CROESUS/AN INSIDER'S VIEW OF THE MARKET:THIS IS one of the busiest periods of the year for company results in Ireland and Britain as quoted companies with December year-ends report their 2007 financial results, and provide up-to-date guidance on prospects for 2008.
In the current uncertain economic environment, the results from construction and property-related stocks, as well as financial stocks, continue to receive particularly close attention.
Several British housebuilding and construction stocks reported results this week. Persimmon, the largest quoted housebuilder in Britain (with a market capitalisation of £2.1 billion) reported results that were in line with consensus expectations.
Profit before tax rose 1 per cent to £585 million and the full-year dividend was increased by 10 per cent, although the final dividend was held unchanged.
However, the current trading environment remains tough and the group stated that its order book was down 19 per cent year-on-year to £1.05 billion as customers adopted a "wait and see" approach.
Barratt Developments (market cap: £1.3 billion) reported tough trading conditions in the first six months of its financial year to end-December. Completions fell by 14.8 per cent although, like other British housebuilders' sales, prices held steady.
Both Barratt and Persimmon reported that there had been a marked pick-up in visitor numbers to their developments since the start of 2008.
Of particular relevance to Kingspan were Persimmon's comments regarding affordable housing and timber-frame housing. Output of factory-built units - which are carbon-efficient - from Persimmon's Space4 unit rose by 78 per cent in 2007.
The number of affordable homes it delivered in the UK grew by 40 per cent.
The group also noted the continued drive for the adoption of "sustainability" in its developments and notes that it will, where practical, incorporate modern methods of construction technologies in its processes.
This is positive for Kingspan as it indicates that demand for Kingspan's off-site construction solutions should grow over the medium term.
Keir Group (market cap: £480 million) reported good interim results to end-December 2007 with pre-tax profits up 23 per cent to £44.6 million.
Keir has a somewhat unusual mix of housebuilding, contracting, support services, property development and infrastructure investment activities.
It is a relatively small housebuilder, with sales of 827 homes over the half year at an average selling price of £173,200.
To put this in context, brokers are forecasting that Abbey will produce 450 houses in the UK in the year to April 2008, and that McInerney will produce 1,800 British units in 2008.
Keir said that the credit crunch unquestionably reduced mortgage availability and its order books at the beginning of February were 20 per cent lower than a year earlier.
Of relevance to Bank of Ireland and Irish Life & Permanent (IL&P) was data released by the Council of Mortgage Lenders on the UK buy-to-let market. This market has continued to grow and buy-to-let mortgages now top one million.
Arrears have grown but quite modestly to 0.91 per cent from 0.71 per cent a year earlier. Strong underlying tenant demand is underpinning this market in Britain.
This is good news for Bank of Ireland and IL&P where British mortgages comprise approximately 50 per cent and 25 per cent respectively of their total mortgage books.
On Wednesday, IL&P reported a solid set of final results for 2007. Out of total operating profits of €590 million, the life business increased its operating profit by 26 per cent to €346 million. Growth in the banking division was much slower due to the slowing Irish housing market.
Management is now guiding operating profit for 2008 to be marginally ahead of 2007.
This is consistent with Croesus's view of flat to declining profits from the Irish financials over the next couple of years.
Ultimately, as with the other Irish banks, the investment case rests on the very high dividend yield on offer.
