View from City Road: Benefit of the doubt at Wimpey

There is something slightly worrying about the enthusiasm with which George Wimpey greeted yesterday's sale of a 29 per cent stake by Grove Charity Management. Shareholders in Wimpey, unlike those in many of its rivals, have not been forced to watch huge amounts of rights issue cash disappear down the drain of ill-judged property development and housing write-offs. The removal of the Grove stake increases the chance that Wimpey will look for equity funding.

Joe Dwyer, chief executive, does little to dispel those fears. The board will now have 'more flexibility', he said. A takeover or a merger 'which might be in our interest' would have been complicated by the trust's stake. He has already made it plain that he wants to increase investment in minerals from the current pounds 216m to pounds 350m, and adding to its housing volumes will require additional capital, regardless of its ability to develop a strategic store of land. Borrowings, at 30 per cent of net assets, are low but without some equity finance its expansion plans could severely stretch its balance sheet.

The fact that Wimpey has never had a rights issue has not stopped it squandering shareholders' cash - provisions of almost pounds 170m over the last two years more than match some of its more profligate rivals. But the lack of a cash call did force it to learn financial management rather earlier, and Mr Dwyer has demonstrated considerable skill in raising funds by selling assets.

The size of yesterday's placing means the immediate appetite for Wimpey shares is likely to be satisfied, so it could be next year before Wimpey makes a move. But the fact that Wimpey's shares closed down just 4p at 142p, despite the size of the placing, suggests shareholders will be willing to give him the benefit of the doubt. Although he has yet to test his skills at growing the business, Mr Dwyer's record means their faith is justified.