Wimpey profits through the roof

GEORGE Wimpey, Britain's largest housebuilder, delivered a huge increase in half-year profits today and said it anticipated results for the whole of 2002 to be 'well ahead of market expectations'.

Visitor levels at its 300 developments nationwide have not slipped over the summer and its forward order book is 50% higher in value than a year ago with 90% of the year's anticipated completions now either achieved or reserved.

Much of the 63% jump in operating profits to £86.3m can be explained by the benign conditions in the British housing market. Not many industries have enjoyed a 19% rise in selling prices in 12 months, but Wimpey, like many housebuilders, has reaped the benefits of house price inflation, with the average price tag on one of its homes now £140,000.

Chief executive Peter Johnson admitted Wimpey had reaped 'the unwanted benefit of rapid house price inflation', and said he would rather have steady consistent growth. Johnson said the rate of price increases had slipped back in the summer. 'In terms of new homes I believe inflation is in single figures,' he said. While he welcomed signs of a cooling market, investors marked the shares down 2 1/2p to 280 1/4p in order to lock in profits ahead of slower growth.

Johnson claimed management, as well as the market, was responsible for the target busting results. The benefits of the 2001 acquisition of Alfred McAlpine are still coming through and Wimpey has squeezed £40m out of annual overheads, cut building costs and improved procurement practices.

Johnson said: 'The UK business has been transformed from a low-margin, rather old fashioned business with its feet still in its construction past, into a high-margin, high return-on-capital business with real prospects for growth.'

Operating margins rose from 10.5% in the first half of 2001 to 11.4% in the period just ended. The landbank stands at 42,303 plots, which is enough for three and a quarter years. Total sales were up 44% to £1.017bn for the six months to 30 June with the number of legally completed sales up 30% on last year to 5703.

Interim profits in 2001 were depressed by exceptional items and the £86.3m in profits unveiled today is more than double last year's £38.9m. Earnings per share were up 56% to 15.69p and the dividend is lifted 10% to 3.2p.