Housing market worst in 30 years, says Wimpey

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The Independent Online

Wimpey, which also has operations in the US, admitted that group profits for 2005 would miss consensus City forecasts and come in below the record result seen the previous year. Andrew Carr-Locke, Wimpey's finance director, said. "We have just been through one of the toughest trading markets in the last 30 years [in 2005]."

The company said that UK completed sales were 1 per cent down in 2005 and the average net selling prices were 4 per cent lower than 2004, "the result of changes in the [product] mix as well as increased incentives". Margins were down, it added in a trading statement. The US business however again enjoyed a bumper year.

John Messenger, an analyst at Morgan Stanley, said: "I believe Wimpey's UK performance will prove to be worst in class but they clearly had a very good year in the US, which saved the day." According to Mr Messenger's figures, operating profits in the UK division would drop 33 per cent to £273m in 2005 when the company reports for the period. Whereas the smaller US operations would have seen a 60 per cent jump in profits. That would mean group profits would fall 18 per cent for 2005.

Wimpey's statement put no numbers on the scale of the profits decline. Mr Messenger believed that UK margins had collapsed to 12.5 per cent, from 17.8 per cent in 2004. "Wimpey had been gradually improving margins [in the UK] since 2000, from 11.4 per cent to 17.8 per cent in 2004," he said. "But they have just ridden house price inflation in that time. When that inflation stopped, margins went right back down again."

Mr Carr-Locke said that the Wimpey performance was credible against a backdrop in which transactions across the market were down 20 per cent. Wimpey revealed that it entered 2006 with an order book of £731m, up 31 per cent on a year earlier.