Abbey profits soar to €36.7m

PROFITS at builders Abbey Plc soared by 37% to €36.7m with the buoyant Irish housing market pushing profit margins in the sector to 28.4%.

The Dublin-based builder of three and four bedroomed houses in Ireland and Britain said net profits surged to 107.62 cents a share, for the year ended April 30, from 26.7, or 78.4 cents, a year earlier.

Rising house prices in Ireland bolstered Abbey’s revenue, with the lowest borrowing rates for half a century driving sales as the British market begins to cool.

Abbey intends to increase house building activity in Ireland to take advantage of growing profit margins here.

Dolmen Securities analyst Stuart Draper said the results were slightly ahead of consensus forecasts as a result of a stronger operating margin, rather than offsetting the effects of lower interest rates on its large net cash balance of €31m, and the weaker currency translation effect on its British earnings.

Mr Draper says Abbey is another candidate for a possible takeout from the Irish Stock Exchange as the Gallagher family own close to 30% of the company and at least a further 19% is owned by major shareholders

“Abbey would also be off to a good start in terms of securing the necessary 80% shareholder approval for any potential future MBO deal to become unconditional,” points out Mr. Draper.

He sees further upside in the shares and has set a new 12 month price target for Abbey of 6.30, which represents an upside of 15%. He rates the shares a buy.

In a statement accompanying the full year results Abbey said its house building division completed 730 sales (Britain 454, Ireland 276) with a turnover of €151.3 million generating an operating profit of €43 million.

Abbey disclosed that at the end of the year, it held land with the benefit of planning permission, or resolution to grant planning permission, for the provision of 2,368 plots. Abbey says this covers approximately three years’ output.

The company’s British plant hire subsidiary, M&J Engineers, reported operating profits of €2.1 million on a turnover of €20.4 million including a profit of €178,000 arising from the disposal of a surplus yard in Luton.

Commenting on the company’s prospects this year, chairman Charles H Gallagher said: “Trading in the new year is progressing at a reasonable level. Background conditions are less positive than for sometime, however, our good forward order position, particularly in Ireland, means that prospects for this trading year remain good.”