Builder Abbey plc yesterday warned shareholders that dividends could fall next year if tightening credit continued to affect mortgage lending and the Irish and UK housing markets.
The company reported that pretax profits for the six months ended on October 31st, the first half of its financial year, dropped to €18.2 million from €22.6 million during the same period last year.
Chairman Charles Gallagher warned in a statement that trading conditions were getting tougher because house-buyers, particularly in the UK, were finding it harder to get mortgages as a result of the credit squeeze.
"Future dividend policy will need to be considered with reference amongst other matters to the changing business environment. The board cannot rule out a material change to our dividend policy when next considered in the summer."
He said if the company changed its dividend policy in these circumstances it would mean lower payouts to shareholders.
Mr Gallagher explained that his statement referred "more specifically" to British trading conditions. However, Abbey believed it could spill over into this country.
He blamed the credit squeeze, brought on by US banks giving mortgages to high-risk borrowers, that earlier this week brought a warning from the British Financial Services Authority to that country's institutions to adopt more careful lending policies.
He added that the group hoped to have a better idea of what was happening in the credit market next summer. "We would expect to have a clearer picture by then."
Abbey is proposing to pay shareholders 12 cent per share for the six-month period.
It said that, combined with the 24 cent paid out following its October annual general meeting, would bring the total payout for the financial year to 36 cent. The dividends were level with those paid last year.
The group's house-building division sold 408 new homes last year, 170 in Ireland and 278 in the UK. This generated turnover of €97.15 million, and operating profits of €15.41 million.
Its UK plant-hire business, M&J Engineers, had operating profits of €1.6 million on a €11.27 million turnover.
Overall, turnover was €108.6 million for the six-month period, compared with €96.6 million during the same time frame last year.
Earnings per share (eps) for the first half were 48.99 cent, a fall of 14 per cent on the comparable six months last year, when eps were 57.93 cent.
The balance sheet remained strong with total equity of almost €250 million on October 31st, compared with €234 million a year earlier and €245 million at the end of December.
Its statement said that overall the group was "trading profitably and enjoys a strong financial position from which to address the challenges ahead".
Abbey closed nine cent up at €5.90 on the Dublin market yesterday.
