Tuesday 20 February 2018

Profits soar to €49m at Abbey on UK home sales

Abbey executive chairman Charles Gallagher
Abbey executive chairman Charles Gallagher
John Mulligan

John Mulligan

Profits at home builder Abbey more than doubled to €49.1m during its last financial year as it was boosted by "brisk" demand in the UK and an improving outlook in Ireland.

The profits for the 12 months to the end of April were significantly ahead of analyst expectations.

Davy Stockbrokers had expected the stockmarket-listed firm to generate profits of €35.4m. Analyst Colin Sheridan described the performance as "stellar".

Shares in the company were more than 4pc higher by midday yesterday at €13.20, compared to a 52-week low of €5.

Headed by executive chairman Charles Gallagher, Abbey said that "slow but steady" progress has been made in Ireland. It's planning the imminent start of new projects in Co Wicklow and Co Dublin.

"Further projects are being actively sought to drive faster recovery," it added. However, the company noted that projects in Co Laois and Co Kildare remain on hold pending an improvement in local demand.

"For the time being, the strong improvement in the housing market remains most apparent in Dublin," it said, adding that the medium-term prospects here remain good.

"However, the weight of speculative money chasing relatively few opportunities will temper returns," it said.

Abbey generates the bulk of its sales in the UK, where it sold 514 homes during the last financial year. It sold 27 in Ireland and 16 in Czech Republic.

Total turnover at the group rose 51pc to €172.4m in the latest period, with €18m of that revenue generated by Abbey's plant hire business. The plant hire business made a €3m operating profit.

The UK accounted for €37.1m of its operating profits, compared to €17.6m in the previous financial year.

Abbey said that the short-term outlook for the business is good.

"The group is targeting a significant increase in turnover this year and whilst margins may be eroded, a satisfactory year is in progress," it told shareholders.

But it warned that the longer term outlook is more uncertain.

Abbey has been helped in the UK by the government's 'Help to Buy' scheme, with home price rises having continued to outstrip rising costs.

"House prices in the UK now reflect the easy money conditions of the last two years and may struggle to advance rapidly in an environment of rising interest rates and possibly lagging wage growth," it cautioned.

"The sweet spot of the UK cycle is behind us." Abbey has 1,557 plots in the UK with planning permission.

UK Prime Minister David Cameron has just launched a new initiative aimed at helping even more people buy their own homes.

The scheme will introduce a number of measures to improve affordability and availability of homes, and the Help to Buy scheme will be extended. Additional tranches of public land will also be made available for home building.

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