Housebuilder profit falls 15% after weakness in US housing results in £60m write down

George Wimpey saw its profit drop 15% after it was forced to make a £60m write down on its US land bank.

Pre-tax profit dropped to £310.2m for the year ending 31 December 2006 including the write-down but was up 1% to £370.9m without the exceptional item.

Peter Redfern
Redfern: Wimpey has acted swiftly to put US arm on course for growth 2008

Wimpey was forced to make the write-down because to the weakness in the US housing market. Revenue at its US division fell 11% to £56.2m for the period. Taylor Woodrow, the only other UK housebuilder with a US operation made a £20m write down its US land bank late last year.

Wimpey was keen to highlight the performance of its UK arm which posted an 11% rise in revenue to £2.4bn in 2006. The company said its strategy of focusing on land acquisition, people sales leadership and cost control had paid off.

The company has taken steps to reduce it debt burden and has managed to reduce its gearing to 23% from last year’s 34%. Gearing measures the amount of debt a company has to its market value. It has also targeted £25m of input cost savings in 2007.

Group revenue for 2006 was up 5% to £3.14bn while completions increased 6% to 17,963.

Chairman John Robinson said: “We have continued to build on the strong progress made during the first half of 2006. I am delighted with the advances made by our UK business which have offset the effect of market weakness in the US. We have taken the necessary steps to ensure our US business is in the best possible position to benefit as the market returns to stability.”

Peter Redfern, group chief executive, said: “As promised last year we have taken the firm actions required in the UK to deliver improved results. The change in focus has delivered margin growth ahead of expectations in the second half of 2006. With a strong land position, an established cost reduction programme and a record order book we are confident of margin growth going forward.

“In the US, we have acted swiftly and decisively to ensure that Morrison Homes is well placed to return to growth in 2008 when we see market conditions improving.”

Wimpey’s share price had risen 1.3% to 588p per share at 9.20am Wednesday.