Abbey profits fall 5% to E57.3m

David Clerkin

Profits for the year to April fell from E60.2 million to E57.3m despite a minor increase in revenue, which climbed 3% to E207m. Shares fell around 2.5% on the news.

Executive chairman Charles Gallagher said trading in Britain, which accounts for around half of Abbey’s housebuilding activity, was “sluggish” and that sales had failed to meet expectations. He predicted profits in the year ahead would be lower.

The British housing market has disappointed in recent months on the back of a series of interest rate hikes that were brought in by the Bank of England to cool house price inflation. Abbey said it was forced, in common with other builders, to offer extra incentives to buyers to bump up demand. Typical incentives offered by builders include cashback deals of up to E10,000.

“The use of incentives to maintain acceptable levels of business is likely to grow and our margin continues to be eroded as a result,” said Mr Gallagher.

There was better news from Ireland, where sales remained “healthy” but the company also warned of margins coming under pressure thanks to higher land acquisition and other costs.

Mr Gallagher said margins would be “seriously” reduced in the year ahead but that forward sales were good and turnover in the Irish division would increase.

The results meant earnings per share fell 6% to just below 130c. Shareholders will pocket a final dividend of 22c per share, bringing total dividends for the year to 33c. This is 10% higher than last year and in line with analyst expectations.