Interim Results
for half year ended 30 June 2002
Wednesday 4 September 2002
Agenda
Welcome
John Robinson
Introduction
Peter Johnson
H1 financial review
Andrew Carr-Locke
UK business review
Keith Cushen
US business review
Peter Johnson
Next steps and outlook
Peter Johnson
2
Our objectives today:
to demonstrate that
the actions taken over the past 21 months are bearing fruit
the UK restructuring programme is complete
the cost base is much improved
the landbank is getting into good shape
the culture is transformed
Morrison Homes goes from strength to strength
George Wimpey Plc has potential for significant further profit growth
results for 2002 are likely to be well ahead of market expectations
3
2002 H1 financial review
Andrew Carr-Locke
Group Finance Director
First half results
2002
2001
%
1st half 1st half ° change
Revenue £ m
1,018
707
+ 44
Operating profit * £ m
105.5
66.2
+ 59
Interest charge £ m
(19.2)
(13.1)
+ 47
Profit before tax * £ m
86.3
53.1
+ 63
Earnings per share * p
15.7
10.1
+ 56
Dividend per share p
3.2
2.9
+ 10
ROACE %
21.2
16.8
º
restated for FRS 19
* before June 2001 exceptional items of £14.2m
5
Segmental analysis
Revenue
Operating profit * Operating margin ‘
%
£m
%
change
£m
UK
793
+ 55
90.5
+ 68
11.4
10.5
US ˜
225
+ 19
19.1
+ 25
8.5
8.1
+ 59
10.4
9.4
Corporate
GROUP
%
2002
2001
change 1st half 1st half
(4.1)
1,018
* before exceptionals
+ 44
105.5
‘ after fair value adjustments
˜ exchange rate in 2002 $/£=1.45
6
First half completions
Completions
Average selling price
No
%
change
‘000
%
change
5,298
+ 27
£140
+ 19
405
+ 71
£63
+4
UK - total
5,703
+ 30
US
1,325
+ 16
$245
+4
GROUP
7,028
+ 27
UK - pd
UK - social
7
UK margin analysis
2002 1st half
2001 1st half
£m
%
to sales
£m
%
to sales
161.2
20.3
108.7
21.2
Fair value items
5.7
0.7
-
-
Overhead costs
(70.7)
8.9
(54.7)
10.7
Operating profit
before FVIs
96.2
12.1
54.0
10.5
Operating profit
90.5
11.4
54.0
10.5
Gross profit
after FVIs
8
Impact of FRS 19
Profit before tax £ m
Tax £ m
Tax rate %
Balance sheet tax asset £ m
2002
1st half
2001
1st half
restated
2001
1st half
previously
published
86.3
38.9
38.9
(27.6)
(12.4)
(8.8)
32
32
23
15.6
30.6
-
9
UK pensions
1999 valuation £47 m surplus
actuarial valuation £45 m deficit on unchanged assumptions
actuarial valuation £74 m deficit on conservative assumptions
defined benefit scheme  closed to new members from 1 January 2002
 benefits/contributions modified from 1 January 2003
following consultation
2002 SSAP 24 charge £13 m as expected in March
10
Cash flow highlights
£m
2002
2001
106
52
Land spend
(237)
(261)
Acquisitions
(85)
(15)
Land realisations
243
148
Other working capital
(17)
(61)
Tax
(25)
(14)
Funding costs
(28)
(30)
CASH OUTFLOW BEFORE FINANCING
(43)
(181)
Operating profit after exceptionals
11
Balance sheet
capital employed
2002
June
2001
June
23
18
1,093
831
Other current assets
337
305
Deferred tax
16
31
Tax and provisions
(59)
(50)
Deferred consideration
(161)
0
ASSETS EMPLOYED
1,249
1,135
£m
Fixed assets
Land (net of creditors)
12
Balance sheet
financing
2002
June
2001
June
Shareholders funds
833
725
Net debt £ m
416
410
Capital employed £ m
1,249
1,135
Gearing
50%
57%
Interest cover (times)
5.5
5.1
Interest cover (times) net of imputed interest
8.2
5.1
£m
13
Land
owned and controlled
UK
US
June
2002
June
2001
June
2002
June
2001
Total land value £ m
1,133
790
120
116
Short term plots
42,303 31,920 12,536 11,500
Plot change since prior December
+ 1,736 - 1,530
Short term land bank in years
‡
‡
3.3
3.0
+ 301 + 1,530
4.1
4.1
at 12 month build rate
14
Financial summary
UK operating margin† increased from 10.5% to 12.1%
Group PBT* up 63% to £86 m
gearing 50% vs 57%
interest cover 8 times before imputed McAlpine charge
12 month ROACE up to 21.2% from 16.8%
12 month ROE up to 18.4% from 15.0%
*
before exceptionals
†
before fair value adjustments
15
UK business performance
Keith Cushen
George Wimpey UK Managing Director
Financial summary
2001
2000
2001
2001 - 2002 2002
1st half 1st half 1st half full year
1st half
% change
Completions
+ 30
5,703
4,398
4,997
11,537
Revenue £ m
+ 55
793
512
532
1,406
ASP £000
+ 19
140
118
109
123
Operating profit £ m
+ 68
90.5
54.0
54.4
173.6
12.1
10.5
10.2
12.4
Operating margin * %
* Before Fair Value Items
17
Market and sales
 national market strong throughout H1
 benefit of additional outlets from McAlpine acquisition
 visitor levels 33% higher than H1 2001
 first half selling rates increased by 12%
 limited exposure to Central London
 <4% of George Wimpey sales to buy-to-let
18
Restructuring complete
£40 m overhead savings following integration of Wimpey Homes
and McLean Homes and acquisition of McAlpine Homes fully
achieved
£20 m of build cost savings identified and in hand
majority now on track to be achieved in 2002
new organisation structure in place for whole of H1 2002
Wimpey Homes, McLean Homes and McAlpine Homes now fully
integrated and benefits being achieved ahead of expectations
19
McAlpine Homes fully
integrated
build time being reduced from 24 weeks to George Wimpey standard
13 - 15 weeks
high inherited levels of work in progress reduced
large range of McAlpine house types being rationalised
George Wimpey processes introduced
 house types being value engineered
 prefabricated components introduced, eg:
-floor and joist sets
-plastic plumbing
-door sets
 options being introduced to continuing sites
20
Restructuring plus McAlpine
transforming the business
short term landbank refocused
better balance of prime and secondary locations
land purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,000
15% of sales in H1 in excess of £200,000
land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met
land now being bought at significantly better margins
21
Land repositioning
Landbank at June 2002
42,303 plots
LPE approved plots
3.3 years
Owned and controlled plots
1st half
2002
1st half
2001
June
2002
Dec
2001
Dec
2000
North
28%
34%
41%
42%
49%
Midlands
35%
29%
22%
22%
19%
South
37%
37%
37%
36%
32%
22
Restructuring plus McAlpine
transforming the business
short term landbank refocused
better balance of prime and secondary locations
land purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,000
15% of sales in H1 in excess of £200,000
land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met
land now being bought at significantly better margins
23
Selling price increase
2002
2001
%
1st half 1st half change
Completions
5,703
4,398
+ 30
Average square footage per unit
1,062
1,051
+1
Average selling price £ per square foot
132.3
112.6
+ 18
Average selling price per unit £000
140
118
+ 19
TURNOVER £ m
793
512
+ 55
24
Restructuring plus McAlpine
transforming the business
short term landbank refocused
better balance of prime and secondary locations
land purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,000
15% of sales in H1 in excess of £200,000
land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met
land now being bought at significantly better margins
25
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
YTD 2002
26
George Wimpey
margin improvement plan
Reducing costs
land being acquired on improved margins
benchmarking across all businesses driving cost improvement
purchasing efficiencies being achieved
value engineering reducing build costs
continued introduction of prefabricated components
27
George Wimpey
margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locations
large increase in proportion of apartments sold
number of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 2001
28
Product mix and price range
Completions from - apartments
2002
2001
2000
1st half 1st half 1st half
%
%
%
18
9
6
1 and 2 bed houses
10
13
14
3 bed houses
26
26
29
4 + bed houses
46
52
51
Completions £0 -125,000
50
67
72
Completions £125,000 - 200,000
35
26
24
Completions > £200,000
15
7
4
29
George Wimpey
margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locations
large increase in proportion of apartments sold
number of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 2001
30
Options revenue
per completion
2002
1st half
£
2001
1st half
£
%
change
Former George Wimpey outlets
3,717
3,295
+ 13
Former McAlpine outlets
1,690
0
Total George Wimpey
3,224
3,295
-2
TOTAL SALES REVENUE £ m
17.1
13.7
+ 25
31
George Wimpey
margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locations
large increase in proportion of apartments sold
number of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 2001
32
George Wimpey
average selling price
Half yearly average selling prices
160
140
120
100
£ '000
80
60
40
20
0
H1 2000
H2 2000
H1 2001
H2 2001
H1 2002
Order Book
33
George Wimpey
One business one brand
new brand developed to support single business focus on customer
new brand will be rolled out during H2 2002
all rebranding costs charged to H1 profits
new customer management and service procedures introduced to
raise service levels to best in the industry
34
US business performance
Peter Johnson
Chief Executive
Financial summary
2001 - 2002 2002 2001 2000 2001
1st half 1st half 1st half full year
1st half
% change
Legal completions
+ 16
1,325
1,142
947
2,900
Revenue $ m
+ 20
326
272
221
693
ASP $000
+4
245
236
224
238
Operating profit $ m
+ 25
27.7
22.1
12.2
66.4
8.5
8.1
5.5
9.6
Operating margin %
36
Market
US economy
recovery slower and more uncertain than expected
unemployment has remained below 6% throughout H1 2002
30 year mortgage rate at a 32 year low of 6.22%
US Housing market
2002 revised forecast stronger than anticipated
single family starts up 3.6% to ~1.32 million units
supported by strong underlying demographic trends
Morrison Markets
Atlanta, Dallas and Phoenix markets affected by low net job growth
Florida and California markets strong throughout H1
37
Morrison Homes
sales performance
average number of outlets up 22% on H1 2001
visitor levels up 54% on H1 2001
selling rate 10% down on very strong H1 2001
selling prices up 4% on H1 2001
average square foot unchanged
$ per square foot up from $98 to $102
38
Morrison Homes
margin improvement plan
H1 margin 8.5% vs 2001 8.1% and 2000 5.5%
return on capital >20% for second year running
cost reduction/efficiency initiatives introduced
purchasing initiatives to benefit from regional strengths
house type value engineering introduced
systems improvement to reduce build times
strategy refocus to leverage existing overheads
39
Morrison Homes
margin improvement plan
improved market offering
new products introduced into strong executive entry level market
continued development of customer options and services
-extension of Signature Selection Centers
-options up 3.6% to $24,200 per customer, 9.9% of sales
-Morrison Financial Services and Title businesses expanded
40
Next steps
Peter Johnson
Chief Executive
Next steps
UK focus remains on long term margin growth rather than volume
UK margin growth from
improved land purchase terms
tight cost control
growth in higher price product
growth in options
US focus on margin and volume growth through expansion within
existing markets
US business and future strategy to be presented by Morrison
management team at investor seminar on 4 October
42
Outlook
Peter Johnson
Chief Executive
Outlook: current trading
visitor levels in July and August remain strong:
up 31% on 2001 in the UK
up 43% on 2001 in the US
the order book at the end of August is also very strong:
in the UK up 23% by volume and 50% by value on August 2001
the asp on the UK order book up 23% on August 2001 to > £153,000
in the US up 10% by volume and 19% by value on August 2001
the asp on the US order book up 8% on August 2001 to $261,000
44
Outlook
healthy conditions have continued in George Wimpey markets
affordability remains good and demand high in UK and US
visitor levels remain strong
costs remain under good control in both businesses
our forward order books are at record levels
current completions are showing improved margins
barring unforeseen events, the result for the year should be well ahead
of current market forecasts
45
Appendix
To Interim Results Presentation for half year to 30 June 2002
4 September 2002
Published results
£m
2002
1st half
2001
1st half
Operating profit before exceptionals
105.5
66.2
Interest charge
(19.2)
(13.1)
86.3
53.1
-
(14.2)
Profit before tax
86.3
38.9
Interest cover before exceptionals
8.2
5.1
PBT before exceptionals
Exceptionals
47
Cash flow highlights
£m
2002
2001
106
52
(237)
(261)
Land Realisations
243
148
Other Working Capital
(17)
(61)
Acquisitions
(85)
(15)
Tax
(25)
(14)
Funding Costs
(28)
(30)
CASH OUTFLOW BEFORE FINANCING
(43)
(181)
Operating Profit after Exceptionals
Land Spend
48
Balance sheet
2002
June
2001
June
Shareholders funds
833
725
Net debt
416
410
1,249
1,135
23
18
1,093
831
Other current assets
337
305
Deferred tax
16
31
Tax and provisions
(59)
(50)
Deferred consideration
(161)
0
ASSETS EMPLOYED
1,249
1,135
Gearing
50%
57%
Shareholders funds
222p
195p
£m
CAPITAL EMPLOYED
Fixed assets
Land (net of creditors)
49
World-wide sales
Sales
Ave sites
Selling rate
per outlet / week
2002
2001
2002
2001
2002
2001
1st half 1st half 1st half 1st half 1st half 1st half
7,597
5,978
308
271
0.95
0.85
284
282
-
-
-
-
UK - total
7,881
6,260
308
271
-
-
US
1,884
1,698
109
89
0.66
0.73
GROUP
9,765
7,958
417
360
0.90
0.85
UK -pd
UK - social
50
UK housing
PD activity analysis
2002
2001
2001
1st half 1st half 2nd half
2001
Year
Average number of sites
308
271
283
277
Average house size sq ft
1,062
1,051
1,027
1,036
Average selling price £ / sq ft
132.3
112.6
125.1
118.2
51
UK housing
turnover analysis
2001
2001
2001
2002
1st half 1st half 2nd half Year
PD -
5,298
4,161
6,768
10,929
ave price £000 140.4
118.3
125.1
122.6
volume
turnover £ m
744
492
847
1,339
volume
405
237
381
608
ave price £000
63
60
60
61
turnover £ m
25
14
23
37
Other turnover (mainly land sales)
24
6
24
30
TOTAL
793
512
894
1,406
Partnership -
£ m
52
UK housing
margin analysis
2002
1st half
2001
1st half
2001
2nd half
2001
Year
Gross margin %
20.3
21.2
20.1
20.5
Gross profit £ m
161.2
108.7
179.7
288.4
Selling expenses £ m
(27.8)
(22.7)
(22.1)
(44.8)
Overhead costs £ m
(42.9)
(32.0)
(38.0)
(70.0)
OPERATING PROFIT £ m
90.5
54.0
119.6
173.6
Operating margin %
11.4
10.5
13.4
12.4
Fair value items (FVI) £ m
5.7
-
0.9
0.9
OP MARGIN % before FVI
12.1
10.5
13.5
12.4
53
UK housing
product mix
2002
1st half
%
2001
1st half
%
2001
2nd half
%
2001
Year
%
Flats
18
9
12
11
1 and 2 bedroom houses
10
13
12
12
3 bed semi / terraced
19
18
19
19
3 bed detached
7
8
8
8
4 and 5 bedroom houses
46
52
49
50
100
100
100
100
54
UK housing
geographic mix
% LEGALS BY AREA
2002
1st half
2001
1st half
2001
2nd half
2001
Year
Scotland
12
13
13
13
North
28
29
33
32
Midlands
24
25
21
22
South East
25
23
23
23
South West / Wales
11
10
10
10
100
100
100
100
55
UK housing
price mix
% LEGALS BY PRICE
£000
2002
1st half
2001
1st half
2001
2nd half
2001
Year
0 - 50
1
3
0
2
51 - 75
10
15
15
15
76 - 100
20
29
25
26
101 - 125
19
20
23
22
126 - 150
17
13
17
15
151 - 175
11
8
8
8
176 - 200
7
5
5
5
201 +
15
7
7
7
100
100
100
100
56
UK housing
long term land
2002 1st half
Gross
Acres
%
Value
£m
Freehold
3,550
22
Option
12,750
TOTAL
2001 1st half
%
Gross
Acres
88
78
78
25
22
16,300 100
113
%
Value
£m
%
2,500
23
31
65
8,200
77
17
35
100 10,700 100
48
100
57
UK housing
short term land
OWNED PLOTS
2002
1st half
2001
1st half
2001
2nd half
2001
Year
Start of period
32,348
24,000
23,860
24,000
Net additions
2,738
4,021
15,256
19,277
Legal completions
(5,298)
(4,141)
(6,768)
(10,929)
End of period
29,788
23,860
32,348
32,348
Controlled
12,515
8,060
8,219
8,219
TOTAL LAND BANK
42,303
31,920
40,567
40,567
58
UK housing
land
2002 1st half
Plots Cost per Value
plot
£m
£000
32,348
32.8
1,062
2001 1st half
Plots Cost per Value
plot
£m
£000
24,000
28.7
688
4,139
46.4
192
4,040
41.3
167
Land sales /
LT land
(1,401)
(31.4)
(44)
(19)
-
(5)
Legal
completions
(5,298)
(35.9)
(190)
(4,161)
(26.0)
(108)
END OF
PERIOD
29,788
34.2
1020
23,860
31.1
742
Opening land
bank
Additions
59
US housing
PD activity analysis
2002
1st half
Average no of sites
2001
2001
1st half 2nd half
2001
Year
109
89
105
97
Average house size sq ft
2,393
2,396
2,356
2,372
Average selling price $/sq ft
102.4
98.4
101.4
100.2
60
US housing
turnover analysis
2002
1st half
PD -
volume
2001
2001
1st half 2nd half
2001
Year
1,325
1,142
1,758
2,900
ave price $000
245
236
239
238
turnover $ m
324
269
420
689
Other -
$m
2
3
1
4
TOTAL
$m
326
272
421
693
61
US housing
margin analysis
2001
2001
2001
2002
1st half 1st half 2nd half Year
margin %
21.1
21.2
21.9
21.6
profit $ m
68.3
57.2
91.9
149.1
profit $ m
1.5
0.2
0.1
0.3
TOTAL GROSS PROFIT $ m
69.8
57.4
92.0
149.4
Selling expenses $ m
(20.3)
(16.9)
(25.0)
(41.9)
Overhead costs $ m
(21.8)
(18.4)
(22.7)
(41.1)
OPERATING PROFIT $ m
27.7
22.1
44.3
66.4
Operating margin %
8.5
8.1
10.5
9.6
PD -
Other -
62
US housing
legals
2002
1st half
2001
2001
1st half 2nd half
2001
Year
Western US
433
318
535
853
Florida
509
382
666
1,048
Texas
219
237
298
535
Georgia
164
205
259
464
TOTAL
1,325
1,142
1,758
2,900
63
US housing
short term land
2001
2001
2001
2002
1st half 1st half 2nd half Year
Owned
start of period
10,160
8,330
9,860
8,330
net additions
1,801
2,672
2,058
4,730
legal completions
(1,325) (1,142) (1,758) (2,900)
end of period
10,636
9,860
10,160 10,160
1900
1,640
2,075
Controlled
TOTAL LAND BANK
LAND SPEND $ m
2,075
12,536 11,500 12,235 12,235
56
67
65
132
64