Softening house market?

And guys have paid big money for land and need a back door bailout for paying too much for it in the first place.

How many unitss did they build 3k-4k. At 3k it's 80 k/ house for 2021. If it's 4k it's 60 k/ unit.

10%drop takes 50k or a tad more would see very low profit levels. There is evidence that build is slowing

Cairn have a huge land bank boought at pretty low values, that will be a large part of where the profit comes from, if you went out in the morning to buy a site and develop it you wont make margins anything like they do.

Ah, a soft landing, such good news. Now where did we hear that one before?

A big one, I'd say. I bought several years ago in an overheated market, and prices kept going up since.

As for the number, my guess is probably better than yours. Among other reasons, the banks are slightly less at risk this time round.

There is a basic concept known as "sunk cost".

The site could just be a sunk cost for a builder. If they foolishly overpay for it, then that is their choice. They might pay the equivalent of say 100k per house for the site. Then things turn. They can build a house for say 200 and sell it for 250 and make 50k, or they can sit on it and make nothing while paying higher interest rates on the loan for their sunk cost. They would always be better off going ahead and developing the site and selling the houses.

It's not huge about 15% margin.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.cairnhomes.com/media/4t1osq0z/cairn-homes-plc-2022-interim-results-investor-presentation-release-version-08092022.pdf&ved=2ahUKEwjV_Njxg-j6AhW4S0EAHb6BDrcQFnoECBoQAQ&usg=AOvVaw21VVs7H8cSNPqRuKOINpKM

Just looking at the figures they expect this year to finish1988 units with revenue of 760 million or 382k/unit.

However in H1 they have finished 547 houses with a profit of 36.2 million or 66k/house. Considering that they are probably operating off sites that are longterm in the system there margin or s not excessive. Most companies operate on that sort of margin. As well they are one of the biggest developers and you assume that they are operating at a higher margin than many other smaller size operations.

A 10%drop in price would put them in a difficult position especially with the price newer sites are coming in at. Much lower than that and they be reducing output or shutting down sites

We we have had 8 years of predictions of a price collapse. When prices started to rise in 2014 it was a blip this would not continue house prices would collapse again in a few months. Then it was after Brexit vote 2016/17 prices would again collapse, then as Britain left the EU in 2019 prices would nose dive. Then we had the COVID uncertainty from March to May that prices would again go downhill. We had experts advising buyers to withdraw from sales and go on n at low-ball bids. We had a lad called Prop Queries predicting a property Armageddon all through 2020/21.

I am still going for a 10ish drop from present peak.

That's like saying "Tesco has had huge profits! I'm sure my local shop is making the same".

Your figures lack context.

Revenue up 84%. Up 84% from what? If I lost a million quid last year and lost less this year, my revenue would be up.

Operating profit €36million. What is their total revenue?

Predictions on a price crash for covid were valid considering the natural run of things. The massive State supports worldwide were not expected. The US stock market soared for example due to citizens receiving their stimulus cheques. A lot of businesses in Ireland would have shut up shop had it not been for massive supports.

Not quite. Everyone forgets that many businesses availed of massively generous supports. They remember PUP but not the wage subsidy because those people kept getting paid as normal.

At that point in time, nobody knew how the pandemic would progress.

No. You don't include your "required margin" as an expense. Not sure why you are bothering with your attempted strawman. It's very childish.

Also if you include the actual costs of outsourcing everything, including the risk, then you actually have no justification for demanding any profit.

If I want to own a restaurant and then I include as my costs the cost of financing 100% the building and capital (in which case the bank is taking all the risk there), and also include the cost to have all the management outsourced, then what am I bringing to the table to demand an additional "required return"? Even if I do manage to get away with demanding a "required return", it doesn't go into my projected costs. I put in my costs and my income and then I have profit and I compare that profit to my required return to see whether I will proceed.

If I decide to finance and manage it myself and pay myself a salary 200k to manage the restaurant, and calculate 100k a year for my pocket as compensation for the capital I put in, then why am I adding an extra 15% as a "required return" to my "costs"? That's not part of my costs. My salary is. My charge for the capital is. My "profit" isn't a cost.

Feel free to try it out with Revenue though. If they come telling you that you owe tax on profits of 100k in your business, you can tell them no, that you actually made a loss of 100k because they didn't take into account your required margin of 200k as an expense 😉

The cost of capital you refer to is the interest on debt finance. There is also a cost of the equity finance which the margin reflects. Their business is funded by a combination of debt and equity. Equity shareholders need to get a return otherwise whats the point of investing. If you expect businesses to run with zero return to equity shareholders then no businesses would be started.

What is the ber, I can't see it on the listing

So you are saying that Cairns a PLC quoted company on the Irish stock exchange is fiddling it's accounts.

You are away with the fairies. You are waffling again. Anybody working in a publicly quoted company is paid a wage whether it's a the photo copier assistant or the chief financial officer.

It's profits have to be verified by auditors who you say are allowing the accounts to be fiddled. It's yield on it's shares are about 6%. It's has 650 million tied up in sites and 300 million in ongoing building work.

It gross margin is 21% and net margin is 15%. It's actual share value is less than 50% of its 2017 price so investors are not exactly rushing to hold the shares of this so called highly profitable company