Housing woes take toll on George Wimpey

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The Independent Online

George Wimpey, one of Britain's top three housebuilders, added to the gloom surrounding the housing market yesterday when it warned of a slide in first-half profits of more than 10 per cent and falling margins.

The company predicted a profit fall in the "low double digits" which will take pre-tax profits down to about £400m for the 26 weeks to 3 July, from £475m a year ago. The news knocked the group's shares down 19.5p to 436.5p.

The group said: "Higher interest costs and the impact of lower volumes and margins in the UK will mean group profits in the first half will be well below the record levels achieved last year."

In one of the most pessimistic trading updates of the sector, Wimpey, whose chief executive is Peter Johnson, said a healthy start to the year had been short-lived and the market had been sluggish since February, defying expectations of a pick-up once the election was out of the way.

The group said first-half sales were down 17.5 per cent on a year ago, despite having 10 per cent more showrooms open. Housing completions will be a little more than 10 per cent lower than a year ago. Wimpey expects sales to recover in the second half, putting completions for the year at a similar level to last year.

Its order book is running 7 per cent lower by volume and 12 per cent lower by value than at the same time last year, due in part to more orders for cheaper social housing. Selling prices are expected to remain flat at about £195,000, where they have been stuck since the middle of last year. Gross margins are set to fall from last year's figure because of higher building materials costs and a greater use of incentives to stimulate sales.

Meanwhile, Wimpey is seeing bumper sales in the booming housing market in the US.