24% rise in full-year profits for Abbey

BUILDING group Abbey has reported a 24% rise in full-year profits to just over €60 million.

The company said the profits were buoyed by the continued strength of the housing market, where output jumped from 276 homes to 407.

Construction activity in Britain weakened in the year, with the number of homes built dropping from 454 to 385. Even with this dip, group turnover increased by €26 million to €201.5m for the year to end April 2004.

Abbey's plant hire business M&J Engineers turned in flat operating profits of €2.1m on sales which were e1m lower at €19.4m.

Though it has enjoyed a surge in annual profits, executive chairman Charles Gallagher cautioned that the housing markets in Ireland and Britain could see growth easing back.

"Abbey is looking to an increase in turnover this year as margins in Ireland have been lower and there are some concerns of a reversal in British prices."

Mr Gallagher's comment echoes several reports on the health of the British housing market, including one by the Bank of England, which has repeatedly warned that double-digit price increases are unsustainable. Rising interest rates are also a threat to the housing market. "Business is good at the moment, but we like to remind people that there are considerable risks. In England we are pointing out that interest rates have been going up and while the market was stronger earlier in the year, it is quieter than it was. Whenever the market goes up very sharply there is always a danger that it might come back a little bit," said Mr Gallagher.

The outlook for the Irish market was much better, with 80,000 homes expected to be built this year and prices expected to moderate in the coming months.

"It's another record year for volume here. But obviously, the more houses we build does have a dampening effect (on prices). Prices could have gone up faster if it wasn't for the number of houses built."

Though it focuses on the British and Irish housing markets, it has made a tentative foray into the Eastern European market with the purchase of 10 acres of land in Prague in the Czech Republic. Mr Gallagher said it was looking for planning permission to develop the site in the next two years.

Shareholders will get a final dividend of 20 cent, which will be paid out of earnings per share of 137 cent.

One broker said the dividend payout was disappointing given the strong balance sheet. However, Mr Gallagher said the company needed to use the cash to fund the ongoing purchase of development land.