Wimpey defies City fears with 19% profit hike

Housebuilder Wimpey prompted a sigh of relief among investors this week when it announced a strong set of annual results and was bullish about the future.

Despite a slowdown in the housing market, Wimpey reported a rise in pre-tax profit of 19% to £451m for 2004, and demonstrated confidence in the future by raising the full-year dividend 31% to 16p a share.

Wimpey was the first of the volume housebuilders to reveal its results, and the market was treating its performance as an indicator for the health of the housebuilding sector.

Peter Johnson, the chief executive of Wimpey Group, did not express the caution that had been feared by the City, shareholders and homeowners. Instead, he said Wimpey had entered 2005 “in far better shape than ever before”.

He said: “Our focus on controlling costs, selective land purchase and opening more outlets, will support our performance in all conditions.”

Shares rose 5% to a high of 465.75p on Tuesday in response to the results.

However, the growth was largely driven by Wimpey’s activities in the USA, where Morrison Homes achieved a 59% rise in pre-tax profit to £99m after factoring in a loss of £10m caused by the weak dollar.

Peter Redfern, chief executive of the UK business, said that it was too early to draw firm conclusions on the outlook for the British market, but said: “There is certainly evidence to refute the doom-mongers.”

In the first seven weeks of 2005, sales rates outstripped the low levels of last autumn. Johnson also described customer inquiry levels as “encouraging”.

He said that Wimpey was operating from 12% more sites than the same period last year, that pricing was “broadly stable” and that the use of incentives to encourage sales had decreased.

The company sold fewer homes in the UK in 2004, with 12,232 units sold compared with 12,909 in 2003.

However, the average selling price rose 8% to £182,000.

Redfern added that Wimpey was buying a site in Bracknell, Berkshire, from English Partnerships, which paid the Ministry for Defence £96m for the transfer of the land.

He said that Wimpey was happy to meet EP’s aspirations for sustainable construction at Bracknell because it was an outstanding site.

Redfern added that a “genuine will” existed in the government to improve the planning process and increase the output of affordable houses.

However, he warned that “delivery has yet to be seen. We would like the government to look at the Barker report with a fresh pair of eyes after the election.”