Fears over State intervention in housing sector

Housebuilding group Abbey says it is concerned over State intervention in its sector in its core markets of Britain and Ireland and has urged both countries’ governments to sell more land to private developers.

The Co Meath-headquartered group, which also operates in the Czech Republic, saw profit returning to its Irish operations in its last financial year (for the 12 months to the end of April) for the first time in four years.

The company is hopeful of increasing its number of house sales in Ireland from 30 to 100 in the medium-term and feels the Irish market can reach a sustainable level of annual new house builds of 15,000 to 20,000 units within the next five years.

Yesterday, Abbey published a strong set of results for the first half of its current financial year. During the six months to the end of October, the company generated an operating profit of €16.53m; a 161% jump from the €6.32m profit seen in the corresponding period last year.

Pre-tax profits rose, year-on-year, from €7.65m to just shy of €17m; while first- half group revenue was up by 54% to €72.5m.

Good cash flow was maintained during the period,and Abbey held €38.85m in cash, together with €24.1m in UK government debt, as of the end of October. Some 225 builds were completed in the six months; 205 in the UK, 15 in Ireland and five in the Czech Republic.

Management is expecting further progress in the coming months across the group with executive chairman Charles Gallagher saying yesterday that he is expecting a good year regarding the current fiscal year, with 2015 set to be the best year for the company for some considerable time.

“The immediate outlook is positive. Our sales in south-east England continue to be strong. In the medium term, prospects are more uncertain, however, for this year the group is on track for a good result,” he said.

In Ireland, Abbey has sold 90% of the houses in its Rathfarnham project in Dublin, while it is now set to turn its attention to its new project in Lucan, which is set to launch in the New Year.

Mr Gallagher, however, expressed concern about the growing threat of State intervention in the Irish and British housing markets.

In particular, he criticised the British government’s intention to boost housing stock by effectively becoming a land developer/housebuilder itself thus pushing private capital out of the marketplace; and said the notion was unworkable.

In Ireland, where such moves could be more damaging to Abbey in the long-term Mr Gallagher said that State agencies including Nama should not go it alone with build-ready land on their books and, instead, put it up for sale to private developers.

He said that Abbey is constantly on the lookout for new land in Ireland and is bidding every week.

Ultimately however, he said that Ireland with rising employment, gradual mortgage crisis recovery and a reviving economy is well-placed for future growth.

Abbey also yesterday declared a dividend of 5c per share, which together with the 6c dividend approved at the company’s AGM in October, makes a total of 11c for the financial year.

Davy Stockbrokers said that significant upgrades to consensus numbers are likely on the back of Abbey’s latest results, adding that it sees plenty of upside to the stock.