Disclaimer
The information in this presentation does not constitute an offer
to sell or an invitation to buy shares in George Wimpey Plc or
any other invitation or inducement to engage in investment
activities.
Past performance cannot be relied upon as a guide to future
performance
2
George Wimpey Plc
Interim Results
for the 26 weeks to 3 July 2005
Tuesday 6 September 2005
Welcome
John Robinson
Chairman
Agenda
H1 Financial Review
Andrew Carr-Locke
UK Business Review
Pete Redfern
US Business Review
Peter Johnson
Strategy and Outlook
Peter Johnson
5
H1 2005 financial review
Andrew Carr-Locke
Group Finance Director
IAS reconciliation
Income statement
H1 2005
H1 2004
£m
UK GAAP*
IAS
UK GAAP*
IAS
Operating profit
158.0
156.5
181.6
181.8
Interest
(27.3)
(34.2)
(23.1)
(27.9)
PBT
130.7
122.3
158.5
153.9
Tax
(41.0)
(37.9)
(49.1)
(47.8)
89.7
84.4
109.4
106.1
Profit after tax
*Consistent 2004 UK GAAP basis
7
First half results
H1
2005
H1
2004*
Change
Turnover
1,190
1,220
-2%
Operating profit
156.5
181.8
-14%
Interest charge
(34.2)
(27.9)
+23%
Profit before tax
122.3
153.9
-21%
Earnings per share
21.5p
27.7p
-22%
NAV per share
348p
296p
+52p
Dividend per share
5.7p
5.2p
+10%
22.7%
25.6%
£m
ROACE**
8
*restated for IAS
**last 12 months
Segmental analysis
Turnover
Operating
profit
Operating
margin
H1
H1
2005 2004
£m
Change
£m
Change
GWUK
858
-10%
107
-32%
12.4% 16.4%
Morrison Homes*
332
+24%
55
+64%
16.4% 12.4%
Other
-
-
(5)
-
Total
1,190
-2%
157
-14%
9
*Exchange rate in 2005 $/£=1.87, 2004 $/£=1.81
First half completions
Completions
Ave selling price
No
Change
£/$
Change
4,154
-11%
£194,000
-
422
-6%
£88,000
+2%
GWUK
4,576
-10%
£185,000
-
Morrison Homes
1,996
+16%
$302,000
+9%
GROUP TOTAL
6,572
-3%
GWUK private
GWUK affordable
10
Cash flow summary
H1
2005
H1
2004*
Operating profit
Land spend
Land realisations
Other working capital movements
157
(502)
284
(134)
182
(462)
284
(137)
CASH INFLOW FROM OPERATIONS
(195)
(133)
Interest
Tax
Dividends
Exchange rate effects
Other movements
(27)
(55)
(41)
(31)
(11)
(23)
(55)
(16)
5
(3)
INCREASE IN NET DEBT
(360)
(225)
£m
*restated for IAS
11
Balance sheet net assets
3 Jul
2005
30 Jun
2004*
45
29
Land
2,136
1,767
Land creditors
(240)
(147)
Other net operating assets
546
451
Tax and provisions
(94)
(63)
Net pension deficit
(145)
(129)
TOTAL NET ASSETS EMPLOYED
2,248
1,908
£m
Fixed assets and joint ventures
* restated for IAS
12
Balance sheet financing
3 Jul
2005
30 June
2004*
1,367
1,154
881
754
Capital employed £m
2,248
1,908
Gearing
64%
65%
Interest cover last 12 months
7.1x
7.6x
Cash interest cover last 12 months
9.4x
9.8x
Shareholders’ funds £m
Net debt £m
13
* restated for IAS
Financial summary
Results now published under IAS
Challenging market conditions in the UK
GWUK margins down 4.0pp, volumes down 10%
Continued strength in the US
Morrison margins up 4.0pp, volumes up 16%
Group PBT down 21% at £122m
Gearing in line with prior year at 64%
ROCE at 22.7% remains healthily above cost of capital
Half year dividend increased by 10% to 5.7p
14
Impact of IAS
Interest charge – net payable
£m
UK GAAP basis*
Interest charge on discounted
pension liabilities under IAS 19
Reallocate JV interest
Interest charge on
discounted land creditors
Notional interest expense
booked to cost of inventory
Movement on interest
rate derivatives
IAS basis
*Consistent 2004 UK GAAP basis
H1 2005
H1 2004
(27.3)
(23.1)
(4.2)
(4.0)
0.6
-
(3.1)
(1.4)
1.1
0.6
(1.3)
-
(34.2)
(27.9)
15
Financial summary
Results now published under IAS
Challenging market conditions in the UK
GWUK margins down 4.0pp, volumes down 10%
Continued strength in the US
Morrison margins up 4.0pp, volumes up 16%
Group PBT down 21% at £122m
Gearing in line with prior year at 64%
ROCE at 22.7% remains healthily above cost of capital
Half year dividend increased by 10% to 5.7p
16
UK business review
Pete Redfern
Chief Executive, GWUK
Financial summary
George Wimpey
Laing Homes
H1 2005
H1 2004
H1 2005
H1 2004
Total completions
4,177
4,560
399
533
Private completions
3,793
4,220
361
423
Private ASP
£182,900
£183,600
£316,400
£308,100
Turnover £m
739.3
809.3
119.1
142.9
Gross margin %
24.3%
26.8%
20.3%
23.1%
GWUK
H1 2005
H1 2004*
Operating profit £m
106.7
156.2
Operating margin %
12.4%
16.4%
18
* restated for IAS
UK market conditions
Market continues to be
tough but steady
very price sensitive and incentive led
Second hand market (down 30%) affecting new build sales
and conversion rates.
Summer visitor levels are slightly better than last year
cancellation rates below peak in November 2004
Geographically no clear difference in market conditions,
in the South slightly more confidence in the short term
Apartment market is particularly price sensitive - occupier and
investor
19
Ave weekly sales rates
GWUK 2003 – 2005
1.2
Sales per site per week
1
0.8
0.6
0.4
0.2
0
Jan
Feb
Mar
Apr
May
2003
Jun
2004
Jul
Aug
2005
Sep
Oct
Nov
Dec
20
Net sales prices on reservations
GWUK 2003 – 2005
210
ASP achieved on reservations £000s
200
190
180
170
160
150
140
Jan
Feb
Mar
Apr
May
2003
Jun
2004
Jul
Aug
2005
Sep
Oct
Nov
Dec
21
Price points
1400
1200
2005
Total completions
1000
2004
800
600
400
200
0
£0-50k
£51-100k
£101-150k
£151-200k
£201-250k
Price band
£251-300k
£301-500k
£500k+
22
Product mix
H1
2005
H2
2004
H1
2004
Apartments
34%
29%
32%
2 / 3 bed houses
32%
29%
35%
4 / 5 bed houses
34%
42%
33%
100%
100%
100%
PD completions %
23
Margin reconciliation
H1 2005 H1 2004 Change
FY 2004
Turnover
100%
100%
-
100%
Land costs
26.5%
23.9%
(2.6)%
24.2%
Build & other costs
49.7%
49.7%
0.0%
49.5%
Direct selling expenses
4.7%
3.8%
(0.9)%
3.3%
Overhead costs
6.6%
6.1%
(0.5)%
5.2%
Operating profit
12.4%
16.4%
(4.0)%
17.8%
24
Build Costs
Underlying cost pressures remain, pressure on labour rates
and availability has reduced
Material cost pressure remains high, driven by higher energy
and other input costs, partly balanced by scale
Cost management program enabled us to hold build costs
Confident of £20m cost saving program, c.£17m impacts on
2005 with much of the balance locked up in WIP and build
Key initiative is rationalisation of house types
September 2004 - every business had own house designs
no core national range since 2001
today - a ‘preferred range’ of 30 products
25
Landbank
Owned and
controlled plots
Jun 2005 Jun 2004
Long term acres
Jun 2005
Jun 2004
North
15,555
15,630
4,784
4,908
Midlands
12,360
12,147
5,329
5,497
South
16,648
16,078
6,218
7,720
City
3,559
2,398
-
-
Laing
6,258
4,648
-
-
TOTAL
54,380
50,901
16,331
18,125
Planning approvals achieved on 14,500 plots in last 12 months
26
Land cost
Cost per plot of 2005 acquisitions is higher due to Laing /
South mix
Continued focus on larger sites where competition slightly
reduced and scale gives advantage
Significant skills developed since 2003 on partnership
schemes like Bracknell and Dartford
For PD owned
plots only
H1 2005
Landbank
194.5
194.3
Cost per plot £000s
52.3
54.0
Land value % ASP
26.6%
27.8%
ASP £000s
27
Bracknell case study
Existing planning consent - 584 PD units, 146 affordable units
Phased land payment terms, above standard gross margin
Pursuing enhanced planning application, including 38% affordable
provision
c.£260k average selling price
Mix includes
c.20% 1&2 bed apartments
2-5 bed houses
EcoHomes ‘Very Good’
Anticipated site start Feb 06
based on existing consent
28
Dartford case study
794 private development units, 340 affordable units
Phased land payment terms, above standard gross margin
39% apartments across the development
c.£230k average selling price
Design codes for integrated mixed use development
Land acquired fully serviced
‘Fastrack’ - dedicated
transport service
Anticipated site start mid 06
29
Summary
Challenging first half
market tough, use of incentives essential
order book at 90% of expected full year volumes, margins
below first half
build cost pressures significant but balanced by savings
Outlook for H2
early to call autumn market
balance between customer demand and supply availability is
critical factor
cost pressures remain but mitigated by savings
operating margins improved by volume weighting
30
US business review
Peter Johnson
Group Chief Executive
US housing market
continued healthy economic data…
Employment
240,000+ new jobs in July, 169,000 in August
unemployment at four-year low
Consumer confidence
up to 105.6 in August (vs. 106.2 max 2004 and 2005)
30-year mortgage rates
5.71% - still near record lows
32
US housing market
underpinned by demographics
US Homeownership rates
71%
70%
69%
A homeownership rate of 70% in
2010 would imply the creation of
c.1.28m households pa from 20042010, compared to the 800,000
created pa from 1999-2004
68%
67%
66%
70.0
69.2
65%
68.0
68.3
68.6
67.5
66.9
66.4
64%
65.1
63%
63.9
64.1
64.1
64.0
64.1
1990
1991
1992
1993
1994
65.4
65.7
62%
Source: CSFB
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2010E
33
Morrison Homes
H1 performance
H1 2005
H1 2004
Change
Visitor rates per site
19.6
18.2
+8%
Sales rates per site
1.15
1.08
+6%
$302,000
$278,000
+9%
Ave selling price
More outlets open in continuing businesses
1 Jan = 89 outlets
1 Sep = 98 outlets
34
Financial summary
H1 2005
H1 2004*
Change
1,996
1,714
+16%
$302,000
$278,000
+9%
621
484
+28%
Operating profit $m
101.9
60.3
+69%
Operating margin %
16.4%
12.4%
+4.0pp
Legal completions
Ave selling price
Revenue $m
35
* restated for IAS
Margin performance
H1 2005
H1 2004
Change
Gross margin
27.1%
24.0%
+3.1pp
Operating margin
16.4%
12.4%
+4.0pp
Margins above these levels in sales proceeding
Implied operating margin LPEs year to date = 16.5%
H1 cost inflation c.7% annualised (Source: CSFB)
Some labour and material shortages in strongest markets
36
Land
Jun 05
Dec 04
Jun 04
Plots owned / under option
19,661
18,892
17,456
Plots controlled
3,058
2,687
2,606
Total landbank
22,719
21,579
20,062
Net additions (plots, last 6 months)
2,765
4,144
3,866
156
174
108
Land spend $m (last 6 months)
Land in place for growth in 2006 and largely in place for 2007
Good regional balance
37
Progress on strategy:
four platforms for growth
Focus on growing markets
major beneficiaries of underlying trends
Establish satellites in neighbouring markets
land in place to support 2006 growth in Reno, Ft Myers and
Daytona Beach
Product development
continued success of townhome product
Performance improvement in Texas and exit from Atlanta
Texas completions + sales proceeding up 53% in H1
Atlanta exit largely complete
38
Morrison Homes markets
major beneficiaries of underlying trends
000s
Job
Growth
Rank
last 12 mths
SF
Permits
Rank
H1 2005
California
321
1
104
2
Florida
262
2
106
1
Texas
185
3
82
3
Arizona
116
6
43
6
Colorado
58
18
21
12
TOTAL
941
-
355
-
Total US
2,947
887
Morrison
Markets
32%
40%
39
Morrison Homes markets
major beneficiaries of underlying trends
000s
Job
Growth
Rank
last 12 mths
SF
Permits
Rank
Morrison
completions
last 12 mths
H1 2005
California
321
1
104
2
1,004
Florida
262
2
106
1
1,954
Texas
185
3
82
3
780
Arizona
116
6
43
6
528
Colorado
58
18
21
12
184
TOTAL
941
-
355
-
4,450
Total US
2,947
887
Morrison
Markets
32%
40%
40
Progress on strategy:
four platforms for growth
Focus on growing markets
major beneficiaries of underlying trends
Establish satellites in neighbouring markets
land in place to support 2006 growth in Reno, Ft Myers and
Daytona Beach
Product development
continued success of townhome product
Performance improvement in Texas and exit from Atlanta
Texas completions + sales proceeding up 53% in H1
Atlanta exit largely complete
41
Summary
Excellent first half performance
visitor levels, sales rates, selling prices all up
Strongly placed for second half
94% sold or completed for 2005
order book margins and prices above first half
volumes may be held back by materials shortages
Well-positioned for continued growth
land already in place to support continuing volume growth in
2006 and largely in place for 2007
42
Strategy and outlook
Peter Johnson
Group Chief Executive
Strategy
Market background
UK
underpinned by continuing supply shortfall
price growth likely to be limited
opportunities at lower price points
US
underpinned by demographics and economy
remains strong with wide regional variations
will come off peak but remain at historically high levels
44
Strategy
UK - focus remains on volume growth
plans in place to deliver through
expanding existing regions
new Laing regions
new George Wimpey satellites
Government initiatives offer potential for new business
implementation depends on market and land prices
US - sustained volume growth
“four platforms” growth plan in place
land and detailed business plans in place to support growth
these plans could deliver 10,000 unit business within 5 years
45
Outlook
UK
current sales rates ahead of same period 2004
premature to draw conclusions on autumn market
if sales rates sustained, full year total volumes similar to 2004
by 1 September 90% completed or in order book
margins in order book below first half actuals
US
visitor and sales rates remaining strong
full year volumes still expected to be up c.10%
small volume risk from materials and labour shortages
by 1 September 94% completed or in order book
margins and prices in order book above first half actuals
46
George Wimpey Plc
Interim Results
for the 26 weeks to 3 July 2005
APPENDIX
Impact of IAS
Balance sheet
H1 2005
H1 2004
£m
IAS
UK GAAP
IAS
UK GAAP
45
44
29
29
Land
2,136
2,143
1,767
1,771
Land creditors
(240)
(244)
(147)
(151)
Other current assets*
547
544
451
452
Tax & provisions
(94)
(103)
(63)
(69)
Net pension deficit / SSAP 24 prepaid
(145)
-
(129)
-
TOTAL NET ASSETS EMPLOYED
2,248
2,384
1,908
2,032
Fixed assets & JVs
*Primarily elimination of interim dividend for IAS
48
Group reservations
Reservations
H1
2005
Ave sites
Per outlet /
per week
H1
2004
H1
2005
H1
2004
H1
2005
H1
2004
GWUK private
5,936 6,641
321
294
0.71
0.87
GWUK affordable
1,201
-
-
-
-
GWUK TOTAL
7,137 7,476
321
294
-
-
US TOTAL
2,804 2,932
93
104
1.16
1.08
GROUP TOTAL
9,941 10,408
414
398
-
-
835
49
GWUK turnover analysis
H1
2005
H1
2004
H2
2004
full year
volume
4,154
4,643
6,631
11,274
ave price £000s
194.5
194.9
192.4
193.5
turnover £m
808
905
1,276
2,181
volume
422
450
508
958
ave price £000s
87.7
85.9
92.5
89.8
37
39
47
86
Other turnover
13
8
26
34
TOTAL £m
858
952
1,349
2,301
Private
-
Affordable -
turnover £m
2004
50
GWUK margin analysis
H1
2005
H1
2004*
H2
2004*
2004
full year*
Gross profit £m
203.7
250.0
352.8
602.8
Gross margin %
23.7%
26.2%
26.1%
26.2%
Selling expenses £m
(40.5)
(36.2)
(39.8)
(76.0)
Overhead costs £m
(56.5)
(57.6)
(59.4)
(117.0)
OPERATING PROFIT £m
106.7
156.2
253.6
409.8
Operating margin %
12.4%
16.4%
18.8%
17.8%
51
* restated for IAS
GWUK PD product mix
H1
2005
H2
2004
H1
2004
full year
Apartments
34%
29%
32%
31%
2 / 3 bed houses
32%
29%
35%
32%
4 / 5 bed houses
34%
42%
33%
37%
100
100
100
100
Completions %
2004
52
GWUK PD price mix
H1 2005
H1 2004
Completions
%
Completions
%
0
0%
8
0%
£51 – 100k
162
4%
344
7%
£101 – 150k
1250
30%
1332
29%
£151 – 200k
1325
32%
1400
30%
£201 – 250k
792
19%
831
18%
£251 – 300k
311
8%
323
7%
£301 – 500k
268
6%
357
8%
£500k +
46
1%
48
1%
4,154
100%
4,643
100%
£0 – 50k
Total
53
GWUK PD activity analysis
Ave house size sqft
Ave selling price £ / sqft
H1
2005
H1
2004
H2
2004
2004
full year
1,015
1,069
1,008
1,033
192
182
190
187
54
GWUK PD geographic mix
H1 2005
Legals
Size
sqft
ASP
£000
H1 2004
Legals
Size
sqft
ASP
£000
H2 2004
Legals
Size
sqft
ASP
£000
North
1,205 1,084 172
1,459 1,150 169
2,123 1,095 171
Midlands
1,307 979
168
1,593 1,033 173
1,983 953
166
South
1,202 970
206
1,055 1,036 212
1,843 958
204
City
79
Laing
361 1,129 316
423 1,088 308
506 1,149 329
Total
4,154 1,015 195
4,643 1,069 195
6,631 1,008 192
713
242
113
776
267
176
699
237
55
GWUK landbank by region
Owned and
controlled plots
June
June
2005
2004
Long term acres
June
2005
June
2004
North
15,555
15,630
4,784
4,908
Midlands
12,360
12,147
5,329
5,497
South
16,648
16,078
6,218
7,720
City
3,559
2,398
-
-
Laing
6,258
4,648
-
-
Total
54,380
50,901
16,331
18,125
56
GWUK short term land
H1
2005
H1
2004
H2
2004
full year
- Start of period
37,222
33,559
34,191
33,559
Net additions
7,138
5,725
10,170
15,895
Legal completions
(4,576)
(5,093)
(7,139)
(12,232)
End of period
39,784
34,191
37,222
37,222
CONTROLLED
14,596
16,710
13,897
13,897
TOTAL LANDBANK
54,380
50,901
51,119
51,119
OWNED
2004
57
GWUK owned land
H1 2005
Short term
Plots
H1 2004
Cost per Value
plot £k
£m
Plots
Cost per Value
plot £k
£m
Opening landbank
37,222
45.6
1,698
33,559
44.6
1,497
Additions
7,138
52.3
373
5,725
47.6
272
Completions
(4,576)
(47.9)
(219)
(5,093)
(44.6)
(227)
End of period
39,784
46.6
1,852
34,191
45.1
1,542
Long term
End of period
Acres
Value £m
Acres
Value £m
16,331
49
18,125
61
58
Morrison Homes turnover analysis
H1
2005
H1
2004
H2
2004
full year
1,996
1,714
2,708
4,422
Ave selling price $000s
302
278
296
289
Turnover $m
603
476
801
1,277
Other turnover
18
8
5
13
TOTAL $m
621
484
806
1,290
Volume
2004
59
Morrison Homes margin analysis
H1
2005
H1
2004*
H2
2004*
2004
full year*
Gross profit $m
168.3
116.4
200.5
316.9
Gross margin %
27.1%
24.0%
24.9%
24.6%
Selling expenses $m
(31.6)
(26.7)
(37.3)
(64.0)
Overhead costs $m
(34.8)
(29.4)
(35.2)
(64.6)
OPERATING PROFIT $m
101.9
60.3
128.0
188.3
Operating margin %
16.4%
12.4%
15.9%
14.6%
60
* restated for IAS
Morrison Homes price mix
H1 2005
H1 2004
Completions
%
Completions
%
$0 – 200k
390
19%
344
20%
$201 – 250k
395
20%
442
26%
$251 – 300k
332
17%
318
19%
$301 – 350k
265
13%
281
16%
$351 – 400k
215
11%
190
11%
$401 – 450k
172
9%
75
4%
$451 – 500k
128
6%
20
1%
$500k +
99
5%
44
3%
1,996
100%
1,714
100%
Total
61
Morrison Homes activity analysis
Ave house size sqft
Ave selling price $ / sqft
H1
2005
H1
2004
H2
2004
2004
full year
2,322
2,409
2,371
2,386
130
115
125
121
62
Morrison Homes geographic mix
H1
2005
H1
2004
H2
2004
full year
West
460
402
728
1,130
Southeast
932
816
1,276
2,092
Southwest
604
496
704
1,200
1,996
1,714
2,708
4,422
West
428
372
413
398
Southeast
282
260
263
262
Southwest
237
231
234
233
TOTAL
302
278
296
289
Completions
TOTAL
2004
Average selling price
63
Morrison Homes regional performance
Turnover
H1 2005 H1 2004
$m
$m
Operating profit*
Operating margin
H1 2005
$m
H1 2004
$m
H1 2005
%
H1 2004
%
West
204
153
56.5
32.1
27.7%
21.0%
Southeast
266
215
39.2
24.9
14.8%
11.6%
Southwest
149
117
16.8
9.3
11.3%
8.0%
Corporate
2
-
(10.6)
(6.0)
-
-
621
484
101.9
60.3
Total
16.4% 12.4%
64
* restated for IAS
Morrison Homes short term land
OWNED AND OPTIONS
H1
2005
H1
2004
H2
2004
full year
Start of period
18,892
15,304
17,456
15,304
Net additions
2,765
3,866
4,144
8,010
Legal completions
(1,996)
(1,714)
(2,708)
(4,422)
End of period
19,661
17,456
18,892
18,892
End of period
3,058
2,606
2,687
2,687
TOTAL LAND BANK
22,719
20,062
21,579
21,579
156
108
174
282
2004
CONTROLLED
LAND SPEND $m
65