Westbury benefits from improved margins

A RESTORATION of profit margins has led to a 31 per cent jump in underlying profits at Westbury, the West Country-based housebuilder, writes Robert Cole.

Operating profit margins grew from 5 to 6.2 per cent in the six months to 31 August. Richard Fraser, chief executive, said the improvement came from lower land prices and a reduced need for incentives to attract buyers, rather than higher selling prices.

He said that the group was budgeting for little upward movement in prices in the near future. But he added: 'This may be over- cautious and pessimistic.'

Westbury, like many of its rivals, is gradually getting rid of land bought at inflated prices before the recession. As the company uses more land bought at sober prices, margins improve.

Mr Fraser said the average incentive, usually paid in cash, easier finance facilities, furniture or fittings, was pounds 2,364, down from pounds 2,797.

Operating profits jumped from pounds 3.6m to pounds 4.2m in the half. Pre-tax profits rose by 45 per cent to pounds 3.7m ( pounds 2.5m), helped by interest received of pounds 145,000 compared with a pounds 583,000 interest bill last time.

The rise in earnings per share, however, was restricted by an increase in the tax charge. Westbury paid tax at 33 per cent in the half, having used up tax losses from previous years. Earnings were 3.7p, up from 3.5p. The company is trying to rebuild dividend cover and held the half-year payout at 1.75p.

The shares, which have risen steadily from 70p this time last year, added another 6p yesterday to close at 174p. Over the same period Westbury has outperformed the stock market average by 105 per cent and has done 60 per cent better than average for the construction sector.