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Disclaimer
This presentation is being made only to and is directed at (a) persons who have
professional experience in matters relating to investments falling within Article
19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2001 (the "Order") or (b) any other persons to whom it may otherwise lawfully be
communicated, falling within Article 49(1)of the Order (all such persons being
referred to as "relevant persons").
Any person who is not a relevant person should not act or rely on this
presentation or any of its comments.
The financial information set out in this document does not constitute the
Company's statutory accounts. Statutory accounts for 2002, which received an
auditors' report that was unqualified and did not contain any statement concerning
accounting records or failure to obtain necessary information and explanations,
have been filed with the Registrar of Companies.
George Wimpey PlcInterim Resultsfor the half year ended 30 June 2003
Wednesday 30 July 2003
Welcome
John Robinson
Chairman
Agenda
Introduction Peter Johnson
H1 Financial Review Andrew Carr-Locke
UK Business Review Keith Cushen
US Business Review Peter Johnson
Summary and Outlook Peter Johnson
Introduction
Peter Johnson
Group Chief Executive
Highlights
A strong set of H1 results in both UK and US.
Operating profit: George Wimpey core business up 26%
£12m contribution from Laing in line with expectations
Morrison up 64% in dollar terms
Operating margins increased ahead of plan
from 11.4% to 16.5% in George Wimpey UK
from 8.5% to 11.1% in Morrison Homes
Full year outlook around top end of market expectations
strong order books in both UK and US
improved land positions in both UK and US
Confidence reflected in strengthened dividend policy7
H1 2003 financial review
Andrew Carr-Locke
Group Finance Director
H12002
Change
Turnover
Operating profit
Interest charge
Profit before tax
Earnings per share
Dividend per share
ROACE*
1,017 +4%
105.5 +40%
(19.2) +32%
86.3 +42%
15.7p +43%
3.2p +19%
21.2%
£m
First half results
H12003
1,059
148.0
(25.3)
122.7
22.5p
3.8p
24.1%
*Last 12 months, before exceptionals 9
Turnover
£m
Operating profit1
Operating margin1
Change £m ChangeH1
2003H1
2002
George Wimpey
Laing Homes
Morrison Homes2
Group
TOTAL
691 (13)% 114 +26% 16.5% 11.4%
114 - 12 - 10.6% -
254 +13% 28 +47% 11.1% 8.5%
- - (6) -
1,059 +4% 148 +40%
Segmental analysis
1After fair value items
2Exchange rate in 2002 $/£=1.45, 2003 $/£=1.61 10
See appendix:
(vii) (viii) (xvi)
(xxi) (xxii)
Completions
No Change £ / $ Change
Ave selling price
GW PD
GW social1
Laing PD
Laing social
UK total
US total
GROUP TOTAL
4,125 (22)% £163,000 +16%
245 (49)% £75,000 +17%
310 - £331,000 -
9 - £102,000 -
4,689 (19)%
1,521 +15% $266,000 +9%
6,210 (13)%
First half completions
1Includes contract partnership 11
See appendix:
(vii) (xvi) (xxi)
Strengthened dividend policy
Over past two years earnings growth of 40% p.a. has been achieved
compared with dividend growth of 10% p.a.
UK restructuring has created a strong business now delivering improved
results
A high degree of political and economic uncertainty reduced
UK outlook sound, US outlook good
margins risen to industry levels
strong forward order books
Confidence in continued earnings growth reflected in revised dividend
policy enhancing long term value for shareholders
ensuring prudent balance sheet structure
enhancing dividend growth rate to reduce cover over time 12
Operating profit
Land spend
Acquisitions
Land realisations
Other working capital
Tax
Funding costs
CASH OUTFLOW BEFORE FINANCING
H12003
H12002
148 106
(482) (237)
(120) (85)
254 243
(157) (17)
(54) (25)
(34) (28)
(445) (43)
£m
Cash flow summary
13
June2003
June2002
Fixed assets
Land
Other current assets
Tax and provisions
Deferred consideration
TOTAL NET ASSETS
27 23
1,642 1,257
491 337
(66) (43)
(92) (161)
1,834 1,249
£m
Balance sheet - net assets
14
Land creditors (168) (164)
See appendix:
(iv)
£m
Analysis of increase in assets in last 12 months
1Net of creditors
2Net of creditors, since acquisition 15
McAlpine payments
Investment in land1
Investment in WIP
Acquisition payments
Other working capital
Investment in land
Sub-total
TOTAL
163George Wimpey
Laing Homes
Morrison Homes
Corporate
Sub-total
Sub-total
Investment in land2
Other mainly exchange
Sub-total
106
321
52
200
60
237(23)
43
33
(10)
(6)
585
June2003
June2002
Shareholder’s funds £m
Net debt £m
Capital employed £m
1,022 833
812 416
1,834 1,249
Gearing
Interest cover*
79% 50%
8.5x 6.6x
Underlying interest cover*net of imputed interest
10.5x 9.5x
Balance sheet -financing
*Last 12 months, before exceptionals 16
See appendix:
(iv)
Land owned and controlledPD and social housing
Total land value £m 1,209 1,133
Short term plots 42,562 42,303
Controlled plots 11,957 12,515
Short term landbankin years
3.4 3.3
280 -
4,126 -
912 -
3.4 -
153 120
15,325 12,536
2,751 1,900
4.1 4.1
GW
June2003
June2002
June2003
June2002
Laing Morrison
June2003
June2002
17
Owned plots 30,605 29,788 3,214 - 12,574 10,636
See appendix:
(xii) (xiii) (xiv) (xix) (xxiv)
Financial summary
Group PBT +42% despite reduction in UK first half volumes
Operating margins H1 2002 to H1 2003:
George Wimpey 11.4% to 16.5%
Morrison Homes 8.5% to 11.1%
Dividend
increase in dividend growth reflects confidence in the future and
commitment to reduce dividend cover over time
Increased gearing (debt/equity) to 79%
Improved interest cover, underlying cover increased from 9.5x to 10.5x
18
UK business review
Keith Cushen
Chief Executive, George Wimpey UK
George Wimpey Laing Homes
H1 2003H1 2003 H1 2002
Legal completions
Turnover £m
PD ave selling price
Operating profit £m
Operating margin*
4,370 5,776
691 793
£163,000 £140,000
114.0 90.5
16.5% 11.4%
319
£331,000
114
12.0
10.6%
20
Financial summary
* after fair value items
See appendix:
(vi) (vii) (viii)
(xi)
Highlights
Restructuring now complete
common approach across all businesses
strong management team in place
continuous improvement the order of the day
Land bought earlier in the year and on better terms
to accommodate lengthier planning process
to deliver 2004/2005 outlets
>90% of 2004 plots now in place
and continuing to buy land at improving margins
Business well in control of costs
both materials and labour costs remain stable
cost lessons of PPG3 learnt and reflected in current practices 21
UK housing market
Short term factors
affordability - interest rates lowest since 1955
high employment - continued job creation in public sector
Long term factors
demand - population growth, immigration, ageing population
supply - restricted by planning regime
continued housing shortfall, c.40,000 units in 2002
House price inflation returning to sustainable levels
still experiencing increases in the north
moderate increases in the midlands
levelling off in the south
22
UK Options
Total UK options turnover £21.2 million +24%
Laing Homes only recently introduced - opportunity for the future
First Regional Options Centre in Edinburgh - £9,500 per customer
two new centres to be opened in 2003, a further three in 2004
Improving services offered to customers making it even easier to buy a
George Wimpey home - financial services joint venture established23
Revenue per plot
£9,133
George Wimpey £4,860
Laing Homes £3,565
Low: GW Midland £2,865
Average:
High: GW East London
George Wimpey
Visitorsper site
per week
Salesper
week
Visitorsper site
per week
Salesper
week
Visitorsper site
per week
Salesper
week
2003 a ‘normal’ market
GW
H1 2003
12.9 0.88
H1 2002
12.6 0.95
H1 2001
10.7 0.85
Average weekly visitors above 2002
very strong in the North
H1 2003 sales per outlet slightly behind H1 2002
North and Midlands above last year
certain markets in south remain behind 2002
for whole of core business, sales rates experienced in June and July ahead of
2002Incentives remain at ‘normal’ levels
at week 29 use of P/X and APP at lowest levels ytd
25
George Wimpey sales rates
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Week no
Sal
es p
er w
eek
per
sit
e
2001 2002 2003
26
H1 2003
£m % to sales £m % to sales
H1 2002
Gross profit
Fair value items
Overhead costs
186.8 27.0% 161.2 20.3%
2.0 0.3% 5.7 0.7%
(72.8) 10.5% (70.7) 8.9%
Operating profitbefore fair value items
Operating profitafter fair value items
116.0 16.8% 96.2 12.1%
114.0 16.5% 90.5 11.4%
Margin reconciliation
27
See appendix:
(viii)
Land purchase margins
28
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
H1 2000 H2 2000 H1 2001 H2 2001 H1 2002 H2 2002 H1 2003
PBIT%
Landbank
Land being bought earlier in the year to allow for extra planning time
time taken to gain planning approval has increased by a third in past
two years
George Wimpey have continued to buy land in the right locations at the
right price
as promised strategic landbank now delivering land into short term
landbank29
H12003% landbank
H12002
North
Midlands
South
31%
35%
34%
34%
34%
32%
See appendix:
(xii) (xiii) (xiv)
SAS Headquarters Hereford
September 2000: Site identified as mixed-use site in local plan
LPE drawn up
March 2001: site purchased unconditionally for £5.75 million
500 plots anticipated
assumed value with planning permission £12 million
July 2002
outline planning granted for 160 units subject to S106 agreement
S106 agreement expected to be complete by end of August 2003
September 2003: demolition planned to start, infrastructure
construction commencing October 2003
September 2003 outline consent for remainder of site expected 30
H12003% completions from:
H12002
H12001
Apartments
1 & 2 bed houses
3 bed houses
4 & 5 bed houses
21%
8%
26%
45%
18%
10%
26%
46%
9%
13%
26%
52%
31
Product mix
Impact of PPG3: increase in apartments, attached and 3 storey products
increase in coverage c.12,000 sqft per acre - 17,000 sqft per acre
changing dynamics of business, different process, build and sales
programme
still broad spread
54% brownfield completions H1 2003
See appendix:
(ix)
Laing Homes
33
In line with expectations
Laing Homes benefiting from George Wimpey business improvement
experiences in benchmarking and sharing best practice
Immediate integration plans complete
removal of centralised functions and overhead
Cost savings analysis now complete - savings being implemented in
homestyle sales and marketing procurement
overheads standard detailing
£10 million on target for 2004
Increased investment in land, being acquired on improved margins
Experienced management team retained after acquisition
Market conditions
All price points selling equally
Visitor rates similar to 2002Sales rates down on 2002Investors starting to returnJune and July ahead of 2002 for both visitors and sales
<300
301 - 500
500 +
Nov / Dec2002
227
105
39
371Total
%
61
28
11
100
PD completions£000
H1 2003
181
87
42
310
%
58
28
14
100
34
See appendix:
(xvii)
35
Platform for growth
Programme of land investment since acquisition
100% of plots for 2004 now owned or controlled
70% of plots for 2005 now owned or controlled
Land now being purchased at better margins
increased hurdle rates, coming in line with George Wimpey
Potential for increased options revenue
learning from shared experiences with George Wimpey and Morrison
Operating margins targeted to return to historic levels (c.16%) over time
Improving trend in visitor and sales rates
UK summary
37
We have created a strong business
Simple strategy for improvement over past 21/2 years
created the right business structure
introduced strong discipline of cost control
delivered significant sustainable improvement in operating margin
ahead of plan
acquired Laing Homes premium brand
improved customer focus to provide opportunities for the future
received 30% of NHBC ‘Pride in the Job’ awards
Combined George Wimpey and Laing Homes order book >£1bn
outlets at June 2003 in line with June 2002
targeting H2 2002 volumes for H2 2003
US business review
Peter Johnson
US housing market
Positive outlook for US housing and Morrison markets, in particular:
Short term factorscontinuing low 30-year mortgage ratesjob and income growth predicted for H2 2003NAHB predicts record new homes sales in 2003, just under 1m unitsFlorida and California staying strong; Texas, Phoenix picking up
Long term factorsdemand set to remain high (~1m SF houses) until at least 2020record 9 million 1990’s immigrants entering house ownership marketecho baby boomers - 60m births 1979 to 1994 - also entering marketageing population with record home ownership - up to 68%continuing job and retirement migration to south and west
39
Immigration and birth rates1940-2000
1,035,039
2,515,479
3,321,677
7,338,062
9,095,417
4,493,314
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
1940's 1950's 1960's 1970's 1980's 1990's
No
. im
mig
ran
ts
2,500,000
2,700,000
2,900,000
3,100,000
3,300,000
3,500,000
3,700,000
3,900,000
4,100,000
4,300,000
4,500,000
No
. b
irth
s
Immigrants Birth Rate
Baby Boom
Echo Boom
40
Financial summary
41
Legal completions
Revenue $m
Ave selling price
Operating profit $m
Operating margin %
H1 2003 H1 2002%
change
1,521 1,325 +15%
409 326 +25%
$266,000 $245,000 +9%
45.3 27.7 +64%
11.1 8.5 +2.6pp
See appendix:
(xxi) (xxii)
Margin reconciliation
42
H1 2003
$m % to sales $m % to sales
H1 2002
Gross profit
Selling expenses
Overhead costs
93.9 23.0% 69.8 21.4%
(23.9) (5.9)% (20.3) (6.2)%
(24.7) (6.0)% (21.8) (6.7)%
OPERATING PROFIT 45.3 11.1% 27.7 8.5%
See appendix:
(xxii)
Profit growth underpinned
Outlet numbers broadly level, but improved sales rates
H1 volume up 15%
order book c.$440m; >85% of years completions in hand
San Antonio exited; improvement plans in place in Dallas and Atlanta
poor outlets being sold out
new sites at better margins
asset levels reduced until performance is improved
Land acquired at improved margins to meet 2004 volume growth
c.90% of 2004 plots in hand to deliver further volume growth
options and higher asset turn limit cash required to sustain growth
43
Summary and outlook
Peter Johnson
Next steps
Actions taken provide platform for growth in 2003 and beyond
George Wimpey operating margins at sustainable levels
costs well under control in a low-inflation environment
land programme in place to allow steady growth in UK volumes
longer term profit growth from Laing Homes cost reduction programme
and improved land purchase terms
ongoing growth in options and options related income
Morrison well-placed to sustain strong volume and profit growth
45
Outlook
Market conditions remain healthy in both UK and US Encouraging recent sales rates in both markets
UK
GW order book and current sales at margins similar to H1
H2 volumes likely to be similar to or slightly ahead of H2 2002
Laing Homes 2003 full year results expected to be in line with 2002
Morrison Homes
strong order book and current sales support full year volume growth
order book and current sales at margins similar to H1
The Board is confident of achieving full year results around the top
end of market expectations46
Appendix
To interim results presentation for half year to 30 June 2003
30 July 2003
H1 2003 H1 2002
Operating profit
Interest charge
148.0 105.5
(25.3) (19.2)
Profit before tax
Interest cover last 12 months
122.7 86.3
8.5x 6.6x
£m
Published results
ii
Operating profit
Land spend
Acquisitions and disposals
Land realisations
Other working capital
Tax
Funding costs
CASH OUTFLOW BEFORE FINANCING
H12003
H12002
148 106
(482) (237)
(120) (85)
254 243
(157) (17)
(54) (25)
(34) (28)
(445) (43)
£m
Cash flow summary
iii
Balance sheet
Shareholders funds
Net debt
CAPITAL EMPLOYED
Fixed assets
Land
Other current assets
Deferred Tax
Tax and provisions
Deferred consideration
ASSETS EMPLOYED
Gearing
Shareholder’s funds
1,022 833
812 416
1,834 1,249
27 23
1,642 1,257
491 337
16 16
(82) (59)
(92) (161)
1,834 1,249
79% 50%
268p 222p
June2003
June2002£m
iv
Land creditors (168) (164)
GW social
Sales
H12003
Ave sitesPer outlet /per week
H12002
H12003
H12002
H12003
H12002
World-wide sales
GW PD
Laing PD
Laing social
UK TOTAL
6,371 7,597 280 308 0.88 0.95
530 - 35 - 0.58 -
263 284
70 -
7,234 7,881 315 308
US TOTAL
GROUP TOTAL
1,938 1,884 103 109 0.73 0.66
9,172 9,765 418 417v
H12003
H12002
H22002
2002full year
Ave house size sqft 1,056 1,062 1,058 1,059
Ave selling price £ / sqft 154.5 132.3 145.3 139.7
George Wimpey -PD completions analysis
vi
H12003
H12002
H22002
2002full year
George Wimpey -turnover analysis
PD - volume
ave price £000s
4,125 5,298 6,847 12,145
163.1 140.4 153.7 147.9
turnover £m 673 744 1,052 1,796
Partnership* - volume
ave price £000s
245 478 651 1,129
75 64 74 70
turnover £m 18 31 48 79
Other turnover mainly land sales 0 18 37 55
TOTAL £m 691 793 1,137 1,930
* includes contracting partnership vii
H12003
H12002
H22002
2002full year
George Wimpey -margin analysis
Gross margin %
Gross profit £m
27.0 20.3 22.5 21.6
186.8 161.2 256.2 417.4
Selling expenses £m (29.8) (27.8) (29.1) (56.9)
Overhead costs £m
OPERATING PROFIT £m
(43.0) (42.9) (47.4) (90.3)
114.0 90.5 179.7 270.2
Operating margin % 16.5 11.4 15.8 14.0
Fair value items (FVI) £m 2.0 5.7 8.1 13.8
OP MARGIN % before FVI 16.8 12.1 16.5 14.7
viii
H12003
H12002
H22002
2002full year
George Wimpey -product mix
Flats
1 & 2 bedroom houses
21 18 19 18
8 10 11 11
3 bed semi / terraced 19 19 19 19
3 bed detached
4 & 5 bedroom houses
7 7 6 7
45 46 45 45
100 100 100 100
%
ix
H12003
H12002
H22002
2002full year
0 - 50
51 - 75
0 1 1 1
4 10 5 7
76 - 100 13 20 16 18
101 - 125
126 - 150
16 19 21 20
21 17 21 19
151 - 175 17 11 12 12
176 - 200
201+
10 7 9 8
- 15 15 15
201 - 250 11 - - -
251 - 300
301+
4 - - -
4 - - -
100 100 100 100
% completions by price£000s
x
George Wimpey -price mix
North
Midlands
South
Total
George Wimpey -geographic mix
xi
Legals
H1 2003 H1 2002
LegalsSizesqft
ASP£000
1,509 1,103 140 1,886 1,071 108
1,528 1,014 156 1,843 1,016 134
1,088 1,050 206 1,569 1,105 186
4,125 1,056 163 5,298 1,062 140
Sizesqft
ASP£000
Legals
H2 2002
2,428 1,116 127
2,324 1,025 150
2,095 1,030 189
6,847 1,058 154
Sizesqft
ASP£000
Owned andcontrolled plots
June2003
June2002
North
Midlands
South
Total
13,311 14,344
14,811 14,533
14,440 13,426
42,562 42,303
Long term acres
June*2003
June2002
4,990 5,847
5,532 3,822
8,322 6,631
18,844 16,300
George Wimpey -land
xii* includes transfer of Laing Homes’ long term acres
H12003
H12002
H22002
2002full year
George Wimpey -short term land
xiii
Start of period
Net additions
29,536 32,348 29,788 32,348
5,194 2,738 6,595 9,333
Legal completions (4,125) (5,298) (6,847) (12,145)
End of period
CONTROLLED
30,605 29,788 29,536 29,536
11,957 12,515 11,396 11,396
TOTAL LANDBANK 42,562 42,303 40,932 40,932
OWNED
Plots
H1 2003 H1 2002
PlotsCost perplot £k
Value£m
Opening landbank 29,536 34.7 1,025 32,348 32.8 1,062
Net additions 5,194 44.1 229 2,738 54.1 148
Legal completions (4,125) (37.5) (155) (5,298) (35.9) (190)
End of period 30,605 35.9 1,099 29,788 34.2 1,020
Cost perplot £k
Value£m
George Wimpey -owned land
xiv
H1 20032002
full year
Ave house size sqft 1,317 1,138
Ave selling price £ / sqft 251 243
Laing Homes - PD completions analysis
xv
H12003
H12002
H22002
2002full year
Laing Homes - turnover analysis
PD - volume
ave price £000s
310 558 728 1,286
331 258 293 276
turnover £m 103 144 211 355
Social - volume
ave price £000s
9 74 130 204
102 95 96 96
turnover £m 1 7 13 20
Other turnover mainly land sales 10 14 10 24
TOTAL £m 114 165 234 399
xvi
H1 20032002
full year
Flats
3 bed
38 44
23 25
4 & 5 bed 39 31
100 100
Completions %
Laing Homes - product mix
xvii
100 - 150
151 - 200
200 - 250
251 - 300
301 - 500
501 - 1000
xviii
TOTAL
H12003
% 2002full year
%
- - 207 16
43 14 351 27
88 28 194 15
50 16 130 10
87 28 301 24
42 14 103 8
310 100 1,286 100
£ 000s
Laing Homes - price mix
June2003
Dec2002
Owned
Controlled
3,214 2,690
912 923
TOTAL LANDBANK 4,126 3,613
Laing Homes - land
xix
Plots
Ave house size sqft
H12003
H12002
H22002
2002full year
2,344 2,393 2,417 2,407
Ave selling price $ / sqft 113.3 102.4 106.1 104.6
Morrison Homes -PD completions analysis
xx
H12003
H12002
H22002
2002full year
Morrison Homes -turnover analysis
PD - volume
ave price $000s
1,521 1,325 1,872 3,197
266 245 256 252
turnover $m 404 324 480 804
Other turnover 5 2 0 2
TOTAL $m 409 326 480 806
xxi
H12003
H12002
H22002
2002full year
Morrison Homes - margin analysis
Gross margin %
Gross profit $m
23.0 21.4 22.1 21.9
93.9 69.8 106.2 176.0
Selling expenses $m (23.9) (20.3) (26.9) (47.2)
Overhead costs $m
OPERATING PROFIT $m
(24.7) (21.8) (26.3) (48.1)
45.3 27.7 53.0 80.7
Operating margin % 11.1 8.5 11.0 10.0
xxii
Morrison Homes - regional performance
Turnover
H1 2003$m
H1 2002$m
West 157 115
Southeast 175 158
Southwest 77 53
Corporate - -
Total 409 326
H1 2003$m
H1 2002$m
29.7 16.9
15.5 15.5
5.2 0.9
(5.1) (5.6)
Operating profit
45.3 27.7
Operating margin
H1 2003%
H1 2002%
18.9 14.7
8.9 9.8
6.8 1.7
- -
11.1 8.5
xxiii
H12003
H12002
H22002
2002full year
Morrison Homes - short term land
Start of period
Net additions
11,796 10,160 10,636 10,160
2,299 1,801 3,032 4,833
Legal completions (1,521) (1,325) (1,872) (3,197)
End of period
CONTROLLED
12,574 10,636 11,796 11,796
2,751 1,900 1,643 1,643
TOTAL LAND BANK 15,325 12,536 13,439 13,439
LAND SPEND $m 83 56 117 173
OWNED AND OPTIONS
xxiv
West
Southeast
H12003
H12002
H22002
2002full year
521 433 644 1,077
687 673 868 1,541
Southwest 313 219 360 579
Morrison Homes -legal completions
xxv
TOTAL 1,521 1,325 1,872 3,197
West
Southeast
H12003
H12002
H22002
2002full year
297 265 288 279
254 235 242 239
Southwest 238 235 239 237
Morrison Homes -average selling price
xxvi
TOTAL 266 245 256 252
$ 000s
