Unlocking the Value Peter Johnson George Wimpey PLC 27 April 2001.

Presentation on theme: "Unlocking the Value Peter Johnson George Wimpey PLC 27 April 2001."— Presentation transcript:

1 Unlocking the Value Peter Johnson George Wimpey PLC 27 April 2001

2 George Wimpey has the potential to compete with and better the performance of its peers. My objective today is to show you how we are bringing this about. Unlocking the Value George Wimpey has earned lower margins than its main competitors - there is no good reason why it should continue to do so.

3 Agenda Wimpey today - where we start from The sources of value and how we will unlock them

4 Wimpey Today

5 Wimpey today 2000 Results - P&L Account Revenue £m Operating Profit £m Profit Before Tax £m Tax % Earnings per Share p Dividend per Share p 1702 170 146 24 30.0 7.5 1527 119 113 22 24.5 6.6 +11% +43% +30% N/A +22% +14% 20001999% Change

6 Wimpey today 2000 Results - Balance Sheet Shareholders Funds £m Net Debt £m Capital Employed £m Shareholders Funds p Gearing % Interest Cover 673 220 893 182 33 7.1 584 179 763 158 31 7.4 20001999

7 Wimpey today 2000 Completions UK PD UK Social UK Total USA Total Group Total £112 £50 $227 £116 +16% +6% +15% +16% Average Price 10823 614 11437 2638 14175 -7% -19% -8% +2% -5% Completions £109 +16% No.% Change£/$000’s% Change

8 Wimpey today Segmental Analysis UK USA Corp. Group 143 35 170 +40% +29% +37% Operating Profit 1254 405 43 1702 +8.0% +22% +10% Revenue (7) £m % Change £m % Change 11.4 8.6 10.0 +2.6% +0.5% +2.0% Operating Margin % % Change

9 The sources of increased value Land: strengthening our land-bank Building: building high quality and reducing costs Product: widening our range, better pricing and options Overheads: getting the benefits from restructuring USA: the growth potential and lessons to learn Partners and people: working with the best

10 Land

11 Strengthening our land bank We were –competing internally –reacting to local demands of regions –trying to get 29 regions to critical mass –rationing on first come first served basis Result was –land in the wrong place –bought at poor margins We now have –prioritised land acquisitions based on our business strategy –all regions with critical mass –workable landbanks in all regions –raised our target returns Result is –we are buying land where we want it –at much better margins

12 Strengthening our land bank Completions Before and After –Regional Businesses now up to critical mass Scotland North Midlands South UK Total 2 6 7 21 780 560 480 540 2001 After 4 8 8 9 29 390 420 390 370 390 2001 Before 6520 No of BU’s Ave. PC’s per BU No of BU’s Ave. PC’s per BU

13 Short Term Land Short-term land bank: –24000 plots owned –9450 plots controlled –total 33450 equals 3.1 years supply 2000 UK land spend of £420 million increased owned plots by 1350 (6%)

14 Short Term Land Short Term Land Bank at end 2000 (Plots) 2,800 7,900 3,650 4,200 2,250 6,100 6,550 Total = 33,450 Plots

15 Short Term Land Short Term Land Bank at end 2000 (Years) 2.5 3.7 2.9 2.8 1.9 4.2 2.8 Average = 3.1 Years

16 Short Term Land Cost of Short Term Land Bank at end 2000 (£millions) 65.3m 85.9m 125.7m 161.7m 50.3m 42.2m 158.6m Total = 689.7m

17 Strategic Land

18 We were –managing strategic land outside UK housing business –focusing on number of plots, not when they were available for use –and on adding plots not getting planning on existing plots –we had no geographical strategy –and had not amended approach in light of PPG3 We now have –fully integrated strategic land into the UK business –created a smaller, more focused resource working closely with our regions –prioritised action to bring existing sites through planning –focused our efforts on high value and brownfield sites

19 Strategic Land Capital Locked Up in Strategic Land Scotland & North East 5.4m North West & Yorkshire 1.6m West Midlands 2.3m East Midlands 3.5m East & South East 1.8m Total 35.8m South 21.2m

20 Stategic Land Where is our Strategic Land? 8 13 6 22 9 31 Category 1 Sites (developable within 2-3 years) Total Number of Sites = 89 Average estimated plots per site = 150 Total estimated plots = 13350

21 Stategic Land Where is our Strategic Land? 15 12 1 32 22 26 Category 2 Sites (developable within 5 years) Total Number of Sites = 108 Average estimated plots per site = 175 Total estimated plots = 18900

22 Stategic Land Key Sites

23 Stategic Land Key Sites Bradbury Estate - A Brownfield Site

24 Stategic Land Key Sites Eastanton Manor Farm - A Greenfield Site AndoverTown HampshireCounty 253 AcresGross Area 109 AcresNet Area 1350Expected Plots

25 Building

26 Building high quality and reducing costs We build well Our competitors say so The NHBC says so The facts confirm they’re right

27 Building high quality and reducing costs NHBC Quality Awards 1999 2000

28 Building high quality and reducing costs NHBC Top 100 Site Manager Awards 1999 2000

29 Building high quality and reducing costs Recommend without being asked I am pleased I bought this home Quality of construction is very good Overall I am very satisfied 29% 94% 46% 56% 20% 85% 36% 45% George Wimpey UK National Average Housing Forum Customer Satisfaction Survey Survey involved over 10,000 Home Buyers Nationally Overall I am fairly or very satisfied 93%87%

30 Building high quality and reducing costs Build Costs –McLean Build Costs more than 10% cheaper than Wimpey Build time –McLean 12 Weeks –Wimpey 16 -19 Weeks

31 Building high quality and reducing costs We were using –Wimpey central design: expensive design features not adapted to local markets costly to adapt to PPG3 We now have –local design (per McLean) savings identified adapted locally easier for PPG3 benchmark costs House Design

32 -Reduction of roof complexity - £1000-Reduction of special features - £600-Positioning - £500 Building high quality and reducing costs Before After FrontRight Redesign of Vaudeville House Type by Leicester Office

33 -Reduction of roof complexity - £1000-Reduction of special features - 600Total Saving = £2,100 Building high quality and reducing costs Before After FrontRight Redesign of Vaudeville House Type by Leicester Office

34 Building high quality and reducing costs We were using –Wimpey central buying: inflexible service not suited to local needs inhibited upgrades high prices Procurement

35 Building high quality and reducing costs Central Purchasing not working –Bricks Wimpey National deal cost £12 per thousand more than McLean –Sanitary Ware McLean co-ordinated approach bought sanitary ware sets £300 cheaper than Wimpey Procurement

36 Building high quality and reducing costs We were using –Wimpey central buying: inflexible service not suited to local needs inhibited upgrades high prices We now have –Product Consultation Groups national deals supported by regional management national scale with knowledge on the ground procurement co-ordinated with site/sub-contractor needs benchmarking of costs Procurement

37 Product

38 Product - Range Continued increase in product selling price Continued progression to larger house types Continued increase in Bespoke

39 Product - Range Movement of product range to higher selling prices

40 Product - Range Product Mix

41 Improved selling and marketing We wereWe now have –common price and market data –plans to exploit full product range where it is needed –established project teams to exploit experience on “options” –as well as on Bespoke developments –not sharing pricing information between Wimpey and McLean –not working together on mixed outlet developments –not transferring experience of successes on options –not sharing market, competitor or customer data

42 Product - Options Top 10 Options for 2000 Margin on Options between 20% and 30% Option Electrical Sockets/Pointing Coving Glazed Doors >40% 25%-40% Take up as % of PC’s Garden Landscaping Burglar Alarms Fire Surrounds Additional Lighting 20%-25% Downlights Kitchen Flooring - Ceramic Carpets

43 Product - Options Taking ideas from regions to form consistent approach Options Project Team e.g. –Double Garage Sales Centre - Yorkshire

44 Product - Options Taking ideas from regions to form consistent approach e.g. –Double Garage Sales Centre - Yorkshire Options Project Team –Car Style Specification Sheet - Bristol

45 Product - Options Taking ideas from regions to form consistent approach e.g. –Double Garage Sales Centre - Yorkshire –Car Style Specification Sheet - Bristol –Commissions from off-site Sales - West London Options Project Team

46 Product - Options Taking ideas from regions to form consistent approach e.g. –Double Garage Sales Centre - Yorkshire –Car Style Specification Sheet - Bristol –Commissions from off-site Sales - West London –Off-site Sales Centres - USA Options Project Team

47 Product - Options £3,100 £2,800 £3,500 £4,100 £2,600 £2,750 £2,950 Sales of Options per House in 2000 (£’s) National Average = £3,100

48 Product - Options 2.8% 3.1% 2.2% 2.9% 3.1% 2.6% Sales of Options as Percentage of House Price in 2000 National Average = 2.8%

49 Overheads

50 Getting the benefits from restructuring Reduced Overheads –Reduction in Staff - 435 –Completions per member of Office Staff increased by >40% – Overhead Savings - £20 million –Impact on Margin for 2002 - 1.7%

51 Getting the benefits from restructuring WHH Top Management 10 Central & Duplicated Functions 35 9 Closed BU’s 235 New Staff Profile 100 Handover Staff (Apr/May) 55 Total 435 Summary of Redundancies

52 Closed Businesses McLean East Scotland Wimpey West Scotland Wimpey Yorkshire Rivermead McLean East Midlands Wimpey Northern Home Counties Wimpey South East Thameswey Wimpey South Wales (kept as satellite) New Business Central London Getting the benefits from restructuring

53 Distribution of Remaining Offices

54 Getting the benefits from restructuring Completions Before and After –Regional Businesses now up to critical mass Scotland North Midlands South UK Total 2 6 7 21 780 560 480 540 2001 After 4 8 8 9 29 390 420 390 370 390 2001 Before 6520 No of BU’s Ave. PC’s per BU No of BU’s Ave. PC’s per BU

55 USA

56 USA - a growth opportunity located in growing markets –5 of 6 States with greatest job creation –well positioned in higher value segments with a structure to support growth –mature businesses to generate cash –well established growing businesses –development businesses established for future growth potential to grow through satellites or small acquisitions

57 USA - a growth opportunity Sacramento East Bay Area San Joaquin Valley Current Morrison Markets Atlanta Jacksonville Orlando Tampa Sarasota Austin San Antonio Dallas/Ft Worth Houston Phoenix

58 USA - a growth opportunity Where the Jobs are. Sarasota, Florida 5.9% Austin, Texas 4.7% Tucson, Arizona 5.4% Tampa, Florida 4.9% Orlando, Florida 5.1% Job Growth Rates over the Last 4 Quarters Source: The Meyers Group, Inc. 2001

59 USA - a growth opportunity Where the jobs are. Even the most pessimistic forecasts for housing starts this year (~1.5 million) is higer than the previous peak years. Better still, economists agree that many areas of the country - notably the West, parts of the Northeast, Texas and Florida - will experience strong housing growth in 2001. Depending on where you build and, to a lesser degree, for whom, the slower gowing economy will be felt differently. -Taken from article in Professional Builder Magazine

60 USA - Regional Analysis Orlando Local economy satistics Population Total Employment Median Household Income Average population change = 3.2% Average employment change = 4.7% Average Income change = 3.7%

61 USA - Regional Analysis Orlando Largest Private Employers

62 USA - Regional Analysis Orlando Top 10 House Builders

63 USA - Regional Analysis Orlando Market Position

64 USA - Regional Analysis Orlando Market Segmentation

65 USA - Options Top 5 Options in Morrisons Category Flooring Carpet/Vinyl/Tile/Hardwood Structural Flexible Designs/Bonus Room/Elevation Cabinetry Cabinetry/Countertop Non-Standards Custom changes per buyer request Pool Option only in Tampa and Orlando Total Revenue $25m $9m $7m $3m

66 USA - Options Total revenue from options in 2000 - $55m Options revenue per house - $20,850 Options revenue as percentage of house price - 9.2% Margins between 20% and 50%

67 Partners and people

68 Partners & People we are able to attract top quality partners –suppliers and subcontractors –partners in major development schemes –our own staff and management

69 Partners & People Years within George Wimpey

70 Partners & People Age of Regional Management

71 Partners & People Graduate Intake in 2000 –4 Oxbridge, Sheffield, Manchester, UCL, Newcastle –Two 1s and Five 2:1s Graduate Intake for 2001 –5 Oxbridge, Warwick, York, St Andrews –Chemistry, Engineering, History, Law, Biosciences etc 16 Women in Regional Boards or above 2 Women are Managing Directors Strengthening our Staff

72 What this means for our shareholders

73 Margins will increase –£20 million overhead cost reductions –land is being bought at better margins –benefits from improved design/procurement –prices will improve through better product and geographical mix –increased options/extras

74 George Wimpey has the potential to compete with and better the performance of its peers. We are putting in place the organisation and processes to ensure it does. What this means for our shareholders George Wimpey has earned lower margins than its main competitors - there is no good reason why it should continue to do so.