Presentation title / Audience / Location / Date / © George Wimpey 2002
George Wimpey Plc
2002 Preliminary Results
Wednesday 5 March 2003
Welcome
John Robinson
Chairman
Agenda
Introduction
Peter Johnson
2002 Financial Review
Andrew Carr-Locke
UK Business Review
Keith Cushen
US Business Review
Stu Cline
Summary and Outlook
Peter Johnson
4
Introduction
Peter Johnson
Group Chief Executive
Key messages
An outstanding result for 2002
More important, sustainable strengthening of underlying business
land acquired on improved margins
benefits of restructuring secured
strong year end financial ratios
Laing Homes performing to plan
Encouraging start to new year
6
2002 Results
Andrew Carr-Locke
Group Finance Director
2002 results
£m
Turnover
Operating profit
Interest
Pre-exceptional PBT
Exceptionals
Profit before tax
Tax
Pre-exceptional EPS p
EPS p
NAV per share p
DPS p
Dividend cover (times)
2002
2001*
Change
2,600
330
38
292
6
286
33
1,896
213
32
181
29
152
32
+ 37%
+ 55%
+61%
+ 88%
-
52.2
51.1
250
9.10
5.6
32.8
27.9
210
8.25
3.4
+ 59%
+ 83%
+ 19%
+ 10%
-
*2001 restated for FRS 19 on deferred tax
8
Segmental analysis
GWUK
Turnover
Operating
profit
£m
£m
Change
1,930 + 37%
270
Change 2002
132
-
20
Morrison Homes
538
+ 12%
54
-
-
(14)
-
330
+ 55%
TOTAL
2,600 + 37%
2001
+ 56% 14.0% 12.4%
Laing Homes
Group
Operating
margin
-
15.2%
-
+ 17% 10.0% 9.6%
9
2002 completions
Completions
Ave selling price
No
Change
£/$
Change
12,145
+ 11%
£147,900
+ 21%
GWUK social
889
+ 46%
£66,000
+ 8%
Laing PD
371
-
£307,600
-
Laing social
75
-
£109,200
-
UK total
13,480
+ 17%
£146,700
+ 23%
US total
3,197
+ 10%
$251,700
+ 6%
16,677
+ 16%
GWUK PD
GROUP TOTAL
10
Cash flow summary
2002
2001
324
184
Investment in land
(803)
(746)
Land realisations
623
393
(263)
263
215
-
11
(167)
Tax
(69)
(35)
Funding costs
(52)
(52)
21
(3)
7
(163)
£m
Operating profit post-exceptionals
McAlpine acquisition
Laing acquisition
Working capital
Exchange
NET CASH FLOW
11
Balance sheet net assets
£m
2002
2001
28
25
Land
1518
1263
Land creditors
(251)
(154)
310
327
15
19
Tax and provisions
(93)
(59)
Deferred consideration
(208)
(255)
TOTAL NET ASSETS
1319
1166
Fixed assets
Other current assets / working capital
Deferred tax
12
Balance sheet financing
2002
2001
Shareholders funds £m
943
783
Net debt £m
376
383
Capital employed £m
1,319
1,116
Gearing
40%
49%
Interest cover
8.7x
6.6x
Underlying interest cover*
11.9x
8.0x
ROACE
26.5%
20.4%
*net of imputed interest on deferred consideration
13
Laing acquisition accounting
Total consideration
Discount on deferred consideration
£m
295.2
(10.2)
Net consideration
Net assets acquired
Discount to net assets
Transaction costs
Goodwill on balance sheet
285.0
286.2
(1.2)
4.8
3.6
Exceptional costs
(5.9)
Payment terms
£80m already paid by December 2002
£120m payable on 31 March 2003
Balance £95.2m payable on 31 December 2003
14
Landbank
UK
2002
Laing
2001
2002
US
2002
2001
Short term owned
and controlled plots
40,932 40,567 3,613 13,439 12,235
Total land value £m
1,025 1,062
Short term landbank
in years
Long term acres
Value £m
3.2
3.1
239
140
118
2.8
4.2
4.2
15,725 15,903 2,856
100
99
14
15
UK pensions
SSAP 24 charge: 2002: £11m
2003E: £13m
FRS 17 net deficit: £115m
April 2002 actuarial valuation showed £74m deficit
Additional cash invested into pension fund: 2002: £3m
2003E: £10m
Pension Fund now >65% invested in bonds
Defined benefit scheme:
 closed to new members from 1 January 2002
 benefits/contributions modified from 1 January 2003
following consultation
16
2002 financial summary
PBT:
Pre exceptional + 61%
Post exceptional + 88%
Margins: UK up to 14.0%
US up to 10.0%
Net debt reduced to £376m (2001: £383m)
Gearing: 2002: 40%
2001: 49%
Interest cover increased to 8.7x with underlying cover rising to 11.9x
Long term financing arranged through $365m US Private Placement
17
UK Business Review
Keith Cushen
Chief Executive, George Wimpey UK
Financial summary
GWUK
Legal completions
PD Ave selling price
Laing Homes
2002
2001
Nov/Dec 2002
13,034
11,537
446
£147,900 £122,600
£307,600
Turnover £m
1,930
1,406
132
Operating profit £m
270.2
173.6
20.0
Operating margin
14.0%
12.4%
15.2%
19
George Wimpey UK
Regional review
2002
Regional businesses
PD completions
ASP
Landbank
Landbank %
North
Midlands
South
7
8
8
4,314*
4,167
3,664
£119,000*
£143,000
£188,000
13,768 plots 14,417 plots 12,747 plots
34%
35%
31%
* includes 9 completions from Cumbria business
21
Progress on restructuring
Trading as one brand since 1 July 2002
Cost savings since 2001 merger
£40m overhead reductions achieved as planned
£20m build cost savings achieved ahead of plan
Benefits from benchmarking still being achieved
£88m reduction in WIP - mainly McAlpine Homes
McAlpine Cumbria sold at premium to NAV
32% premium before fair value adjustment
Established de-centralised business structure with strong regional
management
22
Customer options
Increase in options revenue
£46m 2002 vs £37m 2001 = 24% increase
now at 22.5% margin
Continuing to expand product range
bigger on-site options centres
developing centralised off-site retail centres
High:
GW North East
Ave £5,467 per plot
Average: GWUK
Ave £3,814 per plot
Low:
Ave £1,940 per plot
GW Southern
Potential for further revenue growth
23
Margin focused business
2001 margin
12.4%
Margin improvement
+2.7%
2002 margin
15.1%
Increased pension cost
Cost of fair value amortisation
(0.4)%
(0.7)%
Reported 2002 margin
14.0%
24
Land purchase margins
18.00
16.00
14.00
12.00
10.00
PBIT
%
8.00
6.00
4.00
2.00
0.00
H1 2000
H2 2000
H1 2001
H2 2001
H1 2002
H2 2002
25
Broad product mix
2002
2001
2000
5 bed
4%
2%
1%
4 bed
41%
48%
50%
3 bed detached
7%
8%
8%
3 bed terrace / semi
19%
19%
20%
2 bed
11%
12%
13%
Flats
18%
11%
8%
26
Limited exposure to high
price points
18
% GWUK PD completions
16
14
12
North
10
Midlands
8
South
6
4
2
0
<100k
100-150k 151-200k 201-250k 251-300k 301-500k 500-1000k 1000k+
Selling price £
27
Limited exposure to London
market - GWUK
Greater London
8 outlets
3% GWUK business
ASP ~£285,000
Inside M25
19 outlets
7% GWUK business
ASP ~£210,000
Rest of UK
248 outlets
90% GWUK business
ASP ~£160,000
28
Current market conditions
Performance to end February healthy
completions plus order book up 5% by value on 2002
represents 40% of 2003 expected volume
Visitor levels per site similar to 2002
Reservation levels per site similar to 2001
Cancellation rates remain low
Use of Assisted Purchase Plan moving up towards normal levels
Very limited use of Part Exchange
Signs of weakness limited to higher-priced Central London market
29
Laing Homes
Laing Homes: integration
Acquired on favourable terms on 1 November 2002
Laing Homes to remain a separate division within George Wimpey UK
Paul Healey appointed MD on acquisition and to UK Board
Laing Homes received 4 Awards including Housebuilder of the Year
after acquisition
GWUK safety procedures introduced to all Laing Homes sites
31
Laing Homes: performance
All acquisition objectives to date met:
371 PD completions achieved in November/December
£20m operating profit achieved
Milton Keynes Head Office closed from March 2003, leaving small
management team in place
ongoing functions transferred to regions or High Wycombe
on track for annualised £10m cost savings from end of 2003
Business improvement plan now in place based on sharing
experiences across regional offices and with George Wimpey UK
Laing Homes continues to perform in line with expectations
32
Laing Homes: product mix
2003
Jan / Feb
sales
2002
Full year
legals
Flats
44%
44%
3 Bed
28%
26%
4 / 5 Bed
28%
30%
100%
100%
33
Laing Homes: price points
2003
Jan / Feb
sales
%
2002
Full year
legals
%
100 - 150
9
5
199
16
151 - 200
48
29
353
28
201 - 300
45
26
319
26
301 - 500
47
28
285
23
500 +
21
12
92
7
Total
170
100
1,248
100
£000
34
Limited exposure to London
market - Laing Homes
Greater London
7 outlets
24% Laing business
ASP ~£319,000
Inside M25
4 outlets
14% Laing business
ASP ~£367,000
Rest of UK
18 outlets
62% Laing business
ASP ~£264,000
35
Laing Homes: current
market conditions
Performance to end February satisfactory
completions plus order book at similar levels to 2002
represents almost 40% of 2003 expected volume
Visitor rates in line 2002
Reservation rate lower than 2002, but new outlets performing well
Cancellation rates back to normal levels
Limited use of Part Exchange less than 14% of sales
21 sales in first two months above £500,000 (25 in Jan/Feb 2002)
36
UK summary
Business has adapted to
changing industry
PPG3
changed product mix fully incorporated in product range
PPG3 experiences being shared throughout company
Land availability
56% brownfield use in 2002; will be over 60% in 2003
land bank sustained despite smaller sites
coverage per acre increased from c.13,500 square feet in 2000 to
c.17,500 square feet in 2002
New industry regulations
increased cost of new building regulations addressed
procedures introduced to meet new CML regulations for completion
working with HSE and Environment Agency to meet new
requirements (eg beanbags for fall protection)
38
UK summary
Well positioned for the future
Decentralised management structure working effectively
Strong senior team in place
George Wimpey business totally restructured over the past two years
Cost base much reduced and well-controlled
Healthy land bank bought on greatly improved terms
Benchmarking culture supports further efficiency gains
Options continue to provide potential for further growth
Improvement to customer service to support future growth
39
US Business Review
Stu Cline
President, Morrison Homes
Financial summary
2002
2001
Change
3,197
2,900
+ 10%
$252,000
$238,000
+ 6%
Revenue $m
806
693
+ 17%
Operating profit $m
80.7
66.4
+ 22%
10.0%
9.6%
+ 0.4%
Legal completions
Ave selling price
Operating margin
41
Five year review
Turnover Operating Operating
Completions
$m
profit $m margin %
ASP
$
1998
431
26.2
6.1%
2,477
174,000
1999
510
41.3
8.1%
2,586
197,000
2000
615
53.0
8.6%
2,638
227,000
2001
693
66.4
9.6%
2,900
238,000
2002
806
80.7
10.0%
3,197
252,000
42
Regional review
West
Sacramento
Denver
Central Valley
Phoenix
Regional divisions
Satellite operations
Completions
ASP
Landbank
Operating profit $m
Operating margin
Assets employed $m
2002
2001
3
1
1,077
$279,000
3,736
52.7
17.6%
188.3
3*
1
853
$264,000
3,627
38.3
17.0%
147.0
*Denver division acquired in June 2001 43
Regional review
Southeast
Atlanta
Jacksonville
Tampa
Orlando
Sarasota
Regional divisions
Satellite operations
Completions
ASP
Landbank
Operating profit $m
Operating margin
Assets employed $m
2002
2001
3
2
1,541
$239,000
6,544
36.8
10.0%
137.1
3
2
1,512
$227,000
5,552
32.7
9.5%
124.9
44
Regional review
Southwest
Dallas
Dallas/Ft Worth
Austin
Houston
Regional divisions
Satellite operations
Completions
ASP
Landbank
Operating profit $m
Operating margin
Assets employed $m
2002
2001
3
0
579
$237,000
3,159
5.8
4.2%
95.2
3
0
535
$226,000
3,056
6.8
5.6%
87.0
45
Organic growth
Growth in established markets / regions to
leverage existing overhead base
improve land procurement terms
maximise local knowledge and relationships
Growth through satellite operations to enter related markets at low cost
Successfully achieved in
Jacksonville
Central Valley / Sacramento
Sarasota / Tampa
Grow to separate divisions on 2004
Establish new price points
product repositioning e.g. Austin, Dallas, Atlanta, Orlando
46
Margin improvement plan
Leverage market and regional scale to improve procurement terms
Address under-performing businesses
San Antonio exited: costs incurred in 2002
improvement plans in place in Dallas and Atlanta
meanwhile, investment in these markets reduced
limit further investment in these markets until performance
improvement has been achieved
Continued growth of option revenue
47
Current market conditions
US Market supported by
2002 Single Family housing starts at highest levels since 1986
low mortgage rates - currently at 37-year low
strong demographics - immigration, house-hold size,
‘baby-boom’ generation at peak house-buying age
Morrison markets supported by
increase in interest rates offset by employment growth
internal migration to California / Florida
Forward order book at end of week 9 2003 vs week 9 2002
up 19% in volume
up 33% in value
48
Summary
Well positioned for growth in volumes and margins
Focused in margin and volume increases through developing existing
operations and satellites
Morrison business well positioned geographically in states with good
expected economic and employment growth
Repositioning product mix to lower price points
Excellent business model for growth through satellites
Action plans in place to ensure progress or exit from under-performing
businesses
Improving margin performance
Landbank increased by 1,204 plots to 13,439
Customer satisfaction and options sales ever improving
49
Summary and outlook
Peter Johnson
Group Chief Executive
Summary
Great performance in a strong year helped by timing of McAlpine
acquisition in the UK
More important, underlying UK business strengthened
acquiring the land we need on better terms
addressed cost base
established decentralised business model
acquired premium business on excellent terms
Successfully established new Morrison strategy
growth within existing markets
land position strengthened
cost base lowered
underperforming businesses being addressed
Progress on margin improvement ahead of plan
51
Outlook
2002 was an exceptional year for demand in UK and US
2003 is emerging as a more “normal” year
Central London weak; Greater London patchy; rest of UK healthy
US market conditions similar to 2002
Need for caution against uncertain political and economic background
Good geographic spread / product mix limits exposure to weak
markets
Strong financial ratios provide resilience to take advantage of any
weaker market conditions by developing landbank
52
Outlook
UK volumes:
will prioritise margin over volume
UK prices:
expect only modest increases
UK margins:
continue to benefit from improved land terms and
cost control, as well as volume caution
Laing:
lower volumes and stable pricing reflected in
acquisition terms; first benefit from cost savings
Morrison:
ongoing strategy to grow US volumes and margins
Board remains confident that George Wimpey will achieve further
progress during 2003
53
Presentation title / Audience / Location / Date / © George Wimpey 2002
George Wimpey Plc
2002 Preliminary Results
Appendix
Group sales*
Sales
2002
Selling rates (pa)
2002
2001
2002
2001
286
277
42.1
38.5
-
-
-
-
12,570 11,148
286
277
44.0
40.2
US
3,446
2,942
107
97
32.3
30.3
Group
16,016 14,090
393
374
40.8
37.7
GWUK PD
GWUK Social
GWUK Total
2001
Ave. sites
12,030 10,667
540
481
*Note: Laing Homes excluded 2
GWUK Turnover analysis
2002
Year
H2
2001
H1
Year
H2
H1
PD volume
12,145 6,847
5,298 10,929 6,768
4,161
PD ASP £000
147.9
153.7
140.4
122.6
125.1
118.3
PD turnover £m
1,796
1,052
744
1,339
847
492
Social volume
889
484
405
608
371
237
Social ASP £000
66
70
63
61
60
60
Social turnover £m
59
34
25
37
23
14
Other turnover
75
51
24
30
24
6
1,930
1,137
793
1,406
894
512
Total £m
3
GWUK Margin analysis
2002
2001
Year
H2
H1
Year
H2
H1
Gross margin %
21.6
22.5
20.3
20.5
20.1
21.2
Gross profit £m
417.4
256.2
161.2
288.4
179.7
108.7
Selling expenses £m
(56.9)
(29.1)
(27.8)
(44.8)
(22.1)
(22.7)
Overhead costs £m
(90.3)
(47.4)
(42.9)
(70.0)
(38.0)
(32.0)
Operating profit £m
270.2
179.7
90.5
173.6
119.6
54.0
Operating margin %
14.0
15.8
11.4
12.4
13.4
10.5
Fair value items £m
13.8
8.1
5.7
0.9
0.9
-
Operating margin %
before fair value items
14.7
16.5
12.1
12.4
13.5
10.5
4
GWUK PD activity analysis
2002
2001
Year
H2
H1
Year
H2
H1
Ave. house size
sq ft
1,059
1,058
1,062
1,036
1,027
1,051
Ave selling price
£ / sq ft
147.9
154.0
132.3
118.2
125.1
112.6
5
GWUK Geographic mix
2002
2001
Legals
Size
sqft
ASP
£000
Legals
Size
sqft
ASP
£000
North
4,314
1,093
119
4,326
1,090
100
Midlands
4,167
1,023
143
3,656
996
120
South
3,664
1,062
188
2,947
1,038
159
Total
12,145 1,059
148
10,929 1,036
123
6
GWUK Product mix %
2002
No Bedrooms
2001
Year
H2
H1
Year
H2
H1
Flats
18
19
18
11
12
9
1&2
11
11
10
12
12
13
3 semi / terraced
19
19
19
19
19
18
3 detached
7
6
7
8
8
8
4&5
45
45
46
50
49
52
100
100
100
100
100
100
7
GWUK Product mix %
2002
Legals £000
2001
Year
H2
H1
Year
H2
H1
0 - 50
1
1
1
2
-
3
51 - 75
7
5
10
15
15
15
76 - 100
18
16
20
26
25
29
101 - 125
20
21
19
22
23
20
126 - 150
19
21
17
15
17
13
151 - 175
12
12
11
8
8
8
176 - 200
8
9
7
5
5
5
201 +
15
15
15
7
7
7
100
100
100
100
100
100
8
GWUK Short-term land
2002
2001
Plots OWNED
Year
H2
H1
Year
H2
H1
Start of period
32,348
29,788
32,348
24,000
23,680
24,000
Net additions
9,333
6,595
2,738
19,277
15,256
4,021
Legal completions
(12,145) (6,847) (5,298) (10,929) (6,768) (4,161)
End of period
29,536
29,536
29,788
32,348
32,348
23,860
CONTROLLED
11,396
11,396
12,515
8,219
8,219
8,060
TOTAL LANDBANK
40,932
40,932
42,303
40,567
40,567
31,920
9
GWUK Land
2002
Short term
Plots
2001
Cost per Value
plot £k
£m
Opening landbank
32,348
32.2
Net additions
9,333
45.1
Plots
1,043 24,000
421
19,277
Cost per Value
plot £k
£m
28.7
688
34.2
659
Legal completions
(12,145) (36.1)
(439) (10,929) (27.8)
(304)
End of period
29,536
34.7
1,025 32,348
1,043
Acres
Value
£m
Acres
Value
£m
15,725
100
15,903
99
Long term
End of period
32.2
10
GWUK Land
Owned and
controlled plots
Long term acres
2002
2001
2002
North
13,768
15,712
5,104
Midlands
14,417
12,417
4,458
South
12,747
12,438
6,163
Total
40,932
40,567
15,725
11
Laing Homes Turnover analysis
2002
Nov / Dec
2002
Full year
PD Volume
371
1,286
PD ASP £000
308
276
Turnover £m
114
355
Social Volume
75
204
Social ASP £000
109
96
Turnover £m
8
20
Other turnover £m
10
24
Total £m
132
399
12
Laing Homes Margin analysis
2002
Nov / Dec
2002
Full year
Gross margin %
21.8
20.2
Gross profit £m
28.7
80.6
Selling expenses £m
(4.0)
(13.9)
Overhead costs £m
(4.7)
(24.0)
Operating profit £m
20.0
42.7
Operating margin %
15.2
10.7
13
Laing Homes PD activity analysis
2002
Nov / Dec
Ave number of sites
25
Ave house size (sq ft)
1,243
Ave selling price / sq ft
247
14
Laing Homes Geographic mix
2002
Nov / Dec
2002
Full year
Midlands
62
278
North Home Counties
70
229
North London
89
348
South West Thames
36
119
South East Thames
58
135
Thames Valley
56
177
Total
371
1,286
Completions
15
Laing Homes Product mix %
Completions
2002
Nov / Dec
Flats
47%
3 Bed
20%
4 / 5 Bed
33%
100%
16
Laing Homes Product mix
2002
Nov / Dec
%
100 - 150
23
6
151 - 200
94
26
201 - 250
71
19
251 - 300
39
11
301 - 500
105
28
500 - 1000
38
10
1000+
1
-
371
100
Legals £000
Total
17
Laing Homes Land
2002
2002
Owned plots Long term acres
Midlands
555
1,044
North Home Counties
498
618
North London
496
0
South West Thames
401
387
South East Thames
283
115
Thames Valley
457
692
Total OWNED
2,690
2,856
CONTROLLED
923
Total landbank
3,613
18
Morrison Homes Turnover analysis
2002
2001
Year
H2
H1
Year
H2
H1
3,197
1,872
1,325
2,900
1,758
1,142
PD ASP £000
252
256
245
238
239
236
PD turnover $m
804
480
324
689
420
269
2
0
2
4
1
3
806
480
326
693
421
272
PD volume
Other turnover $m
Total $m
19
Morrison Homes Margin analysis
2002
2001
Year
H2
H1
Year
H2
H1
PD margin %
21.9
22.1
21.5
21.6
21.9
21.2
PD profit $m
176.0
106.2
69.8
149.1
91.9
57.2
-
-
-
0.3
0.1
0.2
Total gross profit $m
176.0
106.2
69.8
149.4
92.0
57.4
Selling expenses $m
(47.2)
(26.9)
(20.3)
(41.9)
(25.0)
(16.9)
Overhead costs $m
(48.1)
(26.3)
(21.8)
(41.1)
(22.7)
(18.4)
Operating profit $m
80.7
53.0
27.7
66.4
44.3
22.1
Operating margin %
10.0
11.0
8.5
9.6
10.5
8.1
Other profit $m
20
Morrison Homes PD activity analysis
2002
2001
Year
H2
H1
Year
H2
H1
Ave. house size
sq ft
2,407
2,417
2,393
2,372
2,356
2,396
Ave selling price
$ / sq ft
104.6
106.1
102.4
100.2
101.4
98.4
21
Morrison Homes Regional performance
Turnover
Operating profit Operating margin
2002
2001
2002
2001
2002
2001
$m
$m
$m
$m
%
%
West
300
225
52.7
38.3
17.6
17.0
Southeast
368
346
36.8
32.7
10.0
9.5
Southwest
138
122
5.8
6.8
4.2
5.6
Corporate
-
-
(14.6)
(11.4)
-
-
806
693
80.7
66.4
10.0
9.6
Total
22
Morrison Homes Legals
2002
2001
Year
H2
H1
Year
H2
H1
West
1,077
644
433
853
535
318
Southeast
1,541
868
673
1,512
925
587
Southwest
579
360
219
535
298
237
3,197
1,872
1,325
2,900
1,758
1,142
Total
23
Morrison Homes Average selling price
2002
$000
2001
$000
%
Change
West
279
264
+6%
Southeast
239
227
+5%
Southwest
237
226
+5%
Total
252
238
+6%
24
Morrison Homes Short-term land
2002
Owned / options
Year
H2
2001
H1
Year
H2
H1
Start of period
10,160 10,636 10,160 8,330
9,860
8,330
Net additions
4,833
2,058
2,672
3,032
1,801
4,730
Legal completions
(3,197) (1,872) (1,325) (2,900) (1,758) (1,142)
End of period
11,796 11,796 10,636 10,160 10,160 9,860
Controlled
1,643
Total landbank
13,439 13,439 12,536 12,235 12,235 11,500
Land spend $m
173
1,643
117
1,900
56
2,075
132
2,075
65
1,640
67
25