Wimpey upbeat about house market prospects

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The Independent Online
George Wimpey, the UK's biggest house-builder, yesterday added its voice to the growing chorus seeing the current strength in the housing market spreading out from the South-east to the rest of the country. Joe Dwyer, the chairman and chief executive, said the election, the Budget and higher interest rates had all passed without any real detrimental effect on consumer confidence.

Echoing very closely comments made by rivals Persimmon on Monday, Mr Dwyer said new house price inflation was running at 6 to 7 per cent in the South-east, dropping to only 1 to 2 per cent in the North and Scotland.

He painted a bullish outlook for the market, even though the growth rate could be cut in two next year, as the Government took action to dampen consumer spending, he said. "It is reasonable to assume that house price inflation will halve to 3 to 4 per cent, but I would still suggest that is a very acceptable background against which to trade."

Mr Dwyer's comments came as Wimpey revealed a turnaround in its interim results to June, with profits of pounds 12.5m replacing losses of pounds 8.6m last time, boosted by a full six months' inclusion of the McLean Homes operation acquired in an asset swap with Tarmac in March 1996. The half-way dividend, which is being held at 2p a share, is covered by earnings for the first time since the late 1980s.

The group revealed it was ready to sell its Ardel housing land development operation in Australia as part of a disposal programme which has seen gearing drop from 57 per cent to 51 per cent since June 1996. Net assets at Ardel are worth around A$60m (pounds 28m). If a sale is agreed this year, as expected, it would swell currently planned disposal proceeds of pounds 50m for 1997. A further pounds 80m of assets remain for disposal after that.

Mr Dwyer also revealed that Wimpey was looking to break out of mid-market private house-building, which became the group's core business after swapping its quarrying and contracting interest in last year's Tarmac deal. Mr Dwyer said they would look at acquisitions or organic growth in the markets for both luxury homes and "customised" units as part of urban renewal programmes and might contemplate a move back into sheltered housing, which many groups backed out of in the late 1980s.

Group completions rose 7 per cent to 6,148 in the first half, boosted by a 50 per cent increase in overseas operations, principally Morrison Homes trading in five US states, which broke even for the first time for several years.

Mr Dwyer forecast that the original Wimpey Homes business would be back up to 6,000 completions by next year, with McLean following the year after.