Investors switch as Abbey profits fall 9.3%

SHARES in house builder Abbey fell yesterday as investors switched to rival McInerney, after Abbey posted a 9.3% fall in profits for the six months to the end of October.

The €2.69 million fall in profits to €26.12m was mirrored on the Irish Stock Exchange, with Abbey shares falling by more than 6% by mid-morning, but rallying before close of business to end 43 cents down, a 5.28% fall to €7.72.

After Dolmen Securities analyst Stuart Draper recommended clients to switch out of Abbey and into McInerney Holdings, the Abbey rival’s shares fell initially, rose in the middle of the day, but fell by the close to €6.82, down 3 cents, a 0.44% fall.

Mr Draper argued that Abbey is now trading at 5.9x current year earnings per share of €1.30, largely in line with the current UK home building sector average of 6x.

Davy Stockbrokers’ analyst Flor O’Donoghue said the tone and thrust of Abbey’s interim results are of no great surprise, although the final result is a little below expectations.

“The reason for this is greater margin attrition than envisaged. Abbey’s first-half house building margin fell from 31.5% to 26.6% and this resulted in PBT and EPS falling 9%.

“The clear implication from the accompanying statement is that all the weakness was UK related. Rising costs and a softening market were cited. In Ireland the market was described as firm,” he said.

In its statement Abbey said profits at the operating level were €25.17m as compared to €28.39m at the half way stage last year.

Abbey’s British plant hire business M & J Engineers generated operating profits of €1.09m on a turnover of €10.44m. Rental income for the period amounted to €116,000 for the half year.

“The Group held substantial cash balances at the end of October. Commitment for land purchases amounting to €12m existed at the end of October,” said Abbey chairman Charles H Gallagher.

The board declared an interim dividend of 11 cents per share to be paid on February 16, 2005 to shareholders on the register at January 14, 2005.

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