Abbey doubles its interim profit

The surge in housebuilding in Ireland and Britain has more than doubled Abbey's pre-tax profit from £3.56 million to £7.56 million in the six months to October 31st, 1997.

The results are better than expected and brokers' projections for the full year are likely to be upgraded. Very buoyant conditions are expected in the traditionally slacker second half and the company looks set to record profits of around £14.5 million for the full year, representing a 60 per cent increase on the £9.1 million generated in the previous year.

Reflecting real growth, earnings per share more than doubled from 6.16p to 13.08p. Shareholders are to benefit from the good results with a 36 per cent increase in the interim dividend to 3.0p. Sales grew by 38 per cent from £28.89 million to £39.8 million in the first half. Profit margins increased from 8.3 per cent to 12.7 per cent, reflecting the strong trading conditions. Abbey enjoyed growth in all its business operations. Sales in housing and property development rose from £23.8 million to £32.7 million, sales in plant hire went up from £4.7 million to £6.7 million while property rentals grew from £309,000 to £334,000. The housebuilding division sold 378 houses. The number of houses built in Ireland almost doubled from 67 to 132. Abbey hopes to complete 270 in the full year, up from 170.

"The Irish market remains buoyant with all our developments performing well and we are on course to achieve this year's targets," said executive chairman, Mr Charles Gallagher. The number of houses sold in Britain increased from 200 to 246 in the first half. Abbey, which generates substantial free cash-flow, improved its financial position further. Cash balances went up from £15.2 million to £16.8 million and now represent 27 per cent of assets. Asked what the group intended to do with the cash, Mr Gallagher said there were no plans to make acquisitions. "I would rather buy land and build houses". It already has a landbank consisting of 2,100 plots (two-thirds in Britain and one-third in Ireland) and this is to be expanded. Growth would be organic, he said.

The shares were unchanged at 275p yesterday (12-month high 290p; low 188p) are on an attractive prospective price/earnings ratio of 11.1, assuming earnings per share rise from 15.76p to 25p this year.