Wimpey profits hit by slump in American housing market

George Wimpey has been forced to take a £61m write-down in the value of its US land holdings after profits in its American housing business plummeted by almost a third.

The bursting of the US housing bubble last year meant that sales dropped 12 per cent to 4,347 homes in 2006 at the company's US division. Operating profit fell 31 per cent to £116.9m, while the order book at the end of December was 67 per cent below that of the end of December 2005. Wimpey warned that the US performance in 2007 would be even worse.

However, Peter Redfern, chief executive, insisted that the US market was recovering. He said that there had been a "sea-change" in conditions in the US, with a stabilising of the market.

The cancellation rate for home sales was running at 52 per cent at the end of last year. That has now come down to 20 per cent - around the long-term average. Forward sales are up from 750 homes at the end of December to 1,000 properties now, and prices have settled at around a 13 per cent decline. "Pricing is still tough but we no longer need to add new incentives. Customer confidence is much, much better. It is a different mind-set now," Mr Redfern said.

He said that while the 2007 result in the US would be "significantly" worse than 2006, "I'm much more optimistic about 2008".

He also said that underlying demand in the states where Wimpey operates - which include Florida and Texas - was still healthy.

Mr Redfern said that US business was in "good shape" after the company reacted to the downturn by renegotiating land purchase deals and putting through a $20m (£10m) cost savings programme.

The US performance brought down group pre-tax profit by 15 per cent to £310.2m. Excluding the exceptional charge on US land, pre-tax profits were up 1 per cent at £370.9m.

In the UK, operating profit climbed 14 per cent to £317.6m. This year will see further profit margin improvement in this country, Mr Redfern said.

Responding to recent accusations from planners that the UK house-building industry is hoarding land, he said that the planning process was still holding back growth in supply.

"We do not have a single site, with implementable planning permission, which we are not developing... The industry wants to grow," Mr Redfern said.