Transcript Document

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 Plc
Interim Results
for 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 policy
7
H1 2003 financial review
Andrew Carr-Locke
Group Finance Director
First half results
H1
2003
H1
2002
Change
Turnover
1,059
1,017
+4%
Operating profit
148.0
105.5
+40%
Interest charge
(25.3)
(19.2)
+32%
Profit before tax
122.7
86.3
+42%
Earnings per share
22.5p
15.7p
+43%
Dividend per share
3.8p
3.2p
+19%
24.1%
21.2%
£m
ROACE*
*Last 12 months, before exceptionals 9
Segmental analysis
Turnover
Operating
profit1
£m
Change
£m
Change
George Wimpey
691
(13)%
114
+26% 16.5% 11.4%
Laing Homes
114
-
12
-
Morrison Homes2
254
+13%
28
+47%
-
-
(6)
-
148
+40%
Group
See appendix:
1,059 +4%
TOTAL
Operating
margin1
H1
H1
2003 2002
10.6%
-
11.1% 8.5%
(vii) (viii) (xvi)
(xxi) (xxii)
1
After fair value items
2
Exchange rate in 2002 $/£=1.45, 2003 $/£=1.61 10
First half completions
Completions
No
Change
£/$
Change
4,125
(22)%
£163,000
+16%
GW social1
245
(49)%
£75,000
+17%
Laing PD
310
-
£331,000
-
9
-
£102,000
-
UK total
4,689
(19)%
US total
1,521
+15%
$266,000
+9%
GROUP TOTAL
6,210
(13)%
GW PD
Laing social
See appendix:
Ave selling price
(vii) (xvi) (xxi)
1
Includes contract partnership 11
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
Cash flow summary
H1
2003
H1
2002
148
106
Land spend
(482)
(237)
Acquisitions
(120)
(85)
254
243
Other working capital
(157)
(17)
Tax
(54)
(25)
Funding costs
(34)
(28)
(445)
(43)
£m
Operating profit
Land realisations
CASH OUTFLOW BEFORE FINANCING
13
Balance sheet net assets
June
2003
June
2002
27
23
Land
1,642
1,257
Land creditors
(168)
(164)
Other current assets
491
337
Tax and provisions
(66)
(43)
Deferred consideration
(92)
(161)
1,834
1,249
£m
Fixed assets
See appendix:
TOTAL NET ASSETS
(iv)
14
Analysis of increase in
assets in last 12 months
George Wimpey
£m
McAlpine payments
163
1
106
Investment in land
Investment in WIP
52
Sub-total
Laing Homes
321
Acquisition payments
Investment in land
200
2
60
Other working capital
(23)
Sub-total
Morrison Homes
Corporate
237
Investment in land
43
Other mainly exchange
(10)
Sub-total
33
Sub-total
(6)
TOTAL
585
1
Net of creditors
2
Net of creditors, since acquisition
15
Balance sheet financing
June
2003
June
2002
1,022
833
812
416
Capital employed £m
1,834
1,249
Gearing
79%
50%
Interest cover*
8.5x
6.6x
10.5x
9.5x
Shareholder’s funds £m
Net debt £m
See appendix:
Underlying interest cover*
net of imputed interest
(iv)
*Last 12 months, before exceptionals 16
Land owned and controlled
PD and social housing
GW
Laing
Morrison
June
2003
June
2002
June
2003
June
2002
June
2003
June
2002
Total land value £m
1,209
1,133
280
-
153
120
Owned plots
30,605 29,788 3,214
-
12,574 10,636
Controlled plots
11,957 12,515
-
2,751
Short term plots
42,562 42,303 4,126
-
15,325 12,536
Short term landbank
in years
3.4
3.3
912
3.4
-
4.1
1,900
4.1
See appendix:
17
(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
Financial summary
George Wimpey
Legal completions
PD ave selling price
(vi) (vii) (viii)
(xi)
H1 2003
H1 2002
H1 2003
4,370
5,776
319
£163,000 £140,000
£331,000
691
793
114
Operating profit £m
114.0
90.5
12.0
Operating margin*
16.5%
11.4%
10.6%
Turnover £m
See appendix:
Laing Homes
* after fair value items
20
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
Revenue
per plot
High:
GW East London
£9,133
George Wimpey
£4,860
Laing Homes
£3,565
GW Midland
£2,865
Average:
Low:
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 established
23
George Wimpey
2003 a ‘normal’ market
H1 2003
GW
H1 2002
H1 2001
Visitors
per site
per week
Sales
per
week
Visitors
per site
per week
Sales
per
week
Visitors
per site
per week
Sales
per
week
12.9
0.88
12.6
0.95
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 2002
Incentives remain at ‘normal’ levels
at week 29 use of P/X and APP at lowest levels ytd
25
George Wimpey sales rates
Sales per week per site
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1
4
7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Week no
2001
2002
2003
26
Margin reconciliation
H1 2003
H1 2002
£m
% to sales
£m
% to sales
186.8
27.0%
161.2
20.3%
Fair value items
2.0
0.3%
5.7
0.7%
Overhead costs
(72.8)
10.5%
(70.7)
8.9%
Operating profit
116.0
16.8%
96.2
12.1%
114.0
16.5%
90.5
11.4%
Gross profit
before fair value items
Operating profit
after fair value items
See appendix:
(viii)
27
Land purchase margins
18%
16%
14%
12%
10%
8%
PBIT%
6%
4%
2%
0%
H1 2000
H2 2000
H1 2001
H2 2001
H1 2002
H2 2002
H1 2003
28
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
H1
2003
H1
2002
North
31%
34%
Midlands
35%
34%
South
34%
32%
% landbank
See appendix:
(xii) (xiii) (xiv)
as promised strategic landbank now delivering land into short term
landbank
29
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
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
% completions from:
H1
2003
H1
2002
H1
2001
Apartments
21%
18%
9%
1 & 2 bed houses
8%
10%
13%
3 bed houses
26%
26%
26%
4 & 5 bed houses
45%
46%
52%
See appendix:
(ix)
54% brownfield completions H1 2003
31
Laing Homes
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
 overheads
 standard detailing
 procurement
£10 million on target for 2004
Increased investment in land, being acquired on improved margins
Experienced management team retained after acquisition
33
Market conditions
All price points selling equally
See appendix:
(xvii)
PD completions
H1 2003
£000
%
Nov / Dec
2002
%
<300
181
58
227
61
301 - 500
87
28
105
28
500 +
42
14
39
11
Total
310
100
371
100
Visitor rates similar to 2002
Sales rates down on 2002
Investors starting to return
June and July ahead of 2002 for both visitors and sales
34
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
35
UK summary
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
37
US business review
Peter Johnson
US housing market
Positive outlook for US housing and Morrison markets, in particular:
Short term factors
continuing low 30-year mortgage rates
job and income growth predicted for H2 2003
NAHB predicts record new homes sales in 2003, just under 1m units
Florida and California staying strong; Texas, Phoenix picking up
Long term factors
demand set to remain high (~1m SF houses) until at least 2020
record 9 million 1990’s immigrants entering house ownership market
echo baby boomers - 60m births 1979 to 1994 - also entering market
ageing population with record home ownership - up to 68%
continuing job and retirement migration to south and west
39
Immigration and birth rates
1940-2000
10,000,000
4,500,000
Echo Boom
9,095,417
9,000,000
4,300,000
Baby Boom
4,100,000
7,338,062
7,000,000
3,900,000
6,000,000
3,700,000
4,493,314
5,000,000
3,500,000
4,000,000
3,300,000
3,321,677
3,000,000
No. births
No. immigrants
8,000,000
3,100,000
2,515,479
2,000,000
2,900,000
1,035,039
1,000,000
2,700,000
0
2,500,000
1940's
1950's
1960's
Immigrants
1970's
Birth Rate
1980's
1990's
40
Financial summary
H1 2003 H1 2002
Legal completions
%
change
1,521
1,325
+15%
$266,000
$245,000
+9%
Revenue $m
409
326
+25%
Operating profit $m
45.3
27.7
+64%
Operating margin %
11.1
8.5
+2.6pp
Ave selling price
See appendix:
(xxi) (xxii)
41
Margin reconciliation
H1 2003
H1 2002
$m
% to sales
$m
% to sales
93.9
23.0%
69.8
21.4%
Selling expenses
(23.9)
(5.9)%
(20.3)
(6.2)%
Overhead costs
(24.7)
(6.0)%
(21.8)
(6.7)%
45.3
11.1%
27.7
8.5%
Gross profit
OPERATING PROFIT
See appendix:
(xxii)
42
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 expectations
46
Appendix
To interim results presentation for half year to 30 June 2003
30 July 2003
Published results
H1 2003
H1 2002
Operating profit
148.0
105.5
Interest charge
(25.3)
(19.2)
Profit before tax
122.7
86.3
8.5x
6.6x
£m
Interest cover last 12 months
ii
Cash flow summary
H1
2003
H1
2002
148
106
(482)
(237)
254
243
Other working capital
(157)
(17)
Acquisitions and disposals
(120)
(85)
Tax
(54)
(25)
Funding costs
(34)
(28)
(445)
(43)
£m
Operating profit
Land spend
Land realisations
CASH OUTFLOW BEFORE FINANCING
iii
Balance sheet
£m
Shareholders funds
Net debt
CAPITAL EMPLOYED
Fixed assets
Land
Land creditors
Other current assets
Deferred Tax
Tax and provisions
Deferred consideration
ASSETS EMPLOYED
Gearing
Shareholder’s funds
June
2003
June
2002
1,022
812
1,834
833
416
1,249
27
1,642
(168)
491
16
(82)
(92)
1,834
23
1,257
(164)
337
16
(59)
(161)
1,249
79%
268p
50%
222p
iv
World-wide sales
Sales
Ave sites
Per outlet /
per week
H1
2003
H1
2002
H1
2003
H1
2002
H1
2003
H1
2002
6,371
7,597
280
308
0.88
0.95
Laing PD
530
-
35
-
0.58
-
GW social
263
284
Laing social
70
-
UK TOTAL
7,234
7,881
315
308
US TOTAL
1,938
1,884
103
109
0.73
0.66
GROUP TOTAL
9,172
9,765
418
417
GW PD
v
George Wimpey PD completions analysis
H1
2003
H1
2002
H2
2002
full 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
2002
vi
George Wimpey turnover analysis
PD
-
Partnership* -
H1
2003
H1
2002
H2
2002
full year
volume
4,125
5,298
6,847
12,145
ave price £000s
163.1
140.4
153.7
147.9
turnover £m
673
744
1,052
1,796
volume
245
478
651
1,129
ave price £000s
75
64
74
70
turnover £m
18
31
48
79
0
18
37
55
691
793
1,137
1,930
Other turnover mainly land sales
TOTAL £m
2002
* includes contracting partnership
vii
George Wimpey margin analysis
H1
2003
H1
2002
H2
2002
full year
Gross margin %
27.0
20.3
22.5
21.6
Gross profit £m
186.8
161.2
256.2
417.4
Selling expenses £m
(29.8)
(27.8)
(29.1)
(56.9)
Overhead costs £m
(43.0)
(42.9)
(47.4)
(90.3)
OPERATING PROFIT £m
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
2002
viii
George Wimpey product mix
H1
2003
H1
2002
H2
2002
full year
Flats
21
18
19
18
1 & 2 bedroom houses
8
10
11
11
3 bed semi / terraced
19
19
19
19
3 bed detached
7
7
6
7
4 & 5 bedroom houses
45
46
45
45
100
100
100
100
%
2002
ix
George Wimpey price mix
% completions by price
£000s
0 - 50
51 - 75
76 - 100
101 - 125
126 - 150
151 - 175
176 - 200
201+
201 - 250
251 - 300
301+
H1
2003
H1
2002
H2
2002
full year
0
4
13
16
21
17
10
11
4
4
100
1
10
20
19
17
11
7
15
100
1
5
16
21
21
12
9
15
100
1
7
18
20
19
12
8
15
100
2002
x
George Wimpey geographic mix
H1 2003
Legals
Size
sqft
ASP
£000
H1 2002
Legals
Size
sqft
ASP
£000
H2 2002
Legals
Size
sqft
ASP
£000
North
1,509 1,103 140
1,886 1,071 108
2,428 1,116
Midlands
1,528 1,014 156
1,843 1,016 134
2,324 1,025 150
South
1,088 1,050 206
1,569 1,105 186
2,095 1,030 189
Total
4,125 1,056 163
5,298 1,062 140
6,847 1,058 154
127
xi
George Wimpey land
Owned and
controlled plots
June
June
2003
2002
Long term acres
June*
2003
June
2002
North
13,311
14,344
4,990
5,847
Midlands
14,811
14,533
5,532
3,822
South
14,440
13,426
8,322
6,631
Total
42,562
42,303
18,844
16,300
* includes transfer of Laing Homes’ long term acres xii
George Wimpey short term land
H1
2003
H1
2002
H2
2002
full year
Start of period
29,536
32,348
29,788
32,348
Net additions
5,194
2,738
6,595
9,333
Legal completions
(4,125)
(5,298)
(6,847) (12,145)
End of period
30,605
29,788
29,536
29,536
CONTROLLED
11,957
12,515
11,396
11,396
TOTAL LANDBANK
42,562
42,303
40,932
40,932
OWNED
2002
xiii
George Wimpey owned land
H1 2003
H1 2002
Plots
Cost per
plot £k
Value
£m
Plots
Cost per
plot £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
xiv
Laing Homes PD completions analysis
Ave house size sqft
Ave selling price £ / sqft
H1 2003
2002
full year
1,317
1,138
251
243
xv
Laing Homes turnover analysis
H1
2003
H1
2002
H2
2002
full year
volume
310
558
728
1,286
ave price £000s
331
258
293
276
turnover £m
103
144
211
355
9
74
130
204
102
95
96
96
1
7
13
20
Other turnover mainly land sales
10
14
10
24
TOTAL £m
114
165
234
399
PD
Social
-
-
volume
ave price £000s
turnover £m
2002
xvi
Laing Homes product mix
H1 2003
2002
full year
Flats
38
44
3 bed
23
25
4 & 5 bed
39
31
100
100
Completions %
xvii
Laing Homes price mix
H1
2003
%
100 - 150
-
-
207
16
151 - 200
43
14
351
27
200 - 250
88
28
194
15
251 - 300
50
16
130
10
301 - 500
87
28
301
24
501 - 1000
42
14
103
8
TOTAL
310
100
1,286
100
£ 000s
2002
full year
%
xviii
Laing Homes land
Plots
Owned
Controlled
TOTAL LANDBANK
June
2003
Dec
2002
3,214
2,690
912
923
4,126
3,613
xix
Morrison Homes PD completions analysis
H1
2003
H1
2002
H2
2002
full year
Ave house size sqft
2,344
2,393
2,417
2,407
Ave selling price $ / sqft
113.3
102.4
106.1
104.6
2002
xx
Morrison Homes turnover analysis
PD
H1
2003
H1
2002
H2
2002
full year
1,521
1,325
1,872
3,197
ave price $000s
266
245
256
252
turnover $m
404
324
480
804
5
2
0
2
409
326
480
806
volume
-
Other turnover
TOTAL $m
2002
xxi
Morrison Homes margin analysis
H1
2003
H1
2002
H2
2002
full year
Gross margin %
23.0
21.4
22.1
21.9
Gross profit $m
93.9
69.8
106.2
176.0
Selling expenses $m
(23.9)
(20.3)
(26.9)
(47.2)
Overhead costs $m
(24.7)
(21.8)
(26.3)
(48.1)
OPERATING PROFIT $m
45.3
27.7
53.0
80.7
Operating margin %
11.1
8.5
11.0
10.0
2002
xxii
Morrison Homes regional performance
Turnover
H1 2003 H1 2002
$m
$m
Operating profit
Operating margin
H1 2003
$m
H1 2002
$m
H1 2003
%
H1 2002
%
West
157
115
29.7
16.9
18.9
14.7
Southeast
175
158
15.5
15.5
8.9
9.8
Southwest
77
53
5.2
0.9
6.8
1.7
Corporate
-
-
(5.1)
(5.6)
-
-
409
326
45.3
27.7
11.1
8.5
Total
xxiii
Morrison Homes short term land
OWNED AND OPTIONS
H1
2003
H1
2002
H2
2002
full year
Start of period
11,796
10,160
10,636
10,160
Net additions
2,299
1,801
3,032
4,833
Legal completions
(1,521)
(1,325)
(1,872)
(3,197)
End of period
12,574
10,636
11,796
11,796
CONTROLLED
2,751
1,900
1,643
1,643
TOTAL LAND BANK
15,325
12,536
13,439
13,439
83
56
117
173
LAND SPEND $m
2002
xxiv
Morrison Homes legal completions
H1
2003
H1
2002
H2
2002
full year
West
521
433
644
1,077
Southeast
687
673
868
1,541
Southwest
313
219
360
579
1,521
1,325
1,872
3,197
TOTAL
2002
xxv
Morrison Homes average selling price
H1
2003
H1
2002
H2
2002
full year
West
297
265
288
279
Southeast
254
235
242
239
Southwest
238
235
239
237
TOTAL
266
245
256
252
$ 000s
2002
xxvi