The Investment Column: Unhappy timing for Westbury

In a piece of unfortunate timing, yesterday's Bank of England warning that interest rates would probably have to rise again came just as Westbury, the Cheltenham-based housebuilder, was toasting what it called the best housing conditions this decade.

Although mortgage lenders have yet to respond, the sudden turn in the interest rate cycle can only be bad news for the likes of Westbury, especially as housing transactions are likely to go on hold in the run-up to a general election.

Still, Westbury is entitled to enjoy its place in the sun even if the shadows are lengthening . Driven by firm house prices in the south and east of England, pre-tax profits in the half-year to August leapt by 49 per cent to pounds 9.7m on turnover of pounds 131.5m (pounds 89.6m). House sales rose by more than a quarter to 1,636, reservations for new homes are 35 per cent ahead, while the pounds 61m purchase of Clarke Homes increased the proportion of more expensive detached houses sold.

Closer examination of the figures shows Westbury still lagging some of its peers. Excluding Clarke, underlying sales were ahead about 15 per cent, less than those of similarly-rated rivals like Bellway. And although margins remain on their upward trend, rising 9.3 per cent from 8.9 per cent, they still fall short of the double-digit figures achieved elsewhere.

Westbury is keen to protect a balance sheet where net debt is still more than a third of shareholders' funds after buying Clarke. This may explain why the dividend was only lifted 7.5 per cent to 2.15p despite being amply covered by a 17 per cent rise in earnings per share to 7.4p. Broker Charterhouse Tilney sticks with its pre-tax profit forecast of pounds 21.5m, implying a p/e ratio of over 14 with the shares at 234p, up 2.5p and just shy of their all-time high. After a good run they look high enough.