The Investment Column: Marginal lift at Westbury

TO some extent, Westbury, the housebuilder, has been a victim of its own success. After a strong rise in house prices the City is wondering just how long the upturn can continue. The recovery has revived the spectre of the 1980s property crash and held back the whole sector.

And for five years now Westbury has pursued a strategy of increasing earnings by improving margins rather than rushing out to boost volumes. Sceptical investors are beginning to ask how it can keep profits motoring without building many more homes.

So far, Westbury has managed to confound its critics. Earnings in the year to February rose by 35 per cent to pounds 30.6m despite a 3 per cent fall in volumes.

And its results lended support to its argument that the housing market is not getting out of control. Prices are rising 5 per cent across the country. Taking the frothy London market out of the equation and that figure falls to 4 per cent, a rate that looks sustainable. Westbury's three-year land bank is also a comfort if prices carry on rising.

Shares in Westbury rose yesterday to 262.5p from 259.5p, valuing it at pounds 292m. On forecast earnings of pounds 45m, or 28p a share, that puts it on a multiple of 9.4. Given Westbury trades below the housing sector average of 10.5, which itself is very lowly rated, its shares look good value.