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Results season opens on upbeat note


BOTH George Wimpey and Morgan Sindall impressed the City when the financial reporting season got under way this week.The pair came in with better-than-expected statements and healthy dividend increases - and both were confident they can ride out any turbulence in their key markets over coming months.

The positive noises about the UK and US housing markets and a 31 per cent increase in the dividend went down particularly well at George Wimpey, whose figures were greeted with a 5 per cent rise in the share price. In common with all house builders, Wimpey saw an abrupt change to UK trading conditions in late summer and early autumn when, as it now admits, the market slowed sharply across the country. But the group says its selling rates in the first seven weeks of this year, although down on last year, have recovered since autumn and, with 12 per cent more sites, its visitor levels are encouraging and it is using fewer incentives.

News that the firm's labour costs have 'moderated significantly'and that it sees scope for cost savings of £20 million also went down well with investors.

With gearing of just 36 per cent and an interest bill covered 10 times by operating profits the City is sensing that, however mixed the outlook for the UK housing market, Wimpey is in significantly better shape than in the last housing downturn. If the group can just hold earnings this year, its shares look cheap on p/e of below six.

Meanwhile, Morgan Sindall's shares rose by 3 per cent as the firm reported a healthy forward order book, progress on improving margins and strong cash generation.

Morgan is benefiting from its exposure to some of the industry's more promising markets, particularly affordable housing and commercial fit-out, while its construction arm is developing a strong specialism in negotiated and framework contracts up to £20 million.

Only its civil engineering business, where turnover and profits both fell, seems to be facing leaner times.