House builder Abbey reported pre-tax profits of €16.99 million for the six months to the end of October on a turnover of €62.63 million, or 27.13% net profit from March to October 2014. In this article in the Irish Times they warn that their profitability, and that of other speculative builders, will be impacted upon by state initiatives to deliver affordable housing. We note a more normal profit level in speculative development is 20%, a level required by most financial institutions to provide finance. This article comes on foot of a Davy report that suggested construction labour costs were 50% higher here than in Northern Ireland.
Link to article here. Extract:
Abbey concerned by level of state intervention in housing market
by Eoin Burke Kennedy on 5th December 2014 in the Irish Times.
House builder says moves by Irish and British governments will crowd out private capital. Abbey reported pre-tax profits of €16.99 million for the six months to the end of October.
House builder Abbey has warned that state intervention in the Irish and British housing markets has the potential to “crowd out” private investors.
In a trading update, the company noted with concern the announcement this week by the UK government that it intends to speculatively develop land for housing.
The proposal, unveiled as part of chancellor George Osborne’s Autumn Statement, is aimed at tackling Britain’s ongoing housing shortage.
“When set alongside similar activities by Government agencies in Ireland, this raises fundamental questions about the future environment for private development in both jurisdictions,” Abbey said.
“Publicly supported UK Housing Associations already speculatively develop houses for sale. This week’s announcement will serve to further crowd out at the margin the role of private capital in housebuilding,” it added.
In the budget, the Irish Government announced ambitious plans to spend €3.8 billion on building and refurbishing 35,000 social housing units over the next five years.
The Government and the Economic and Social Research Institute (ESRI) believe 25,000 new housing units need to be built every year to meet the current level of demand.
Abbey reported pre-tax profits of €16.99 million for the six months to the end of October, up from €7.65 million for the same period last year.
The builder said strong margins were a “notable feature” of the period and should be sustained into the next half year.
While forward sales were also encouraging, it said pressure on costs continued to be a feature of the market.
Its housebuilding division completed 225 sales in the six month-period – 205 in the UK, 15 in Ireland and five in the Czech Republic.
This resulted in a turnover of €62.63 million.
In Ireland, Abbey’s project in Rathfarnham is now 90 per cent sold and the company said it was turning its attention to its project in Lucan, which is scheduled to launch early next year.
Trading in the UK was good throughout the period, the company said.
In Prague sales completed in the period were disappointing, however, as last year a brighter second six months is in prospect, it said.
Overall further progress in all regions can be expected in the second half, it said, noting that during the period 405 plots were added to its land bank.
Abbey’s board announced a dividend of five cents per share, which together with the six cents approved at its AGM in October will make a total of 11 cents for the financial year.
Other posts of interest: