More on Wimpey
Wimpey: H1 results
Housebuilder Wimpey reported weak earnings for the half year to July 2005, despite a 69% increase in profits in its American business, Morrisons Homes. Group revenue declined by 2% to £1,190.2m and operating profits by 14% to £156.5 in H1. Pretax profits dropped by 21% to £122.3m.
The company said the weak market in the UK affected volumes and margins while interest costs were higher as average debt levels rose to support continuing investment in land.
In the UK the market has remained weak with both unit sales and turnover declining by 10%. Wimpey said the average sales rate for the first half was 17% below the same period last year, despite a 10% increase in the number of outlets. Although this compares favourably with the 31% drop in total housing sales observed by the Land Registry, it is hardly encouraging. Gross margins reduced by 2.5% (to 23.7%)as a result of increases in land costs and sales incentives.
In the US, the market remained strong with turnover growing 24% to £331.8m, average selling prices increasing by 9% (they were flat in the UK) and completions up 16% to 1,996.
In the principal UK market, the company is looking for growth through wider geographic coverage, cost control and improved customer service in the backdrop of the gloomy macro picture for UK housing. The strong US market will continue to make a good contribution to earnings-as long as the boom lasts. The US hosuing market is thought to be about a year behind the European market in its cycle and it will be interesting to see if the rapid pace of growth can be maintained.
The share trades at 413.1p, on a prospective PE (2005 earnings) of 5.9x within the sector range with a yield of 4.2%.
Random picks: CSR | Enodis | Johnson Matthey | Liberty International | Marconi | Next | Sage | Sainsbury | Tomkins | WH Smith