Downturn for Wimpey

HOUSEBUILDER George Wimpey revealed a serious downturn in likely sales volumes today as it admitted that orders are well off target. Despite the bad news, the company said it still predicted a record set of annual results this year.

The scale of the downturn will have surprised even the gloomiest of housing market pundits. Wimpey says that its total UK order book at the end of the year is expected to be just over £540m, just 20% of the year's volume target.

By value, the George Wimpey private development order book will also be lower, some 15% adrift and the Laing Homes private development order book a third lower, though this partly reflects the exceptionally high levels achieved a year ago.

The company insisted that full-year operating margins across the business would still show further improvement, even after taking the slowdown in the UK housing market into consideration.

Wimpey was one of the first housebuilding companies to admit earlier this year that the overall homes market had cooled, with new house price stagnation spreading from the South East to the Midlands.

But the company, headed by chief executive Peter Johnson, has maintained average selling prices close to those achieved during the first half, resulting in an increase in selling prices of about 9% on 2003 for the full year.

Wimpey said that at its Laing Homes division average prices were also higher in the second half, reflecting a shift in its product mix.

The company said it remained upbeat about prospects for the UK housing market, despite the clear signs in today's statement of slowing customer enthusiasm. Although Bank of England base rates will end the year at 4.75% they remain low by historic standards, the company commented, while other economic fundamentals remain good.

'The UK housing market is supported by strong demographic factors as well as the economy and is widely expected to remain strong in 2005,' the company said in a statement to the stock market this morning.

Wimpey's trading statement and positive outlook are likely to be seen by the Bank of England, which later today releases the minutes of its most recent monetary policy committee meeting, as evidence that its 'softly softly' approach to interest rates is working.

Economists, meanwhile, believe that while a rise in base rates in January is unlikely though a great deal depends on how retailers fare over the all-important Christmas period. And several economists believe a further 0.25 point rise in base rates is likely at some stage in the first quarter.