Tough trading conditions cause Wimpey profit dive

Wimpey has unveiled an interim pre-tax profit of 120m (150m) in the six months to 30 June.

The results are the first prepared by Wimpey under International Accounting Standards and reveal a 22m loss on the group's defined benefit pension scheme. Under the previous accounting system, this would not have appeared up-front on the profit and loss account.

The rest of the downturn in profitability came from a poorer mix of trading conditions: a strong performance in America helped in part to offset the impact of a weak UK housing market.

Turnover ran to 1.2bn, similar to the figure achieved in the first half of 2004.

Peter Johnson, chief executive, said the market experienced by Wimpey's UK housing division started encouragingly, but with

the recovery proving to be short-lived.

"Customers have remained cautious with continuing weakness in the second-hand market making it difficult for them to commit and contract quickly," he said.

Gross margins reduced by 2.5% as a result of increases in land costs and a higher spend on sales incentives.

Land accounted for 26.5% of total build costs, up from 23.9%, as new sites acquired at higher land prices replaced older sites.

Subcontractor cost inflation has moderated, but underlying material costs have increased.

The average selling price in the UK was 185,000, no change on the first half of 2004, with this figure being made up of two
elements: private sales (195,000 average) and social housing (88,000).

Wimpey's total owned and controlled landbank increased to 54,400 plots, a 7% increase.

"The UK market has remained steady since March," said Johnson. "Trading in July and August has shown some improvement on the very weak period last year, with visitor levels 6% ahead and the average selling rate per site 9% ahead.

"However, the use of incentives continues to increase in order to achieve these sales rates."