Abbey's Gallagher Says Housing Market Outlook Has Worsened

Really amazing how the language has changed so abruptly in recent weeks. Events seem to be gathering a fierce pace out there…

A lot of this is being put out to force Cowen’s hand on Stamp duty. However I think is is damaging an already weakened market. Desparation?!?

Do you really think these people believe Stamp Duty is the problem? I mean I know some stupid journalists might believe that, or might just be looking for a campaign to boost circulation or whatever.

But do you really think people like Charles Gallagher are that naive?

Maybe he reckons a quick sharp shock is better than a long protracted decline. Or maybe he’s just being honest and calling it as he sees it.

This guy has probably forgotten more about the property industry than most people on this forum will ever know.

When people in the industry talk up the market they’re criticised for concealing the truth. When they talk down the market they have an ulterior motive.

If their opinion is so worthless, why do we keep quoting them and parsing their every word?

-Rd

Is that all? These guys are the second largest public building company.

I think you got the bold bits in the wrong place …

I would imagine they are getting stuck into GB’s “new housing” manifesto - see their UK arm looks busy enough

abbeynewhomes.co.uk/future_developments.html

Why the share buyback? I think these guys should be preserving capital. They don’t know how bad things might get.

So they can dump the lot on the market at the new adjusted price and run for the hills. :wink:

Because management owns share options? It’s an effective way of transforming company profits into management bonuses.

A share buy back is a completly legitimate method to boost the companys share price and reduce the “cash on hand” the company holds. Many institutional share holders prefer this course of action where there are no immediate options to employ the companys capital in a better way (such as R&D, new developments, acquisitons). The company tells the stock market it is going to purchase its own shares thus offerting some small amount of support for the price but the major boost to the share value is the resultant reduction in the number of tradable shares on the market.

Fairly usual stuff.

Blue Horseshoe

Don’t forget, the company will also issue a buy-back on the expectation of future gains, as I suspect is the case here.

Maurice Pratt was a canny example of this, when he filled his boots with C&C shares are €14 a pop 8)

I know what a share buyback is. The point is it reduces cash on the balance sheet heading in to a downturn. The building industry is highly cyclical. I think they’re going to need that cash before it’s all over. It will be health of the balance sheet that will matter not the EPS.

Thats it in a nutshell.
If the market is turning down you need the cash.
Non-essential spending (especially on your own shares in an effort to artificially boost the price) is idiotic.
I wonder what the option strike price and excercise date is.

I’ll make a prediction. Before this cycle is over both Abbey and Mc Inerney will cut their dividends and that will be all about the balance sheet.

Apologies DD.

In some ways, when faced with a down turn and a resultant drop in share price, a publicly listed company will want to reduce the cash on its balance sheet. If the share price tumbles as a result of your industry/market tanking, then there’s no point in making a potential take over of your business more attractive by having large cash reserves for a potential buyer to get their hands on. If your assets (including cash reserves) look attractive to a predator, then you can be the target, if only for a quick asset strip.

Abbey will have very low day to day overheads if they need to weather a storm, so significant cash reserves for a prolonged down turn could be more a liability than and asset.

Blue Horseshoe

I pulled up the Company reports for April 07. They have 32m cash and are owed 13M. However they owe 73M. They also have 232M “stocks”(I think land, completed houses, work in progress etc). I’m not a builder or an accountant so I don’t know if that is adequate cash if things really slowdown. I guess the key is the conversion of the stocks into cash, That’s the bit that might get tricky in a downturn.
Other odds and ends. The Gallaghers own 35%. Over half the business is in the UK. Dividend cover was 3.4 last year.
It just seemed odd for a company in a notoriously cyclically industry comes out with a very gloomy statement and also announces a buyback.
Regards

**HouseBuyer wrote
**

Yeah, and then laid off half the work force in Clonmel :unamused:

I understand where you are coming from, but I have to disagree that this was Abbeys strategy.
They are a long way from a takeover approach, given that we appear to be in the first stages of a downturn. The reduction in price of Manor Park from €750m to €400m to what now appears to be abandonment of the sale completely, tells everyone that the appitite for building stocks has evaporated. If Banks are finding it hard to borrow cash, can you imagine how difficult it is for a builder ? Every developer I know is trying to sit on as large a cash pile as possible.

Abbeys move stinks of artificially propping up the share price.
If I was an Abbey shareholder Id use this as a selling opportunity.

Or maybe “the patient is sickly but not dead” is being optimistic.

I’m not sure about that. His buyback in this environment is weird unless he’s absolutely certain things will be better in 2008, but his comments seem to contradict that notion. Is it not possible that Charley, like many of his recently wealthy colleagues in the industry, is a genius in the top half of a business cycle but forgot (or never knew) how to run a business in the bottom half of a business cycle?

You’ve gotta know when to hold ‘em. Know when to fold ‘em, know when to walk away and know when to run. You never count your money, when you’re sittin’ at the table. There’ll be time enough for countin’, when the dealin’s done…

independent.ie/business/down … 29493.html

Blue Horseshoe