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George Wimpey Plc

George Wimpey Plc. Analysts Visit to Milton Keynes 11/12 October 2006. George Wimpey Plc Market and trading update. Pete Redfern Group Chief Executive. UK market and trading update End September 2006. Market continues to be stable and positive across the UK

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George Wimpey Plc

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  1. George Wimpey Plc Analysts Visit to Milton Keynes 11/12 October 2006

  2. George Wimpey PlcMarket and trading update Pete Redfern Group Chief Executive

  3. UK market and trading updateEnd September 2006 • Market continues to be stable and positive across the UK • Sales rates/margins year to date are in line with our plans for the UK business • 97% sold for 2006 target volume • Small price gains are being achieved • Changes in business are well underway • land strategy being delivered • cost improvement plans in place Analyst Visit South Midlands - 12 October 2006

  4. US market and trading updateEnd September 2006 • Market has weakened significantly since half year and 1 August results • Current market conditions are poor • record stock levels driving price reductions • US majors liquidating long land positions, through land sales and incentives • US majors exiting land options and writing down positions • Weakest markets are California, Nevada, Arizona, Florida, with Texas still sound • However • changed position of Fed, with interest rates on hold • general economic data remains sound • new build starts have declined as realism takes hold • September data (where available) shows first stabilising of stock position Analyst Visit South Midlands - 12 October 2006

  5. Morrison Homes sales dataTo week 38 * Average cancellation rate flagged by US majors 35% (Q2 2006 Source: Credit Suisse) Analyst Visit South Midlands - 12 October 2006

  6. US short term market conditionsUpdated stock position • Level of housing stock reaching 15 year high • September data where available shows first signs of bottom Analyst Visit South Midlands - 12 October 2006

  7. US short term stock positionAnnual trend January 1985 – August 2006 Source: US Census Bureau Analyst Visit South Midlands - 12 October 2006

  8. Morrison HomesForward tactics - sales • Generally price to market but Morrison do not need to follow land liquidators • average price reduction 10%, wide range around this • competitor incentives up to $100k • Morrison maintain a sales rate, but not chasing volume • combination of incentives and now some headline reductions • Strong focus on ensuring affordability • financing led deals • some spec. adjustments • medium term may be some product shift • Q4 2006/Q1 2007 price positioning will depend on • pricing actions of competitors • underlying change in absorptions Analyst Visit South Midlands - 12 October 2006

  9. US land marketCurrent position • Land values are reducing and terms are improving • Some way to go in most markets before reaches current market price • Cash pressure yet to bite on most land sellers • Large land pipelines means future recovery in land price will probably be slow Analyst Visit South Midlands - 12 October 2006

  10. Pipeline landbanksUS majors’ landbanks * Based on closing volumes in the year Analyst Visit South Midlands - 12 October 2006

  11. Morrison HomesForward tactics - land • Withdraw from most new land purchases until value rebases • exceptions in Texas • exceptions for A locations that reflect current pricing • Q3 new approvals 706, of which 55% Texas • Review existing land positions • non committed deals for current market value • option and deposited deals for economic value • owned deals for NRV (2005/6 purchases) • Short term slow down of land purchases can be managed with current landbank • Medium term opportunities forpurchase from under pressure sellers Analyst Visit South Midlands - 12 October 2006

  12. US marketConclusions • Current market conditions poor and pricing worsening • Action of US majors is impacting prices and volumes in short term – likely to continue into 2007 • Significant majority of Morrison land is well priced • helped by cautious approach in 2005/6, particularly in California, • some asset issues possible in year end review • dependent on pricing patterns in Q4/Q1 in certain markets • Underlying value intact • employment and economic data still strong • Morrison markets still seeing good job growth • September re-sales listing shows signs of peaking • market conditions will provide future opportunities for real growth Analyst Visit South Midlands - 12 October 2006

  13. George Wimpey PlcGroup outlook • Continuing strong performance in the UK • Tougher trading conditions in the US • For the group as a whole • trading for the year in line with our expectations • assuming no further deterioration in the US market • assumes no material asset adjustments in US market Analyst Visit South Midlands - 12 October 2006

  14. George Wimpey UKStrategy Ian Sutcliffe Managing Director

  15. George Wimpey UKStrategic vision • To have the lowest unit land cost of any major builder • To create the most value in the planning process • To be the most efficient builder • To gain the maximum value for every plot sold • To have the lowest, fit for purpose cost base • To have the best people, who never want to leave • To have a culture of delivering as advertised every time Analyst Visit South Midlands - 12 October 2006

  16. George Wimpey UKStrategic framework Financial Objectives PBIT Volume OP Margin Land Product People Sales & Marketing Core Strategies IT Health & Safety Cost Management Key Enablers Analyst Visit South Midlands - 12 October 2006

  17. George Wimpey UKKey areas of focus Financial Objectives PBIT Volume OP Margin Land Product People Sales & Marketing Core Strategies IT Health & Safety Cost Management Key Enablers Analyst Visit South Midlands - 12 October 2006

  18. George Wimpey UKTotal current landbank Analyst Visit South Midlands - 12 October 2006

  19. George Wimpey UKCurrent land use • Short term land • 1-2 years • nearer planning completion • lower risk/lower margin • Medium term land • 2-5 years • variable stages of planning • risks variable • Long term land • 5-10 years • little planning • higher risk/higher reward Analyst Visit South Midlands - 12 October 2006

  20. George Wimpey UK 100 % Land Developers 90 % 80 % 70 % Cumulative % value of final sales value 60 % Detailed Planning Permission 50 % Ground works and Build Infrastructure and subdivision Marketing and Selling Outline Planning Permission Annual Monitoring Report Value Engineering 40 % LDF Allocation Plot Substitution Change of Use 30 % Base Land RSS 20 % 10 % -10 Yrs -5 Yrs Start +2 Yrs -2 Yrs George Wimpey UKLand value chain Analyst Visit South Midlands - 12 October 2006

  21. Issues Unit land input cost too high, too much short term land Size and quality of the landbank is insufficient for growth Planning timeline extending with more complex schemes Need for greater capital efficiency to fund growth Actions Need to get further back in the value chain Continue to improve discipline around short term land buying Upgrade planning skills and major project development Restructuring of the overall landbank George Wimpey UKLand strategy Analyst Visit South Midlands - 12 October 2006

  22. George Wimpey UKLand strategy How will we get there? • Focus • creating a dedicated land development resource specifically for long and medium term land • Process • proactively targeting opportunities, detailed value engineering and risk management • Competence • develop capability to find, negotiate, promote and project manage through the very best people Analyst Visit South Midlands - 12 October 2006

  23. George Wimpey UK Landbank split Analyst Visit South Midlands - 12 October 2006

  24. George Wimpey UK2006 land acquisitions Analyst Visit South Midlands - 12 October 2006

  25. Issues Little demonstrable value added from the brand Costly visitor generation with fragmenting media viewing Inconsistent sales areas not maximising conversion Need for a more structured sales process to capture the maximum value Actions Sharper brand positioning focussed on key benefits Full review of marketing spend effectiveness Create initial impact and a desire to purchase Build capability to deliver a consistent sense of urgency George Wimpey UKSales and marketing Analyst Visit South Midlands - 12 October 2006

  26. G2 (Value) 10-20% Laing (Premium) 10-20% George Wimpey (Mainstream) 60-80% Exclusive Aspirational Distinct Value For Money Entry Level Affordability Emotional Positioning Core Brand Values Build Quality, Customer Care, Cost Efficiency and Processes (The Way We Do Things – Common to all sub brands) Location Public Realm Specification Floor Plans Optionality Detailing Pricing Functionality Efficiency Rational Support George Wimpey UKBrand strategy - framework Analyst Visit South Midlands - 12 October 2006

  27. George Wimpey UKBrand positioning • Clearly defined customer offer • Affordable, functional, fun • Non traditional build • Non traditional sales • Low cost, fast cash turn • All 60 on pilot scheme sold on the first day Analyst Visit South Midlands - 12 October 2006

  28. George Wimpey UKCost management Issues • Build cost movement sq ft basis8.1% AAI 2002 – 2005 • Fragmented procurement not leveraging buying power • Direct selling cost increases6.8% AAI 2002 – 2005 Analyst Visit South Midlands - 12 October 2006

  29. George Wimpey UKCost management Actions • Developing an on going cost driven mind set • Challenge every process and line item • Identification of each saving initiative • 50+ initiatives • Senior management ownership of each cost area • Overall framework established to track benefits • Fully integrated IT system rolled out in 2007/8 Analyst Visit South Midlands - 12 October 2006

  30. George Wimpey UKCost management initiative Waste Management • Cost champion Ed Woods • Target savings £1.2 m • Identification date November 2006 • Implementation date January 2007 (pilot September 2006) • Identified savings 2006 - £300,000 Total £1.2m Key actionsMeasure and track • Decrease total waste taken off site No skips x £/skip • Segregate inert and active waste Land fill tax • Increase use of REL v builder skips £/skip • Reduce overall administration Administration charge • Establish ongoing measurement,ownership and reporting Analyst Visit South Midlands - 12 October 2006

  31. George Wimpey UK People strategy Issues • Attraction and development • Succession planning • Talent management • Retention of key staff Analyst Visit South Midlands - 12 October 2006

  32. George Wimpey UK People strategy Actions • Double the annual graduate recruitment intake • Identify key development roles • Management development programmes and exposure • position people for succession • Remuneration more directly linked to performance • appraisal rating = incentive award • Recognition for the champions of our business Analyst Visit South Midlands - 12 October 2006

  33. George Wimpey UKSummary and conclusions We have a clear strategic plan • Landbank quality is our top priority • Structured approach to cost management • Sharper sales and marketing to capture value • Increased investment in people All areas are already showing strong results Analyst Visit South Midlands - 12 October 2006

  34. George Wimpey UK Strategy Any questions? Analyst Visit South Midlands - 12 October 2006

  35. George Wimpey South Midlands Peter Gurr Managing Director

  36. George Wimpey South Midlands • Peter Gurr – MD George Wimpey South Midlands appointed June 2004 • 13 years experience as MD within industry • GW South Midlands opened in 1985 as Tarmac Homes business • By June 2004 stronger business focus required • land strategy needed clarifying • geographic spread too broad • limited presence in key regional growth areas - Milton Keynes • people set in their ways, resistant to change • Landbank depleted • at the end of 2003 • 1,027 plots = less than 2 years’ land supply, • only 400 plots with planning Analyst Visit South Midlands - 12 October 2006

  37. George Wimpey South MidlandsStrategy to create a balanced business • Immediate action taken to strengthen landbank • Develop a clear land strategy to refocus on key areas of short term land (1-2 years) medium term land (2-5 years) long term land (strategic) (5 years +) • Appointed new Land and Planning Team • Director appointed October 2004 • Land Managers appointed September 2004 • Developed relationships with • local/national land agents • strategic alliances with EP and Milton Keynes Council • Developed a new product range • PPG3 compliant products, increased standardisation Analyst Visit South Midlands - 12 October 2006

  38. George Wimpey South MidlandsCreating a balanced business • Since June 2004 • 19 new sites purchased • 4,153 plots • Short term 804 plots • Medium 3,149 plots • Long term 200 plots • Gross margin achieved on land bought pre June 2004: 16% • Gross margin achieved on land bought post June 2004: 22% Analyst Visit South Midlands - 12 October 2006

  39. George Wimpey South Midlands Landbank Analyst Visit South Midlands - 12 October 2006

  40. George Wimpey South MidlandsLand acquisitions Short term sites • Pages Priory, Leighton Buzzard (600 units) – part of Pratts Pitt (1,500 units) • Eyebrook Vale, Corby (75) – part of Oakley Vale masterplan (+ 3,000 units) Medium term sites • Design for Manufacture competition winner • awarded Oxley Park site from English Partnerships (145 units) • Parklands – Woburn Sands (576 units) • Newton Leys (1,650 units) • Stotfold (300 units) Long term / strategic • Berryfields, Aylesbury (1,800 units) Analyst Visit South Midlands - 12 October 2006

  41. George Wimpey South MidlandsShape of the landbank Analyst Visit South Midlands - 12 October 2006

  42. George Wimpey South MidlandsThe future business • Financially secure • certainty of financial results, not reliant on market conditions • greater flexibility to balance sales rates and margins • Clearly defined geographic boundaries • well positioned in areas of greatest market demand • established relationships with land agents, planning authorities and strategic partners • Established product range • introduced preferred house type range • secure cost base • Focussed organisation • established as a ‘team’ • internal recognition for excellence in people development Analyst Visit South Midlands - 12 October 2006

  43. George Wimpey Plc Analysts Visit to Milton Keynes 11/12 October 2006

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