View from City Road: Wimpey leaves a lot unsaid

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The Independent Online
THE CITY'S piqued reaction to George Wimpey's relapse into its old, evasive habits is a little unfair. Analysts were not a little peeved yesterday that the company, having duly cut its interim dividend in half, would give no divisional breakdown of profits nor any guidance as to the likely level of writedowns of its housing land bank and investment properties at the year-end.

When the UK construction scene is falling apart, it is perhaps asking too much to expect Wimpey to come up with a figure for provisions so far in advance of the year-end. But a refusal to disclose book profits on the sales of St Alphage House - and since the end of June its 50 per cent interest in Little Britain - while using them to provide an unknown amount against investment properties is particularly provocative.

Wimpey shares fell a sulky 11p to 66p at one point before closing 6p down at 71p. At this level the shares yield 10 per cent, a clear reflection of the large uncertainties surrounding the payment in 1993. This is underlined by BZW's latest gloomy forecast of exiguous profits next year and another 60 per cent cut in Wimpey's dividend to 2p.

With little help from Wimpey, the market has been left to its own devices in working out what is happening in the company's beleaguered empire. In UK housing one key question is just how much more expensive land Wimpey has still to get through.

On recent land purchases Wimpey is securing net margins on house sales of more than 10 per cent, and this seems to be sticking. But the average margin on the 6,250 houses Wimpey expects to complete this year is nearly impossible to forecast, as are the end-year land bank write-downs that analysts put at anything between pounds 10m and pounds 35m.

For what it is worth, Joe Dwyer, chief executive, said that a return to respectable profitability in the rest of the decade was not 'pie in the sky'. A severe fall in minerals volume and prices since May sounds alarming, and contracting in the UK is losing in its attempt to run up a down escalator.

Wimpey can take the pain more than most in the sector, with a pounds 585m balance sheet worth 203p a share after hefty write- downs in 1991 and gearing at an underlying 23 per cent. But until the dust clears there are other, less risky high-yielding sectors.