The house that Westbury built looks like a sound purchase

THE DYNAMICS of the housing market at present - modest volume but decent price growth - is just what Westbury, the housebuilder, ordered. The company's strategy has long been to raise turnover and boost margins by achieving higher prices and cutting costs rather than chasing volume.

THE DYNAMICS of the housing market at present - modest volume but decent price growth - is just what Westbury, the housebuilder, ordered. The company's strategy has long been to raise turnover and boost margins by achieving higher prices and cutting costs rather than chasing volume.

It enjoyed an 11 per cent rise in average selling prices, to £100,000, in the half year. That came in equal measure from inflation and Westbury's decision to build larger homes. Four-bed properties accounted for 28 per cent of Westbury's sales, compared to 25 per cent in the same period last year.

But Westbury's investment in improving customer service and housing quality held margins flat. Westbury hopes pricing restraint in the near term will allow it to charge a premium later, when customers are convinced of the quality of the product. Martin Donohue, Westbury's chief executive, says margins should increase in the second half.

Meanwhile, Westbury is looking to exploit its customer base further, flogging more carpets, curtains and white goods. Mr Donohue hopes these initiatives, along with Westbury's loss-leader part exchange deals, will help it win market share.

Analysts expect pre-tax profits of £52m and earnings of 32.2p per share in the full year, putting the shares, at 243.5p, on a forward price/earnings ratio of just 7.5.

Fears that interest rates could rise have knocked the shares but with Westbury's strategy neatly fitting the environment, the shares are looking cheap.