Building tremor shakes Wilson

THE INVESTMENT COLUMN

Wilson Bowden has established a reputation for plain speaking and good management in the housebuilding sector. Its profits warning last month therefore sent a tremor through the industry out of all proportion to the East Midlands builder's size.

Figures yesterday accompanying Wilson's half-way report show that the stock market was right to sit up and listen. Although house completions edged ahead 3.2 per cent to 987 in the six months to June, they are registering a massive 5.5 per cent decline in the year to date, suggesting that the housing market fell off a cliff in the summer months. Despite the recent gloom from housebuilders, this came as a new blow and Wilson's shares yesterday slid a further 4p to 341p.

The news took the shine off ano- ther impressive set of results from the group, which raised pre-tax profits 3 per cent to pounds 17m in the half-year. Given the continuing squeeze, a half-point slip in housing margins to 15 per cent was a good performance. Wilson had also to contend with a 2 per cent rise in costs on top of last year's increase of between 3 and 4 per cent. The achievement bore testament to the company's ability to move its mix of houses upmarket to counter the gloom among first-time buyers. The proportion of four- to five-bedroom detached properties has been increased from 56 to 64 per cent in the latest period, pushing the average selling price from pounds 91,000 to pounds 98,500.

The second half should benefit from the sale of the Meridien leisure complex development in Leicester, but will still be dominated by the housing market. Full-year profits are likely to dip below pounds 30m, suggesting the shares are overvalued on a prospective p/e of 16, despite the quality management.