PRETAX PROFITS at house builder Abbey slumped by more than 60 per cent to €16.8 million for the year ended March 31st as the company's chairman Charles Gallagher warned that unless conditions markedly improve, a wrenching adjustment lies ahead for the industry.

"In recent weeks trading conditions have deteriorated noticeably," he said.

"The rate and depth of the current slowdown in activity is outside our experience. It seems clear that the source of the difficulty is the dramatic contraction of the mortgage market."

He said builders were "collateral damage" in a crisis that was not of their own making, and that all of Abbey's customers were finding it difficult to get credit.

"It seems to us that the squeeze is tightening," he said.

"From where we are down in the trenches, things are pretty difficult."

The company's pretax profit of €16.8 million was down from the previous year's figure of €45.3 million. After a tax charge of €4.7 million, the group made a profit of €12.1 million. Group operating profits during the year were €15.1 million, against €43.7 million the previous year.

Profits were affected by an impairment charge of €20.6 million against land and work in progress arising from the depressed trading conditions, Abbey said. "Whilst we believe these impairments are prudent based on current market conditions, if the market significantly deteriorates, further writedowns may be needed in future," said Mr Gallagher.

Abbey said its housebuilding operations completed 716 sales, with 467 in the UK and 249 in Ireland, with a turnover of €159.2 million generating an operating profit of €10.5 million.

In Ireland, a good result was achieved although an upturn in sales at the start of 2008 faded towards year-end, Abbey said. Trading in the UK was described as "satisfactory", although conditions had deteriorated.

Mr Gallagher said the company has entered the current year with a forward order book sufficient to maintain reasonable trading in the very short term.

"The company is in a reasonably okay situation, but it is a different world we are moving into," he said.

"We're doing what we can do. We have brought our prices down," Mr Gallagher added.

Davy analyst Robert Gardiner said the outlook statement made for grim reading.

NCB said the underlying performance before land writedowns was better than expected, but that the company's comments on the forward outlook were not encouraging, with the group indicating that the market has continued to deteriorate over the past two weeks.