Wilson Bowden: H1 results

2:25 a.m. Fri 09 Sep 2005

Wilson Bowden released poor figures for the half year to June 2005, amidst "the most difficult trading conditions the market has seen for a decade". Turnover declined by 6.4% to £554.9m (2004: £592.9m) and pre-tax profits by 13.1% to £98.5m (2004: £113.4m) in the period. Housing completions fell 7.3% to 2,317.

The company said the results would have been worse had it not been for the strategy of significantly increasing the number of housing outlets which offset some of the weakness in the market. Wilson Bowden increased the average number of sites by 15.6% to 141 (2004: 122). Operating profit (before goodwill) in the housing business declined to £90.2m (2004: £112.9m) while operating margins slipped to 19.6% (2004: 22.2%).

In contrast to the weak housing market, commercial development remained firm with a continuation of healthy demand and sustained yield levels. Boosted by strong demand in retail and leisure, commercial turnover rose to £95.6m (2004: £84m) and operating profits rose to £20.1m (2004: £15.7m).

The company is maintaining a higher level of selling sites (an average of around 135 - 140 sites over the full year compared to 117 last year) in an attempt to counter the weakening demand for houses. Growth rests on cost control and continued growth in the commercial development business. Unfortunately there are signs of a weakening in consumer spending which will undoubtedly affect both retail and leisure development-the drivers in the commercial development business.

The share trades at 1,120p, on a prospective PE(2005 earnings) of 6.4x, in line with the sector. The yield is 3.7%.