More on Wilson Bowden
Wilson Bowden
Wilson Bowden plc is a developer of both residential and commerical property. This includes flats and houses, offices and retail and industrial properties. The residential proprty market is the key driver.
Wilson bowden announced record pre-tax profits of £260.5m up 15.6% (2003: £225.4m) before goodwill amortisation of £2.7m (2003: £2.1m). Total housing completions reached 5,588 (2003: 5,037) at an average selling price o f£206,000, up 0.7% driving turnover by 10% to £1,282.3m (2003: £1,165.8m).
Selling prices appear to have softened in the second half of the financial year but changes in sales mix (with a larger number of smaller units being sold) have clouded the picture. Eliminating the effect of the change in unit size, the average selling price per square foot sold rose by 9.1% overall during the year. Gross margins have improved to 28.3% from 26.5% last year. The Wilson Bowden has been reducing construction costs through a variety of means including re-examining building specifications, and the materials and methods used and has revised procurement processes.
The current year’s performance has benefited from a strong housing market. Future prospects are more difficult to ascertain. The forward order book covered only 15% of next years targeted volumes (at the time of the last trading statement in mid December). Strangely, Wilson Bowden did not provide a further update in the final results but merely said that the order book is at “traditional levels” and that a “large proportion of those orders were obtained early in the autumn with far less activity evident later in October and November”, which does not look very encouraging. Even going by the figures in the trading statement, there is a significant decline in the order book from last year which underlines the fragility of the housing market. The company will be trying to sell smaller units next year,(at lower prices) but the short term trend in the markets will be to softer prices, rising costs, shrinking margins and declining profits.
Wilson bowden reports that the housing market has weakened; “sales were slower and more difficult to bring to a conclusion” according to the chairman’s statement, which goes on to add that:”the nervousness of buyers was evident both in visitor and reservation numbers”.
There is little good reason to gain exposure to the construction industry at this stage of the cycle. Trading at 1240p on a prospective PE of 6.2x Wilson Bowden is in line with the sector. The yield is 3.3%.
Random picks: BSkyB | Egg | Imperial Tobacco | Persimmon | Premier Farnell | Premier Foods | Sainsbury | Signet | Tullow Oil | Capita