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George Wimpey Plc

This presentation discusses the interim results of George Wimpey Plc for the first half of 2006, including financial highlights, group strategy, US and UK housing markets, and market outlook.

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George Wimpey Plc

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  1. George Wimpey Plc Interim Results for the half year ended 2 July 2006 1 August 2006

  2. Disclaimer The information in this presentation does not constitute an offer to sell or an invitation to buy shares in George Wimpey Plc or any other invitation or inducement to engage in investment activities Past performance cannot be relied upon as a guide to future performance. Interim Results for half year ended 2 July 2006

  3. Welcome and introduction John Robinson (Chairman)

  4. Agenda • Interim highlights / group strategy Peter Redfern • Half 1 2006 financial review Andrew Carr-Locke • US housing / UK housing Peter Redfern • Group outlook Peter Redfern • Questions and answers Interim Results for half year ended 2 July 2006

  5. Interim highlights and strategy Peter Redfern (Group Chief Executive)

  6. Interim highlights • Group profit before tax £152.3m + 25% • Strong first half from Morrison Homes $125.3m PBIT + 23% • Gearing reduced to 43% from 64% June 2005 • Group completions increased to 7,822 – highest for 25 years • Group landbank grown to 78,192 plots – strongest ever position • Lowest UK plot acquisition cost since 2002 • Improving margins in UK order book Interim Results for half year ended 2 July 2006

  7. Group strategy Objectives • Focus on residential development in our two key markets • UK where supply demand balance underpins good market • US where demographic growth provides great opportunities • Objective to be the leading housebuilder in the UK and in each of the regional markets we choose in the US • Increase emphasis on ways of adding value • medium term margin growth and stability • value adding processes • steady volume growth Interim Results for half year ended 2 July 2006

  8. US housingBuilding a leading competitive business • Existing strengths • positions in five states with excellent medium term prospects • a strong brand in Morrison Homes for quality • a delivery and growth culture • committed management team with a long term view • Our goals are to • build on our regional positions to create regional leadership • continue to select the right markets for our business • take opportunity from market slow down to build business • increase focus on operating efficiency Interim Results for half year ended 2 July 2006

  9. UK housingBuilding a leading competitive position • Existing strengths • large scale presence in most key markets • strong build cost and overhead base • lead position in customer service and build quality • committed management team with long term view • Our goals are to • change the mix and source of land to reduce our real land cost • capitalise on our scale to become the leader in operating efficiency and effectiveness • operate with a longer term view Interim Results for half year ended 2 July 2006

  10. H1 financial review Andrew Carr-Locke (Group Finance Director)

  11. 2006First half results *last 12 months ¹restated for change in land sales reporting Interim Results for half year ended 2 July 2006

  12. Segmental analysisFirst half 2006 *exchange rate in 2006 £:$1.79. 2005 £:$1.87 ¹restated for change in land sales reporting Interim Results for half year ended 2 July 2006

  13. CompletionsFirst half 2006 Interim Results for half year ended 2 July 2006

  14. Interest charge Interim Results for half year ended 2 July 2006

  15. Cash flow summary Interim Results for half year ended 2 July 2006

  16. Balance sheetNet assets Interim Results for half year ended 2 July 2006

  17. Balance sheetFinancing Interim Results for half year ended 2 July 2006

  18. Financial summaryFirst half 2006 • Group profit before tax £152.3 m + 25% • UK operating profit £114.9 m + 7% • US operating profit $125.3 m + 23% • ROACE - last 12 months 20.2% (2005: 22.7%) • Gearing 43% (2005: 64%) • Shareholders’ funds on June 2005 £1,612 m + 18% • Interim dividend increased from 5.7p to 6.3p + 10.5% Interim Results for half year ended 2 July 2006

  19. US housing Peter Redfern (Group Chief Executive)

  20. US housing Financial summary • Completions increased by 3% excluding Atlanta Interim Results for half year ended 2 July 2006

  21. Short term market conditions Total US stock position • New homes includes homes completed, under construction and not yet started • High level of housing stock needs to clear • 41% increase in existing home inventory • 27% increase in new home inventory • 4.5 – 5 months’ supply of new homes is healthy demand / supply balance • Level varies significantly by region Interim Results for half year ended 2 July 2006

  22. Market conditionsUS 2006 • Market strength affected by • steep price rises mid 2004 to October 2005 • media speculation about ‘crash’ • interest rate rises and concerns about future rises • significant reduction in investor sales • Still a good long term environment • 1.85 m new jobs added since May 2005 + 1.37% • 136.4 m total employment market • 4.6% unemployment - lowest level for 10 years • target of 70% home owners by 2010, 1.28 m new home owners per year Interim Results for half year ended 2 July 2006

  23. US housing Short term market impact • Compared with H1 2005 • H1 visitor levels down 33% • H1 sales rates down by 33% • H1 net prices down by 2.5% • A business of two parts • Florida, California, Phoenix slowing • visitor levels and sales rates well down • significant increase in cancellation rates • incentives increased • Texas and Denver some strengthening • visitor levels and sales rates well up • incentives still necessary but at normal levels Interim Results for half year ended 2 July 2006

  24. US housingAverage weekly sales rates Interim Results for half year ended 2 July 2006

  25. Managing the slowing market Sales • Maintaining higher outlet numbers • outlets currently up 19% • driven by 20% increase in first half outlet openings and slower sales rates • Presenting well structured incentives • reduce up front funding costs • targeted at local market conditions • Continuous review and strengthening of sales people • new Sales and Marketing Director with extensive industry experience • retraining and refreshing of staff • Careful management of order book Interim Results for half year ended 2 July 2006

  26. Managing the slowing market Costs • Overheads • review of overheads within all businesses • reducing headcount without affecting ability to grow in the future • Procurement • purchasing function greater accountability for cost reductions • regional purchasing councils introduced • cost savings of 3 - 5% targeted from all suppliers • opportunities learnt from UK business • Review of product and specification, particularly of lower end product Interim Results for half year ended 2 July 2006

  27. Managing the slowing market Product and specification • Affordability in many markets has become stretched • introduced townhomes into Florida in 2004 to address affordability issues • Essential to stay in the core of the market with the right product • Increase in higher density product across all divisions • townhomes being considered for Texas / California markets • low rise condominiums being considered for Florida • ‘four pack’ higher density homes introduced in Sacramento • Products redesigned to reduce costs without affecting appearance and appeal Interim Results for half year ended 2 July 2006

  28. US housing Cost of land acquired Interim Results for half year ended 2 July 2006

  29. US housing Objectives • Medium term aim to become ‘Top 3’ in each of our selected markets by • developing the right relationships • being selective about land • creating longer term land opportunities • having the right products in the right market segments • Significant opportunity for regional scale - Morrison Homes 19th largest housebuilder in 2005 Interim Results for half year ended 2 July 2006

  30. US housing Going forward • Remains difficult to predict market outcome for 2006 • visitor levels and sales rates below 2005 • completions for H2 expected to be below H2 2005 • margins and prices starting to reflect changing market conditions • order book for completions in 2006 at week 29 • 16% lower by volume and 13% lower by value • Morrison business in good shape • strong land bank with good proportion of historical land cost • strong management team in centre and regions • opportunities for advantage from weaker market • focus on new operational efficiencies Interim Results for half year ended 2 July 2006

  31. UK housing Peter Redfern (Group Chief Executive)

  32. UK housing Financial summary Interim Results for half year ended 2 July 2006

  33. Market conditionsUK 2006 • Market stable throughout period • Buyer confidence improved from Q4 2005 onwards • Affordability constraints in many areas • prices remain competitive • Southern markets showing greatest strength • George Wimpey performance benefiting from stronger order book and improved sales position • Gross margins in order book up more than 1% on December Interim Results for half year ended 2 July 2006

  34. Update on actions taken in December 2005Delivering on promises • Now complete • addressed underperforming businesses • rationalised business structure to improve delivery and reduce overhead cost • Continuous improvement building on H1 2006 progress • increasing margin • H1 / H2 volume balance • reducing build costs • land processes, people and culture Interim Results for half year ended 2 July 2006

  35. Increasing UK margins • 30 June 2006 order book up more than 1% on 31 December 2005 • Future improvement from • improving selling prices • continuous cost reduction • improvement in landbank • Consistent rather than overnight improvement Interim Results for half year ended 2 July 2006

  36. H1 / H2 balance The benefits • Reduces risk and volatility in earnings • Improved cash position • increases land capacity • reduces need for stop start land acquisition • Not hand to mouth on sales • reduces impact of discounting in run up to year end • ‘Evenflow’ business gives efficiency in build costs and procurement • Reduces management distraction from long term view of the business Interim Results for half year ended 2 July 2006

  37. UK housing Improving cost base • Objective to achieve build cost reductions to more than offset inflation and regulation changes • Net cost movement H1 2006 v H1 2005 – down 1% per plot • Following £20 m cost savings delivered 2004/5 cost reduction process renewed • Director of Procurement appointed • brief to undertake complete review of our supply chain • new focus on sales costs where benchmarking shows opportunity • preferred house type designs increasingly used on new sites acquired Interim Results for half year ended 2 July 2006

  38. Strengthening land positionQuality as well as quantity • Objective to reduce real cost of land going forward • Consistency of land acquisition approach – tougher process, not slower process • Focus on ‘value added’ land rather than sourcing next year’s business • Short term ‘retail land’ • existing strength within business • people and process in place • Medium term ‘value added’ land • increased focus since late 2003 • people and processes in place • benefits starting to come through • Longer term ‘value added’ land • new focus since early 2006 Interim Results for half year ended 2 July 2006

  39. UK housing Source of owned and controlled landbank • Optimum mix • 40% short term • 30% medium term • 30% long term Interim Results for half year ended 2 July 2006

  40. UK housing Strengthened owned land position • Plot cost in landbank below that of completions • Land value as % of ASP 3.2% lower in forward landbank Interim Results for half year ended 2 July 2006

  41. UK housing Cost of land acquired Interim Results for half year ended 2 July 2006

  42. UK housing Going forward • Market conditions remain stable • visitor levels and sales rates at normal seasonal levels • Completions for H2 expected to be similar to H2 2005 • total UK completions for 2006 expected to show some progress • Margins in order book showing improvement on H1 • Order book at week 29 • total order book up 5% by volume • private order book 8% by volume Interim Results for half year ended 2 July 2006

  43. Group outlook Peter Redfern (Group Chief Executive)

  44. George Wimpey PlcOutlook • Group outcome for the year expected to be in line with our expectations • US • long term fundamentals remain good, still difficult to predict outlook for full year • continue to strengthen regional positions for long term growth • short term focus on • reducing costs • optimising sales • UK • market remains stable, completions expected to show progress on 2005 • focus on • margin improvement • strong sales performance • improved land buying • reducing costs • Objective to be the leading housebuilder in the UK and regional markets we choose in the US Interim Results for half year ended 2 July 2006

  45. George Wimpey Plc Interim Results for the half year ended 2 July 2006 APPENDIX

  46. George Wimpey PlcUndeveloped land disposals Interim Results for half year ended 2 July 2006

  47. George Wimpey Plc Group reservations Interim Results for half year ended 2 July 2006

  48. UK housing Turnover analysis Interim Results for half year ended 2 July 2006

  49. UK housingMargin analysis Interim Results for half year ended 2 July 2006

  50. UK housingPrivate development product mix Interim Results for half year ended 2 July 2006

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