Wimpey warns of heavy 1992 provisions

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The Independent Online
WIMPEY, the housing and construction group, yesterday dispelled some of the optimism that has been emerging on the housing market when it warned that it will have to make 'substantial provisions' in its 1992 results.

It would not disclose the likely size of the provisions, but analysts estimate they could be as high as pounds 110m, more than double the pounds 46.4m provided last year, and higher than analysts had expected - Kleinwort Benson, the most pessimistic, had pencilled in pounds 80m.

The write-offs will push the group into a substantial loss as analysts had been expecting it to about break even before provisions. It has already warned that its final dividend will be halved to 3.25p, making a total of 5.25p, down from 10.5p last time.

The provisions will mainly be against the value of housing land and commercial property, although there is also likely to be a charge for unwinding interest rate swaps which locked it into borrowing rates above the current levels. In the US, for example, its debt is fixed at 8.9 per cent compared with the prime rate of 6 per cent. It will also make further provisions for redundancy costs.

A spokesman for Wimpey said the group had not detected a significant increase in activity since sterling was devalued in November, in marked contrast to reports from estate agents and building societies who said that December was an unexpectedly good month. The key period for new house sales, however, has traditionally been January and February.

The City is braced for similar warnings from other building companies - such as Amec and Taylor Woodrow - as they begin to prepare their 1992 results. Tarmac has indicated to analysts that it would make substantial provisions against housing land and commercial property that it is committed to selling. County NatWest estimated that these could be as high as pounds 250m, leaving the group with a loss of more than pounds 240m.

Despite the warning, Wimpey's shares rose 1p to 115p as analysts viewed the warning as evidence that it was taking a more realistic attitude to asset values.