HOUSE-BUILDER Abbey plc took a €12 million hit on the value of its development land in the first half of the year, leaving it with a €5.4 million loss at the end of October.
Abbey said yesterday in the six months to the end of October, it wrote down the value of its development land by €11.9 million. This was split at €8.5 million in Britain and €3.4 million in Ireland.
Robert Gardiner, analyst with stockbroking firm Davy, pointed out yesterday that, combined with the €20.6 million writedown in 2007, the company has taken a total of over €32 million off the value of its development land.
Mr Gardiner said this translated to about 17 per cent of its value at the start of the company’s 2007 financial year, or about 14 per cent of its overall net asset value.
The group said yesterday that it lost €5.4 million before tax in the six months to the end of October, against a profit of €18.2 million during the same period last year.
Operating losses were €5.9 million over the period, compared to a gain of €17.24 million in 2007.
House sales operations lost €6.63 million on turnover of €47.16 million. The unit sold 235 houses over the six-month period, 169 in Britain and 66 in Ireland.
MJ Engineers, Abbey’s British plant-hire business, had an operating profit of €496,000, while rental income for the period came to €247,000. In Prague, Abbey has booked 49 reservations on its project in Silvenec at an average price of €244,000.
The group’s performance in the second half is partly reliant on how the normally strong spring season for house-buying turns out in 2009. The company’s year-end is April 30th.
Chairman Charles Gallagher warned that the group’s short-term prospects were poor. “The turmoil in the banking markets in both Britain and Ireland makes for a difficult backdrop for a business reliant on strong mortgage markets.
“The recent forecast in Britain of negative net new mortgage lending in 2009 is cause for concern. The aggressive run-off of significant elements of the Northern Rock’s loan book this year under the direction of the UK authorities was very damaging.”
However, he predicted that the substantial falls in interest rates, combined with the emergence of a stronger banking system, should ultimately facilitate “healthier” mortgage markets.
“Significantly, lower house prices than in recent years may stimulate some demand. The group is in a strong financial position to avail of any improvement in our markets.”
Abbey had good cash-flow during its first half, and had €35.31 million in cash and €17 million in short-term Irish Government debt at the end of the period.
The charge it took on the fall in value of its landbank means that it will not pay shareholders a dividend for the first half.
Mr Gardiner said Abbey would continue to generate bad news for the short term, but agreed that the company’s balance sheet strength made it a good long-term bet. “We recommend buying the shares at these low levels.”
Abbey’s shares dropped 2 per cent to €3 in Dublin yesterday.
