Homebuilder Abbey reported an 18 per cent decline in pretax profit last year despite building more houses in the UK, it's biggest market. It said that profit would be lower again this year and the shares fell almost 11 per cent.
The company said yesterday that pretax profit in the year to the end of April fell to €47.1 million, from €57.5 million a year earlier. Chairman Charles Gallagher attributed the decline to pressure on margins and rising land prices. In the same period, turnover slipped 1 per cent to €204.5 million.
Mr Gallagher said that rising land and stagnating house prices in the UK had put significant pressure on the group's margins. He also said increased regulation in the UK concerning sustainability, insulation and sound were pushing up the cost of building a home in the region.
During the year the company sold 718 new homes - 423 in the UK and 295 in Ireland. The UK figure is 14 per cent ahead of the prior year, while in Ireland the completions are down by 15 per cent.
Mr Gallagher said business conditions in Ireland remain strong and that he expects volumes to rise "quite a lot" in Ireland in the future. While trading picked up towards the end of the year in the UK, Mr Gallagher said he expects things to remain under pressure for the rest of this year.
Abbey last year paid a dividend of 34 cent and is recommending a further payment of 24 cent. Over the past five years, the dividends paid have more than doubled despite a decline in earnings in recent years. Mr Gallagher said that while the dividend won't be cut going forward, it is likely that if profits don't increase, then dividend payments won't increase either.
Shares in the company fell €1.03 to end the day at €8.50.
Analysts expressed disappointment at yesterday's results announcement, which lagged well behind most estimates. Davy, NCB and Goodbody all said they would be revising their future forecasts on the back of the lacklustre performance.
One analyst said that the group had suffered because it had failed to take advantage of the huge demand for property in Ireland. He said the problem was that Abbey didn't have enough land on its books to build sufficient houses, rather than that it couldn't sell the houses it had built.
Abbey has recently spread its wings overseas and moved into eastern Europe, with several land purchases in Prague. While the group has significant potential for building in the region - it already has planning permission for 95 plots - it has experienced delays in obtaining a building licence. As a result, Mr Gallagher said the scheme in Prague won't start now until next year.
In total, Abbey has planning permission for 2,588 plots.
