response will continue to lag demand Unit # Cairn GDA Supply t Forecast 9,733 completions in the GDA in the year to 60,000 September 2018 include 825 (15%) one off Actual demand increases houses. We forecast c. 10,000 units for full each year to account for 50,000 undersupply year 2018 40
Slide 25: Only c. 20 live residential schemes with potential to deliver over 100 units
Only c. 20 live residential schemes that have the potential to deliver in excess of 100 units in 2018 Based on publicly available information on the Property Price Register, it is estimated that there are only 20 live residential schemes nationally which have the potential to deliver in excess of 10
Slide 26: Top 20 homebuilders delivering only 9% of annual national demand
Top 20 homebuilders delivering only 9% of annual national demand A recent Goodbody note stated that the top 20 homebuilders in Ireland only sold c. 1,600 units in H1 2018 New Homes Supply Constraints Industry Cairn Equity base Goodbody report that the top 20 homebuilders in the UK delivered 50% of L
Slide 27: How does Cairn use its scale to manage build cost inflation?
The questions investors are asking How does Cairn use it’s scale to manage build cost inflation? 27 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 28: Disciplined management of build cost inflation
Disciplined management of build cost inflation A key factor in Cairn’s model ensuring that we can continue to price our new homes competitively is how we manage build cost inflation: • We have procured c. €400m (orders placed and prices fixed) since IPO; • Our Top 15 subcontractors account for c. 60
Slide 29: Shackleton Park – our business model in practice
Shackleton Park – our business model in practice Initial Site Commencement: April 2017 Units Sale Completions 200 Under Construction: 500 29 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 30: How a large scheme manages build cost inflation
An illustration of how Cairn and one of it’s large schemes manages build cost inflation 1. Land 2. Planning and Design 3. People Planning Construction Delivery of First Delivery of units supported by c. 1,100 units (69 acres) acquired Phase Units Perm ission Date Com m enced Com pleted Sale > 450 pe
Slide 31: Outlook for apartment building in Dublin
The questions investors are asking What is the outlook for apartment building in Dublin for both build to sell and PRS / multi- family units? 31 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 32: Not enough apartments under construction in the CBD
Not enough apartments under construction in the CBD Despite the large number of apartment schemes that are through planning or in planning, and benefitting from density and height changes, we estimate that only c. 3,500 apartments will be delivered by the end of 2021 in Dublin’s Central Business Dis
Slide 33: Developers focused on commercial property
Developers focused on commercial property The pace of CBD office construction continues to significantly exceed apartment construction. An analysis of current and medium-term anticipated activity in both sectors highlights the ever-growing disparity: CBD New Apartment Delivery CBD New Office Deliver
Slide 34: The Irish PRS market
The Irish PRS market Residential Investment Transactions in Ireland 2012 - H1 2018 Snapshot of Recent PRS Transactions €’M Source: CBRE CBRE Marketview – Ireland Residential Investment Q3 2018 “The volume of institutional equity targeting the residential investment sector in Ireland now exceeds €5 b
Slide 35: Under provision of apartments and limited rental stock
Under provision of apartments and limited rental stock Percentage of Population Living in Apartments Dublin Properties to Rent Dublin Properties to Rent 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 The table above highlights the overall level of The overall undersupply of apartments is fu
Slide 36: How is Cairn positioned in the apartment market?
The questions investors are asking How is Cairn uniquely positioned to meet demand in the apartment market? 36 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 37: Cairn strategically positioned in the Dublin apartment market
Cairn strategically positioned in the Dublin apartment market 6 Acquisition Appraised Units Units to be # Apartment Development Date at Acquisition Delivered 1 Marianella, Rathgar, Dublin 6W Jun-15 231 336 Active 2 Hanover Quay, Dublin 2 Jan-16 100 120 2 3 Greenfields, Donnybrook, Dublin 4 Aug-17 78
Slide 38: Current land market
Current land market Some examples of recent large residential land transactions Reported Price Reported Price Location Planning Status Type Acres Units € per Unit € The Grange, Stillorgan, Co. Dublin Zoned Apartments 5 263 36,820,000 140,000 North Docks (Project Waterfront) Zoned Apartments 3 500 65
Slide 39: Agenda
01 Opportunity 02 The Questions Investors Are Asking 03 Presentation from David Hammond, Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 06 Q&A 39 © Cairn Homes plc 2018. www.cairnh
Slide 40: External presentation: Mortgage Market Conditions
External presentation Mortgage Market Conditions External presentation from: David Hammond Head of Mortgages AIB 40 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 41: The Mortgage Market
The Mortgage Market David Hammond Head of Mortgages 17th November 2018
Slide 42: ➢ AIB Group ➢ Housing Demand ➢ Home Formers
➢ AIB Group ➢ Housing Demand ➢ Home Formers ➢ Pent-up Demand ➢ The Mortgage market
Slide 43: AIB Group Multi Brand Strategy in Mortgage Market
AIB Group Multi Brand Strategy in Mortgage Market Over 200 locations nationwide 70 EBS offices in Key locations • New Head of Homes in 19 ‘Mortgage Masters ‘ Local Markets • 18 Mobile Mortgage 156 Mortgage Brokers Managers nationwide • Fully qualified Homes Advisor in every location 50 Dedicated Hom
Slide 44: AIB On-site collaboration with Cairn Homes
AIB On-site collaboration with Cairn Homes
Slide 45: Mortgage Demand: Economic & Social Backdrop
Mortgage Demand: Economic & Social Backdrop ✓ There are now more than 2.3 million people at work in Ireland for the first time since 2008. ✓ Unemployment has now fallen to below 6%. ✓ Net Migration: 31.5% of all migration to Ireland in 2018 has been returning Irish nationals. This figure now exceeds
Slide 46: Meet the Home Formers (20-39yrs)
Meet the Home Formers (20-39yrs) Meet the Home Formers (20-39yrs) We have seen a big decrease in Home Yet 90% of Home Formers still want to Owners with a Mortgage and a growth We have seen a big decrease in Home Owners with a own their own home Yet 90% of Home Formers still want to own their own Mor
Slide 47: Pent-up Demand
Meet the Home Formers (20-39yrs) Pent-up Demand There is considerable pent up demand for mortgages, estimated @ over €12bn . This pent-up mortgage demand is Location Pent Up Average FTB concentrated in cities and surrounding Demand Mortgage Rebound TX Value counties. (Units) Leverage Potential (€000
Slide 48: Mortgage Market MPM
Mortgage Market MPM January 2018 AIB Approach 2019 Position FTB’s 20% 20% Compliance 31/12 Approvals Non FTB’s 20% 10% Full year availability FTB’s 20% Non FTB 10% Correction in 2018 Current pipeline • Normalised 2017 wash out • Substantial exceptions available to Draw
Slide 49: Mortgage Market Activity
Mortgage Market Activity Drawdowns Market Size Approvals Q1 2018 – 7,879 2016 - €5.6 Billion Current pipeline €7bn Drawdowns (€1.7bn) 2017 - €7.3 Billion Q2 2018 – 9,339 2018 - €8.7 Billion (F) €10bn Approvals Drawdowns (€2.01bn) 2019 - circa €10 Bn (Sep 17- Sep 18) Q3 2018 – 11,011 Drawdowns (€2.37
Slide 50: Thank you
Key limiting factor to level of market growth is supply Underlying demand dynamics strong Significant level of pent up demand AIB Group strong focus on mortgage growth MPM - adjustment period in ‘18 Thank you
Slide 51: Agenda
01 Opportunity 02 The Questions Investors Are Asking 03 Presentation from David Hammond, Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 06 Q&A 41 © Cairn Homes plc 2018. www.cairnh
Slide 52: External presentation: Build Cost Environment
External presentation Build Cost Environment External presentation from: Paul Mitchell Quantity Surveyor Founder and Partner Mitchell McDermott Property Consultants 42 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 53: Cairn Homes Benchmark Report
Professionalism, Integrity and Innovation Cairn Homes Benchmark Report
Slide 54: Contents
Professionalism, Integrity and Innovation Contents Introduction Executive Summary Benchmark Projects Overview Programme Costs Appendices
Slide 55: Introduction
Professionalism, Integrity and Innovation Introduction
Slide 56: Introduction
Introduction Professionalism, Integrity and Innovation Mitchell McDermott were appointed by Cairn Overall, 2,518 units were analysed across 2 Homes plc to carry out a Benchmark Study on schemes. 1,579 of these are Cairn schemes and low-density housing including existing Cairn the remaining 939 units
Slide 57: Executive Summary
Executive Summary Professionalism, Integrity and Innovation This presentation includes the high level The construction cost benchmarking shows findings of the construction cost benchmarking that the six (6) Cairn schemes analysed are 4.6- exercise carried out on 2,518 units across 22 10.9% cheaper t
Slide 58: Benchmark Projects Overview
Professionalism, Integrity and Innovation Benchmark Projects Overview
Slide 59: Benchmark Projects - Overview
Benchmark Projects - Overview Professionalism, Integrity and Innovation Post recession schemes have seen an increase in the The non-Cairn schemes are all debt backed schemes but number of main contractors building schemes for Funds. would also included some form of early stage private equity compani
Slide 60: Benchmark Projects - Overview
Benchmark Projects - Overview Professionalism, Integrity and Innovation Both sets of data cover the same counties which are Dublin and surrounding commuter belt counties. Regional Spread of Projects 1000 Nr. 903 Nr. Wicklow 900 Nr. 411 Nr. 15% 800 Nr. 692 Nr. 700 Nr. 600 Nr. 500 Nr. Dublin 1,595 Nr.
Slide 61: 1. Programme
Professionalism, Integrity and Innovation 1. Programme
Slide 62: 1. Programme Benchmarking
1. Programme Benchmarking Professionalism, Integrity and Innovation The following Approach was agreed with Cairn The Outputs agreed to be provided by Mitchell at the outset of the task: McDermott as part of the report were: • Cairn to set out programme and nr. of • Narrative comparison that sets out
Slide 63: Average programme per unit / sq ft
Average programme per unit / sq ft Professionalism, Integrity and Innovation The following table compares the average time it takes Cairn to The following graph compares both data sets on a square footage produce one unit compared to the other benchmark schemes. basis which shows that there are bigg
Slide 64: 1. Programme Benchmarking - Conclusions
1. Programme Benchmarking - Conclusions Professionalism, Integrity and Innovation 3,500 sq ft/week The analysis shows that Cairn are building 18% faster than the benchmark schemes used when 2,968 sq ft/week compared on a square footage basis and 30% 3,000 sq ft/week faster when compared on a unit ba
Slide 65: 2. Cost
Professionalism, Integrity and Innovation 2. Cost
Slide 66: 2. Cost Benchmarking
2. Cost Benchmarking Professionalism, Integrity and Innovation The following Approach was agreed with Cairn The Outputs agreed to be provided by Mitchell at the outset of the task: McDermott as part of the report were: • MMCD to compare the costs, including • Financial benchmarking for Cairn prelimi
Slide 67: Average Construction Cost per unit
Average Construction Cost per unit Professionalism, Integrity and Innovation The following table compares the average construction cost of a housing unit (excl. siteworks) of the large Cairn and non-Cairn units and the overall average of the full data set. It shows that Cairn are 4.6% less expensive
Slide 68: Average Preliminaries Cost
Average Preliminaries Cost Professionalism, Integrity and Innovation The following table compares the average preliminaries cost of the large Cairn and non-Cairn units and the overall average of the full data set. It shows that Cairn are 4.9% less expensive that other similar scale developers and 15
Slide 69: Construction Cost Benchmarking - Conclusions
Construction Cost Benchmarking - Conclusions Professionalism, Integrity and Innovation The construction cost analysis and €120.00/sq ft benchmarking shows that the six Cairn schemes analysed are between 4.6-10.9% cheaper than competitors used in this study. These costs relate to the construction of
Slide 70: Appendix
Professionalism, Integrity and Innovation Appendix
Slide 71: Appendix
Appendix Professionalism, Integrity and Innovation The information contained in the appendices includes backup and introductory information that the reader may find useful.
Slide 72: Benchmark Projects - Overview
Benchmark Projects - Overview Professionalism, Integrity and Innovation The following table shows the start and completion date of each of the schemes. Programme Overview
Slide 73: Benchmark Projects - Overview
Benchmark Projects - Overview Professionalism, Integrity and Innovation The houses are largely 3 & 4 beds. Quite a few of the benchmark schemes are smaller than the Cairn schemes and have been categorised into small/medium and large for more accurate comparison later. Project Breakdown by Bed Type 5
Slide 74: Average programme per unit
Average programme per unit Professionalism, Integrity and Innovation The following graph shows each of the schemes average time to complete one unit. 8.0 wks Average Programme per unit (all sizes) 7.0 wks 6.7 wks 6.4 wks 6.0 wks 5.0 wks 4.6 wks 4.0 wks 3.5 wks 3.1 wks 3.0 wks 3.0 wks 2.6 wks 2.5 wks
Slide 75: Average programme per unit (large schemes)
Average programme per unit (large schemes) Professionalism, Integrity and Innovation Average Programme per unit (large schemes only) 1.4 wks/unit 1.2 wks/unit 1.2 wks/unit 1.0 wks/unit 1.0 wks/unit 0.8 wks/unit 0.7 wks/unit 0.6 wks/unit 0.5 wks/unit 0.5 wks/unit 0.5 wks/unit 0.5 wks/unit 0.5 wks/uni
Slide 76: Average Cost per unit
Average Cost per unit Professionalism, Integrity and Innovation Average Preliminaries per unit (all sizes) €35,000 14.0% Sum of Construction Cost (Prelims) (per unit) 11.9% €30,000 12.0% Sum of Prelim % 10.4% 10.0% 10.0% 9.7% €25,000 10.0% 9.1% 8.6% 8.3% €20,000 7.5% 7.5% 8.0% 7.2% 7.0% 7.0% 6.8% 6.
Slide 77: Agenda
01 Opportunity 02 The Questions Investors Are Asking 03 Presentation from David Hammond, Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 06 Q&A 43 © Cairn Homes plc 2018. www.cairnh
Slide 78: Conclusion
Conclusion Unique business in a unique Ready to take advantage of Business has successfully market at a unique point in the opportunities we have scaled time highlighted today Dividends from FY 2019 Our strategy is clear and our Revenue growing to c. €550m driven by very strong cash capability is st
Slide 79: Agenda
01 Opportunity 02 The Questions Investors Are Asking 03 Presentation from David Hammond, Head of Mortgages, AIB “Mortgage Market Conditions” 04 Presentation from Paul Mitchell, Mitchell McDermott Property Consultants “Build Cost Environment” 05 Conclusion 06 Q&A 45 © Cairn Homes plc 2018. www.cairnh
Slide 80: Investor Q&A
Q&A Investor Q&A 46 © Cairn Homes plc 2018. www.cairnhomes.com 17 November 2018
Slide 81: Disclaimer
Disclaimer This presentation document (hereinafter This document has been prepared in good Certain information contained herein “this document”) has been prepared by faith, but the information contained in it has constitutes “forward-looking statements”, Cairn Homes plc (“Cairn” or the “Company”). n