Housebuilding group McInerney has taken a major step in expanding its British interests with the €13 million (£10.2 million) acquisition of Charlton Group, a house-builder based in the north-west of England.
This is McInerney's second house-building acquisition in the UK - the group dipped its toe into the market in 1999 with the €2.4 million acquisition of the small Lancashire group William Hargreaves. Charlton is a substantially bigger operation than Hargreaves and had pre-tax profits of €2.5 million last year.
McInerney is making an up-front payment of just less than €9 million in cash and loan notes, a short-term earn-out of €807,000 in loan notes based on 2002 targets and a longer-term earn-out up to a maximum of €3.2 million based on profits targets for the three years to the end of September 2004.
McInerney is buying Charlton on a relatively low multiple of profits - little more than five times pre-tax profits for the last financial year. But McInerney chief executive Mr Barry O'Connor said the low multiple partly reflected the amount of goodwill involved in the deal - Charlton's net assets are €3.8 million - and McInerney's plans to take on Charlton's €6 million debt. Currently, Ireland accounts for about three-quarters of McInerney's business, so the €13 million investment in Charlton represents a significant expansion in the UK.
Mr O'Connor said Charlton would add about 12 per cent to McInerney's earnings in the current year.
Charlton has been in operation since 1987 and the company is focused on house-building and apartment developments in Liverpool, Manchester and Chester.
The group has three distinct target markets - starter homes and apartments for first-time buyers, more up-market houses and loft-style apartment developments in key population centres. The bulk of its operations are "brownfield" redevelopment.
Mr O'Connor says Charlton should benefit from the recent UK directive requiring 60 per cent of new housing developments to be carried out on brownfield sites. Charlton completed 240 units last year, but Mr O'Connor said that the aim was to increase this by 60-80 units in the current year.
