Abbey hopeful after a poor performance

HOUSEBUILDER and property group, Abbey, is hoping for a resumption of growth this year, following the 26 per cent cut in pre tax profits, from £8,365,000 to £6,223,000, in the year ended April 30th, 1996.

Although the prospects are mixed, Abbey is hopeful of "resumed progress", according to chairman, Mr Charles Gallagher. Forecasts of accelerated British growth "are a source of encouragement".

The Irish operations are expected to continue to grow strongly and the British operations should go on a recovery path. However, he stressed that this will be tempered by the continuing difficulties facing its plant hire activities.

A final dividend of 3.4p net per share has been declared, making a total of 5.5p, up from 5.25p previously. Earnings per share fell from 15.08p to 11.17p.

Abbey sold 100 houses in Ireland last year at an average of £69,000 per house. This year, 175 houses should be sold and this could go as high as 200, said Mr Gallagher. It has three developments in Ireland.

The development outside" Greystones has almost been sold out. A development at Saggart with 320 houses is underway, "while a development containing a small number of higher priced houses at Killarney Road, Bray, will be launched in September.

Abbey is to continue with its policy to "steadily grow" its Irish business.

It sold 314 houses in Britain costly in the south east - at an average cost of £88,000, stering last year. Competition in that market is "quite acute".

However, Abbey had detected a recovery and Mr Gallagher noted that the days of double digit inflation rates are over. "I have no doubt that the UK will benefit in a similar way to Ireland".

Abbey should see "reasonably sustained" growth in Britain over the next five to seven years, according to Mr Gallagher.

Abbey has a land bank of 1450 plots in Britain (650 in Ireland) which it is trying to expand.

With £11 million cash in the balance sheet it has plenty of resources. The group may make an acquisition, provided the right one comes along.

It went as far as a due diligence, last year but this fell through. There is "plenty of scope to grow the company" and he reckons that £30 million could be spent without adversely affecting gearing.

The verse trend in Abbey's test figures is worse than what appears at the pre tax profit stage which was inflated by a surplus off £519,000 on the revaluation of investment property (this reversed the fall in 1993).

If this and interest payments (up from £374,000 to £515,000)," are excluded, the underlying fall is 35 per cent.

The fall in profits from its British housing operations was partly responsible but its plant hire operation, which saw a fall in profits from £1,700,000 to £460,000, was also a major contributor.

Mr Gallagher said the group intends to keep this division because it is a big generator of cash and is poised for a sharp recovery, though his may not come through until 1997.