Transforming Wimpey: a year of change Peter Johnson Chief Executive - GEORGE WIMPEY PLC HSBC HOUSING CONFERENCE 19 October 2001.

Presentation on theme: "Transforming Wimpey: a year of change Peter Johnson Chief Executive - GEORGE WIMPEY PLC HSBC HOUSING CONFERENCE 19 October 2001."— Presentation transcript:

1 Transforming Wimpey: a year of change Peter Johnson Chief Executive - GEORGE WIMPEY PLC HSBC HOUSING CONFERENCE 19 October 2001

2 Transforming Wimpey: a year of change George Wimpey a year ago a new strategy to create value step 1: The merger of Wimpey and McLean achievements and lessons learnt step 2: The acquisition of McAlpine Homes progress to date next steps

3 George Wimpey a year ago low margins in the UK low rating - discount to book value undemanding targets no business strategy excessive bureaucracy Wimpey, McLean and SLM competing demotivated management deteriorating land position

4 A new strategy to create value establish focus on shareholder value restructure Group to reduce costs and increase accountability restructure UK activities to achieve industry standard margins exploit value potential of Morrison Homes restructure senior management and Board

5 A new strategy to create value Restructure UK activities improve land purchase to buy land 0 in the right location 0 at the right time 0 at the right price reduce build costs increase revenue per plot reduce overheads

6 Step 1: The merger of Wimpey and McLean What we did listened to major shareholders involved the organisation at all stages acted quickly and ruthlessly communicated fully and openly set demanding targets internally made realistic promises externally maintained a fast pace

7 Step 1: The merger of Wimpey and McLean What we achieved a single UK business 0 one, decentralised, business model 0 clear lines of authority and accountability 0 speedy, delegated decision-making 0 single set of values and behaviours a new company 0 forward looking 0 moved away from Hammersmith 0 aspiring to be a successful housebuilder

8 Step 1: The merger of Wimpey and McLean What we achieved Total overhead cost saving: £20 m reduced number of regions from 29 to 21 reduced staffing in Wimpey regions closed Wimpey head office total headcount reduced by 435 slimmed corporate office delivered ahead of plan

9 Step 1: The merger of Wimpey and McLean What we achieved Projected build cost savings: £15 m comprehensive benchmarking introduced opportunities identified in product design, product specification, and procurement processes introduced to share experiences benefits already being achieved

10 Step 1: The merger of Wimpey and McLean What we achieved Improved land purchase reduced regional pressure to buy land rapid response time improved opportunities strategic land integrated into the business hurdle rates raised

11 Step 1: The merger of Wimpey and McLean What we achieved Increased revenue per plot sales of options benchmarked project team reviewed best practice and achievements of Morrison Homes new marketing suites introduced superior McLean approach being adopted options sales up 13% year to date

12 Step 1: The merger of Wimpey and McLean What we achieved Changed the culture delegated authority clear leadership and strategy companywide benchmarking 0 an opportunity not threat open and honest communication a single set of values and behaviours

13 Step 1: The merger of Wimpey and McLean What we learnt what we got right 0 involvement and ownership 0 communication and honesty 0 maintaining trust through being fair 0 setting demanding targets and a rapid pace 0 maintaining the focus on the future what we got wrong 0 underestimating the challenge of transition

14 Step 2: The acquisition of McAlpine Homes The objectives Refocus land bank to raise selling prices increase proportion of business in the south increase focus towards primary locations increase number of sites with larger houses acquire land bank for 2002/3 volume needs

15 Step 2: The acquisition of McAlpine Homes The objectives Why McAlpine meets our objectives average price £145k vs Wimpey £118k > half sales in south vs one third of Wimpey greater focus on primary locations greater proportion of larger houses

16 London Bristol Birmingham Manchester Leeds Liverpool Newcastle Combined geographic coverage (excluding Scotland)

17 London Bristol Birmingham Manchester Leeds Liverpool Newcastle LONDON Chelmsford Basingstoke Southampton Slough Guildford Colchester Ipswich St Albans Cambridge Milton Keynes Maidstone Rochester Norwich South East George Wimpey Sites Improved South East presence McAlpine

18 London Bristol Birmingham Manchester Leeds Liverpool Newcastle LONDON Chelmsford Basingstoke Southampton Slough Guildford Colchester Ipswich St Albans Cambridge Milton Keynes Maidstone Rochester Norwich South East George Wimpey Sites George Wimpey 5 Bed Det. Sites McAlpine LONDON Chelmsford Basingstoke Southampton Slough Guildford Colchester Ipswich St Albans Cambridge Milton Keynes Maidstone Rochester Norwich McAlpine LONDON Chelmsford Basingstoke Southampton Slough Guildford Colchester Ipswich St Albans Cambridge Milton Keynes Maidstone Rochester Norwich Improved South East Product Mix

19 McAlpine George Wimpey Sites MANCHESTER Liverpool Chester Southport Blackburn Improved North West Presence McAlpine George Wimpey 5 Bed Det. Sites

20 Step 2: The acquisition of McAlpine Homes What we did Structuring the deal for our shareholders a modest premium to historic net assets a small discount to current market values deferred payments to meet bridging finance detailed due diligence to minimise valuation and integration risks

21 Step 2: The acquisition of McAlpine Homes Where we are Drawing on the lessons we learnt involvement and ownership 0 > 40 Wimpey managers in due diligence team 0 full involvement in integration planning communication and honesty 0 regular communication since announcement 0 McAlpine managers fully informed of our plans 0 email address for queries

22 Step 2: The acquisition of McAlpine Homes Where we are Drawing on the lessons we learnt maintaining trust and fairness  honest and open from the start 0 series of pre-acquisition meetings 0 promised to honour obligations setting demanding targets and a rapid pace 0 set target of 450 job reductions: 25% of staff 0 began integration before completion! 0 new structure to be in place by new year

23 Step 2: The acquisition of McAlpine Homes Where we are Drawing on the lessons we learnt maintaining the focus on the future 0 involved management team in business plan 0 focus on “new” company underestimating the challenge of transition 0 loyalty bonuses to retain staff until new year 0 focus on recruitment of key skills

24 Progress to date new Group management team in place new UK management team in place McAlpine acquisition completed offices relocated from Hammersmith bulk of £20 m savings achieved this year £15 m build cost savings fully identified £18 m McAlpine savings identified

25 Next steps Inner City business to be brought together branding to be resolved McAlpine work in progress to be reduced McAlpine build cost savings to be quantified McLean option performance to be transferred to Wimpey and McAlpine making the most of our US experience