Abbey reports 63% fall in profits

House-builder Abbey today reported a 63 per cent fall in profits and warned of a “wrenching adjustment” unless market conditions improve.

Reporting results for the year to the end of April, the company said pre tax profits fell to €16.8 million from €45.3 million for the same period the previous year.

Due to the depressed trading conditions Abbey took an impairment charge of €20.5 million against land and work in progress.

“While we believe these impairments are prudent based on current market conditions, if the market significantly deteriorates further write-downs may be needed in future,” the company said.

Over the year Abbey said it had completed 716 sales; 249 in Ireland and 467 in the UK, generating turnover of €159.2 million and an operating profit of €10.5 million.

While trading in the UK – where Abbey gets about two-thirds of its sales – was described as satisfactory, a brief up turn in sales in Ireland at the start of 2008 has faded.

Over the last two months market conditions have “deteriorated noticeably”, with the slowdown at a rate and depth that is outside the company’s experience.

Abbey chairman Charles Gallagher blamed the slowdown on the “dramatic contraction of the mortgage market” and added that “unless conditions markedly improve, which seems unlikely in the short term, a wrenching adjustment lies ahead”.

As a result, Abbey said it would not be recommending a dividend at its agm in October.

At the end of the year the company held land with planning permission for 2,300 plots and added that in the current circumstances its landbank was likely to be reduced this year.

Shareholder funds stood at €207.9 million while net cash balances stood at €39.4 million.

Abbey said that it had completed the purchase of 4.3 million shares for €25.4 million by last November under the approved share purchase scheme.

Davy analyst Robert Gardiner said in a note to investors the statement made grim reading and that its forecasts for the stock were under review.

At 9.30am Abbey shares were trading down 4.2 per cent at €2.68. The share price has fallen 54 per cent since the start of the year and the stated market cap is €67.7 million.