Interim Results for half year ended 30 June 2002

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

º restated for FRS 19 * before June 2001 exceptional items of £14.2m

20021st half

1,018

105.5

%change

+ 44

+ 59

20011st half °

707

66.2

Revenue £ m

Operating profit * £ m

86.3

15.7

3.2

+ 63

+ 56

+ 10

53.1

10.1

2.9

Earnings per share * p

Dividend per share p

Profit before tax * £ m

Interest charge £ m (19.2) (13.1) + 47

ROACE % 21.2 16.8

5

Segmental analysis

£ m%

change£ m%

change2001

1st half2002

1st half

793

225

1,018

+ 6890.5

+ 2519.1

(4.1)

+ 59105.5

+ 55

+ 19

+ 44

US ˜

GROUP

UK

Corporate

10.511.4

8.18.5

9.410.4

Revenue Operating profit * Operating margin ‘%

* before exceptionals ‘ after fair value adjustments ˜ exchange rate in 2002 $/£=1.45

6

First half completions

No%

change‘000%

change

5,298

405

+ 19£140

+ 4£63

+ 27

+ 71UK - social

UK - pd

5,703 + 30UK - total

Completions Average selling price

7,028 + 27GROUP

1,325 + 4$245+ 16US

7

UK margin analysis

£m%

to sales£m%

to sales

161.2 21.2108.720.3Gross profit

2002 1st half 2001 1st half

(70.7) 10.7(54.7)8.9Overhead costs

90.5 10.554.011.4Operating profitafter FVIs

5.7 --0.7Fair value items

Operating profitbefore FVIs

96.2 12.1 54.0 10.5

8

Impact of FRS 19

86.3

(27.6)

32

15.6

38.9

(8.8)

23

-

20021st half

20011st half

previously published

20011st halfrestated

38.9

(12.4)

32

30.6

Profit before tax £ m

Tax £ m

Tax rate %

Balance sheet tax asset £ m

9

UK pensions

1999 valuation £47 m surplusactuarial valuation £45 m deficit on unchanged assumptionsactuarial 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

2002

106

(237)

2001

52

(261)

Operating profit after exceptionals

(85) (15)Acquisitions

(25)

(28)

(43)

(14)

(30)

(181)

Tax

CASH OUTFLOW BEFORE FINANCING

Funding costs

Land spend

243

(17)

148

(61)

Land realisations

Other working capital

£ m

11

Balance sheet capital employed

2002June

2001June £ m

23 18

1,093

337

16

(59)

831

305

31

(50)

Deferred consideration

ASSETS EMPLOYED

Fixed assets

Land (net of creditors)

Other current assets

Tax and provisions

Deferred tax

(161)

1,249

0

1,135

12

Balance sheet financing

2002June

833

416

1,249

2001June

725

410

1,135

Shareholders funds

Interest cover (times)

Gearing

Net debt £ m

Capital employed £ m

£ m

50%

5.5

57%

5.1

Interest cover (times) net of imputed interest 8.2 5.1

13

Landowned and controlled

‡ at 12 month build rate

Total land value £ m

Short term land bank in years ‡

Short term plots

Plot change since prior December

June 2002

1,133

42,303

+ 1,736

3.3

June 2001

790

31,920

- 1,530

3.0

June2002

120

12,536

+ 301

4.1

June 2001

116

11,500

+ 1,530

4.1

UK US

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

+ 30

+ 55

+ 19

+ 68

4,9974,398

532512

109118

54.454.0

10.210.5

5,703

793

140

90.5

12.1

ASP £000

Completions

Operating margin * %

Revenue £ m

Operating profit £ m

2001 - 20021st half

% change

20001st half

20011st half

20021st half

2001full year

11,537

1,406

123

173.6

12.4

* 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 sites20

Restructuring plus McAlpine transforming the business

short term landbank refocusedbetter balance of prime and secondary locationsland purchased in H1 2002 sustains new geographic mix

average selling price up 19% to £140,00015% of sales in H1 in excess of £200,000land 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

Midlands

North

South

3.3 years42,303 plotsLandbank at June 2002

49%

19%

42%

22%

32%36%

Dec2000

Dec2001

41%

22%

37%

June2002

Owned and controlled plots

28%

35%

37%

1st half2002

LPE approved plots

34%

29%

37%

1st half2001

22





23

Selling price increase

%change

+ 30

+ 1

+ 18

+ 19

+ 55

20021st half

5,703

1,062

132.3

140

793

20011st half

4,398

1,051

112.6

118

512

Completions

TURNOVER £ m

Average square footage per unit

Average selling price £ per square foot

Average selling price per unit £000

24





25

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

H1 2000 H2 2000 H1 2001 H2 2001 YTD 2002

PBIT %

Land purchase margins

26

George Wimpeymargin 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 locationslarge increase in proportion of apartments soldnumber 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 200128

Product mix and price range

20001st half

%

6

72

24

4

20021st half

%

18

50

35

15

20011st half

%

9

67

26

7

Completions from - apartments

Completions > £200,000

1410 131 and 2 bed houses

Completions £0 -125,000

Completions £125,000 - 200,000

2926 263 bed houses

5146 524 + bed houses

29











Options revenue per completion

3,717

1,690

3,224

+ 13

- 2

3,295

Total George Wimpey

Former George Wimpey outlets

Former McAlpine outlets

20021st half

£

%change

20011st half

£

17.1 + 2513.7TOTAL SALES REVENUE £ m

0

3,295

31











George Wimpey average selling price

Half yearly average selling prices

0

20

40

60

80

100

120

140

160

H1 2000 H2 2000 H1 2001 H2 2001 H1 2002 Order Book

£ '000

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

+ 16

+ 20

+ 4

+ 25

9471,142

221272

224236

12.222.1

5.58.1

1,325

326

245

27.7

8.5

ASP $000

Legal completions

Operating margin %

Revenue $ m

Operating profit $ m

2001 - 20021st half

% change

20001st half

20011st half

20021st half

2001full year

2,900

693

238

66.4

9.6

36

Market

US economyrecovery slower and more uncertain than expectedunemployment has remained below 6% throughout H1 200230 year mortgage rate at a 32 year low of 6.22%

US Housing market2002 revised forecast stronger than anticipated

single family starts up 3.6% to ~1.32 million unitssupported by strong underlying demographic trends

Morrison MarketsAtlanta, 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

20011st half

20021st half

66.2105.5

(13.1)(19.2)

53.186.3

(14.2)-

38.986.3

5.18.2

Operating profit before exceptionals

Profit before tax

Interest cover before exceptionals

Interest charge

Exceptionals

£ m

PBT before exceptionals

47

Cash flow highlights

2002

106

(237)

243

(17)

(85)

(25)

(28)

(43)

2001

52

(261)

148

(61)

(15)

(14)

(30)

(181)

Operating Profit after Exceptionals

Acquisitions

Tax

CASH OUTFLOW BEFORE FINANCING

Funding Costs

Land Spend

Land Realisations

Other Working Capital

£m

48

Balance sheet

2002June

833

416

1,249

23

2001June

725

410

1,135

18

1,093

337

16

(59)

831

305

31

(50)

Shareholders funds

Deferred consideration

ASSETS EMPLOYED

Shareholders funds

Gearing

Net debt

CAPITAL EMPLOYED

Fixed assets

£m

Land (net of creditors)

Other current assets

Tax and provisions

Deferred tax

(161)

1,249

50%

222p

0

1,135

57%

195p

49

World-wide sales

7,597

284

7,881

1,884

9,765

271308

--

271308

89109

360417

5,978

282

6,260

1,698

7,958

UK - total

UK -pd

GROUP

UK - social

US

20021st half

20011st half

20021st half

20011st half

20011st half

20021st half

0.850.95

--

--

0.730.66

0.850.90

Sales Ave sites Selling rateper outlet / week

50

UK housing PD activity analysis

308

1,062

132.3

283 277

1,027 1,036

125.1 118.2

271

1,051

112.6Average selling price £ / sq ft

Average number of sites

Average house size sq ft

20021st half

20012nd half

2001Year

20011st half

51

UK housing turnover analysis

20012nd half

2001Year

6,768 10,929

125.1 122.6

847 1,339

381 608

60 61

23 37

24 30

1,406894

20021st half

5,298

140.4

744

405

63

25

20011st half

4,161

118.3

492

237

60

14

24

793

6

512

PD - volume

ave price £000

turnover £ m

TOTAL £ m

Other turnover (mainly land sales)

ave price £000

turnover £ m

Partnership - volume

52

UK housing margin analysis

20012nd half

2001Year

20.1 20.5

179.7 288.4

(22.1) (44.8)

(38.0) (70.0)

119.6 173.6

13.4 12.4

0.9 0.9

12.413.5

20021st half

20.3

161.2

(27.8)

(42.9)

90.5

11.4

5.7

12.1

20011st half

21.2

108.7

(22.7)

(32.0)

54.0

10.5

-

10.5

Gross margin %

OPERATING PROFIT £ m

Operating margin %

OP MARGIN % before FVI

Fair value items (FVI) £ m

Gross profit £ m

Selling expenses £ m

Overhead costs £ m

53

UK housing product mix

20012nd half

%

2001Year

%

12 11

12 12

19 19

8 8

49 50

20021st half

%

18

10

19

7

100

20011st half

%

9

13

18

8

52

Flats

4 and 5 bedroom houses

1 and 2 bedroom houses

3 bed semi / terraced

3 bed detached

46

100 100100

54

UK housing geographic mix

20021st half

12

28

24

25

100

20012nd half

2001Year

13 13

33 32

21 22

23 23

10 10

20011st half

13

29

25

23

10

Scotland

South West / Wales

North

Midlands

South East

11

100 100100

% LEGALS BY AREA

55

UK housing price mix

20021st half

1

10

20

20012nd half

2001Year

0 2

15 15

25 26

20011st half

3

15

29

0 - 50

51 - 75

76 - 100

% LEGALS BY PRICE £000

19

11

23 22

17 15

20

13126 - 150

101 - 125

17

8 88151 - 175

7

100

5 5

7 7

5

7201 +

176 - 200

15

100 100100

56

UK housing long term land

3,550

12,750

16,300

7888

2225

100113

22

78

100TOTAL

Freehold

Option

6531

3517

10048


Gross Acres %

Value£ m% %

Value£ m%

GrossAcres

232,500

778,200

10010,700

57

UK housing short term land

20012nd half

2001Year

23,860 24,000

15,256 19,277

(6,768) (10,929)

32,348 32,348

8,219 8,219

40,567 40,567

20021st half

32,348

2,738

(5,298)

29,788

12,515

42,303

20011st half

24,000

4,021

(4,141)

23,860

8,060

31,920

Start of period

Controlled

TOTAL LAND BANK

Net additions

Legal completions

End of period

OWNED PLOTS

58

UK housing land

32,348 24,0001,06232.8Opening land bank


Plots PlotsValue£ m

Cost perplot

£000

Value£ m

Cost perplot

£00068828.7

(5,298)

29,788

(4,161)(190)

23,8601020

(35.9)

34.2END OF PERIOD

Legal completions

(108)(26.0)

74231.1

4,139

(1,401)

4,040192

(19)(44)

46.4

(31.4)Land sales / LT land

Additions 16741.3

(5)-

59

US housing PD activity analysis

109

2,393

102.4

105 97

2,356 2,372

101.4 100.2

20021st half

20012nd half

2001Year

20011st half

89

2,396

98.4

Average no of sites

Average house size sq ft

Average selling price $/sq ft

60

US housing turnover analysis

1,758 2,900

20012nd half

2001Year

239 238

420 689

1 4

421 693

1,325

20021st half

20011st half

1,142PD - volume

245

324

236

269

ave price $000

turnover $ m

2

326

3

272

Other - $ m

TOTAL $ m

61

US housing margin analysis

20012nd half

2001Year

21.9 21.6

91.9 149.1

0.1 0.3

92.0 149.4

(25.0) (41.9)

(22.7) (41.1)

44.3 66.4

9.610.5

20021st half

21.1

68.3

1.5

69.8

(20.3)

(21.8)

20011st half

21.2

57.2

0.2

57.4

(16.9)

(18.4)

27.7

8.5

22.1

8.1

PD - margin %

Selling expenses $ m

Overhead costs $ m

Operating margin %

OPERATING PROFIT $ m

profit $ m

Other - profit $ m

TOTAL GROSS PROFIT $ m

62

US housing legals

535 853

20012nd half

2001Year

666 1,048

298 535

259 464

1,758 2,900

433

20021st half

20011st half

318Western US

509

219

382

237

Florida

Texas

164

1,325

205

1,142

Georgia

TOTAL

63

US housing short term land

20021st half

10,160

1,801

(1,325)

10,636

1900

12,536

20012nd half

2001Year

9,860 8,330

2,058 4,730

(1,758) (2,900)

10,160 10,160

2,075 2,075

12,235 12,235

20011st half

8,330

2,672

(1,142)

9,860

1,640

11,500

56 65 13267

Owned start of period

Controlled

TOTAL LAND BANK

LAND SPEND $ m

net additions

legal completions

end of period

64

Documents

Interim Results for half year ended 30 June 2002