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George Wimpey Plc Interim Results for H1 2004

A presentation of George Wimpey Plc's interim results for the half-year ended June 30, 2004. The presentation includes a financial review, business reviews, market conditions, and a summary of the company's performance.

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George Wimpey Plc Interim Results for H1 2004

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  1. 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 2003, 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.

  2. George Wimpey PlcInterim Resultsfor the half year ended 30 June 2004 Wednesday 28 July 2004

  3. Welcome John Robinson Chairman

  4. Agenda • Introduction Peter Johnson • H1 Financial Review Andrew Carr-Locke • UK Business Review Pete Redfern • US Business Review Peter Johnson • Strategy and Outlook Peter Johnson 5

  5. Introduction Peter Johnson Group Chief Executive

  6. Highlights • Group H1 PBT up 29% to £158.5m • Margins increased across all three businesses • from 16.5% to 17.1% in George Wimpey • from 10.6% to 12.0% in Laing Homes • from 11.1% to 12.4% in Morrison Homes • Volumes increased in all businesses • Landbank strengthened in UK and US • land purchase disciplines on margins maintained • Interim dividend up 37% to 5.2p • Full year outlook around the top end of market expectations 7

  7. Market conditions UK - H1 generally healthy, normal seasonal pattern emerging • Very strong Q1; H1 pattern similar to 2002 • Recent steadying following normal summer pattern • rate rises will avoid repeat of abnormal 2003 H2 • Continued undersupply, low unemployment and good affordability underpin the market US - H1 exceptionally strong, steadying to strong but sustainable • Economy continues to strengthen • Strong demographic trends and good affordability underpin market • Morrison positioned in particularly strong markets 8

  8. H1 2004 financial review Andrew Carr-Locke Group Finance Director

  9. First half results H1 2004 H1 2003 Change £m Turnover 1,220 1,059 +15% Operating profit 181.6 148.0 +23% Interest charge (23.1) (25.3) - Profit before tax 158.5 122.7 +29% Earnings per share 28.6p 22.5p +27% NAV per share 328p 269p** +22% Dividend per share 5.2p 3.8p +37% ROACE* 24.0% 24.1% 10 *Last 12 months ** restated for UITF 38

  10. Segmental analysis Turnover Operating profit1 Operating margin1 £m Change £m Change H1 2004 H1 2003 George Wimpey 809 +17% 139 +22% 17.1% 16.5% Laing Homes 143 +26% 17 +43% 12.0% 10.6% Morrison Homes2 268 +5% 33 +18% 12.4% 11.1% Other - - (7) - TOTAL 1,220 +15% 182 +23% 1After fair value items 2Exchange rate in 2004 $/£=1.81, 2003 $/£=1.61 11

  11. First half completions Completions Ave selling price No Change £ / $ Change GW private 4,220 +2% £183,600 +13% GW affordable 340 +39% £81,100 +8% Laing private 423 +36% £308,100 -7% Laing affordable 110 N/A £100,800 -1% UK total 5,093 +9% US total 1,714 +13% $277,700 +5% GROUP TOTAL 6,807 +10% 12

  12. Cash flow summary12 months to June Yr to Jun 2004 Yr to Jun 2003 £m Operating profit 463 366 Land spend (834) (848) Land realisations 689 634 Other working capital 5 (63) Tax (120) (97) Interest paid (47) (33) FREE CASH FLOW 156 (41) Acquisitions (95) (349) Dividends (26) (25) Cash inflow / (outflow) before financing 35 (415) 13 restated for UITF 38

  13. Balance sheet - net assets June 2004 June 2003* £m Fixed assets 29 27 Land 1,771 1,642 Land creditors (156) (168) Other current assets 456 494 Tax and provisions (68) (66) Deferred consideration - (92) TOTAL NET ASSETS 2,032 1,837 * restated for UITF 38 14

  14. Balance sheet -financing June 2004 June 2003* Shareholders’ funds £m 1,278 1,025 Net debt £m 754 812 Capital employed £m 2,032 1,837 Gearing 59% 79% Interest cover last 12 months 9.4x 8.5x * restated for UITF 38 15

  15. Land owned and controlled UK US June 2004 June 2003 June 2004 June 2003 Total land value £m 1,604 1,489 167 153 Owned plots 34,191 33,819 17,456 12,574 Controlled plots 16,710 12,869 2,606 2,751 Short term plots 50,901 46,688 20,062 15,325 Short term landbank in years 3.9 3.3 5.5 4.8 16

  16. Financial summary • Operating margins increased in all businesses • Positive free cashflow of £156m in 12 months to June 2004 • Balance sheet strengthened • gearing down from 79% to 59% and interest cover increased • no deferred consideration • Landbank strengthened • now over 50,000 plots in UK • 4,700 plot y-o-y increase in US • land buying margin disciplines remain in place • ROACE 24.0% • Interim dividend up 37% to 5.2p 17

  17. UK business review Pete Redfern Managing Director, GWUK

  18. Financial summary George Wimpey Laing Homes H1 2004 H1 2003 H1 2004 H1 2003 Total completions 4,560 4,370 533 319 Private completions 4,220 4,125 423 310 Private ASP £183,600 £163,100 £308,100 £331,200 Turnover £m 809.3 691.1 142.9 113.6 Operating profit £m 138.7 114.0 17.1 12.0 Operating margin 17.1% 16.5% 12.0% 10.6% 19

  19. Operating margin growth • Helped by strong market • GW strong selling price growth in North and Midlands • Laing H1 volume growth • 3 years of improved land buying • Costs tightly under control • controlled material cost inflation and subcontractor costs ~ 4-5% • improving supplier relationships on service and cost - scale benefits • Excellent production capability • benefits from 2003/4 product rationalisation • square footage per outlet up 12% 20

  20. Geographical and product mix • Regional businesses North/Midlands/South in excellent balance • Focus on prime locations maintained - right place to be in any market • Average private selling price increased by 11% but depth of customer base maintained: • 84% of volume remains under the £250k stamp duty threshold • mix of products changing to maintain affordability 21

  21. Price points 1400 1200 1000 George Wimpey 800 No completions Laing Homes 600 400 200 0 £0k - £50k £51k - £100k £100k - £150k £150k-£200k £200k-£250k £250k-£300k £300k - £500k Over £500k 22 Price band

  22. Product mix • Average product size maintained at ~1,070 sqft H1 2004 H2 2003 H1 2003 Flats 29% 28% 23% 2 / 3 bed houses 29% 31% 33% 4 / 5 bed houses 42% 41% 44% 23

  23. Market update • 2004 H1 has followed similar pattern to 2002 • Q1 very strong – well ahead of 2003 • Q2 slowing into normal summer seasonal pattern • Interest rate rises and BoE price warnings have had desired effect • Visitors and sales rates are in line with summer pattern: quality remains strong • Price growth has come from North and Midlands: prices in South flat since Q3 2002: current price growth modest • No increases in incentives: cancellation numbers similar to last year; part exchange <1% of sales • Market balanced by limited supply and interest rate rises; normal H2 expected compared to abnormally strong H2 in 2003 24

  24. Weekly sales rates1997 - 2004 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 25 1999 2002

  25. Weekly sales rates1997 - 2004 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 26 2002 2004

  26. Weekly sales rates1997 - 2004 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27 2002 2003 2004

  27. Weekly sales rates1997 - 2004 1.10 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 28 1997 1998 1999 2000 2001 2002 2003 2004

  28. George WimpeyASP on reservations 250 200 150 £000s 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 29 North Division Midland Division South Division 2003 2004

  29. Landbank • Total land bank at 50,901 (2003 H1 46,688) plots, of which 21,000 plots owned with detailed planning • Greater length of pipeline land required due to longer planning process • Long term land beginning to contribute - long term land bank includes 13,000 plots allocated in local plans. • Land bank is of a good quality, for example for George Wimpey private plots: H1 2004 Landbank ASP £000s 184 185 Cost per plot £000s 44 44 Land value % ASP 24% 24% 30

  30. Land purchase margins 20 18 16 14 12 % 10 8 6 4 2 0 FY 2000 FY 2001 FY 2002 FY 2003 H1 2004 31 PBIT %

  31. Customer service • ‘Would you recommend’ breaks 85% target • 8% improvement year-on-year in Customer Service Monitor scores • ‘Growing Wiser’ programme rolled out to all businesses GW and Laing • Again won more ‘Pride in the Job’ awards than any other housebuilder • GW options revenue up 11% per home 32

  32. 75% 70% 65% Monthly CSM score 60% 55% George Wimpey recommendation rate 50% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2003 2004 Customer service Current industry ave recommendation rate Barker target 2007 recommendation rate 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 33 2003 2004

  33. Laing Homes integration • Restructuring now complete: new management team established • The business fully integrated into GWUK • one UK management team • one UK head office • Laing fully part of the GW specialist structure (eg procurement) • benchmarking across Laing and GW • Overhead costs on plan, £12m savings achieved within expected exceptional cost • Track record of award winning quality continued in 2004 • Laing Homes well placed to deliver volume growth 34

  34. Future expectations • Priority is to sustain margins • Volume growth can come from both Laing and George Wimpey • significant if changes arise from Barker • slower but still deliverable if not • However land buying will remain selective - having built margins up over three years both in results and stored in the land bank, we will not let them slip • In summary, in any market George Wimpey has several advantages • significantly improved land bank • highly professional sales offering - customer service, options and site presentation • highly efficient site production machine • opportunity to grow Laing - margins and volumes 35

  35. US business review Peter Johnson

  36. Financial summary H1 2004 H1 2003 Change Legal completions 1,714 1,521 +13% Ave selling price $278,000 $266,000 +5% Revenue $m 484 409 +18% Operating profit $m 60.1 45.3 +33% Operating margin % 12.4 11.1 +12% 37

  37. US housing market • Economy continues to strengthen • healthy job growth; consumer confidence at 18 month high • Interest rates have started to increase • but mortgage rates still historically low • positive economic environment balancing out rate rise • demand has not been dampened • Another very strong year forecast for SF starts and sales • Exceptionally strong demand experienced by Morrison in H1 2004 • visitor levels up 30% • sales rates up almost 50% • H2 likely to return to more sustainable levels 38

  38. Margins • H1 margins benefited from • selling price increases • improved land purchasing over past two years • But offset by • significant increases in material costs • increase in overheads to support longer term growth • Margins sustainable as growth continues through • improved overhead recovery • bigger land deals - getting invited to the party more regularly H1 2004 FY 2003 H1 2003 Operating margin 12.4% 11.9% 11.1% 39

  39. Land • Landbank increased by over 30% y-o-y • 2.7 plots added for every plot used so far in 2004 • Excellent position for further growth Jun 04 Dec 03 Jun 03 Plots owned / under option 17,456 15,304 12,574 Plots controlled 2,606 1,663 2,751 Total landbank 20,062 16,967 15,325 Land spend $m (last 6 months) 108 120 83 40

  40. Excellent position for growth • Excellent forward sales position for 2004 >90% reserved/completed • significant increase in full year numbers expected • Strong land position for further significant volume growth in 2005 • Successful new product development • smaller, more affordable product in Austin, Atlanta and Dallas • town houses successfully introduced in Florida • Underperforming businesses in Atlanta and Texas being addressed • Former satellites in Central Valley and Jacksonville performing well; new division to be formed in 2005 from Sarasota satellite • Well located in 5 of top 10 fastest growing Metropolitan areas in job growth and SF Permits 41

  41. Strategy and outlook Peter Johnson

  42. Strategy - background • The strategy set out three years ago has now largely been delivered • performance of UK business substantially improved • second brand established to support UK volume growth • benefits of scale established and reinforced • potential for significant growth in US has been created • margins have been improved across all businesses • Rapid pace of UK market has now slowed • house price inflation has slowed, but costs continue to grow • land market remains competitive as planning restricts supply • Outlook for US market remains very strong • underlying demographic growth and job growth • excellent Morrison positions in location, land, brand and management 43

  43. Strategy – today’s priorities • Sustain GW margins through selective land acquisition • Continue to bring Laing margins up to GW levels • Sustain benefits arising from absolute and relative scale • Put structure in place to allow growth if land available on good terms In UK, prioritise margin over rapid volume growth • Maintain rapid growth rate of Morrison within existing markets • Resolve outstanding performance issues in Atlanta and Texas Deliver significant growth from potential in Morrison • Continue to reduce gearing levels • Sustain policy to increase dividends ahead of earnings growth Reduce gearing and increase dividend payout 44

  44. Outlook UK • Market appears to have returned to normal and sustainable levels • >80% of full year target completions now reserved or completed at margins ahead of 2003 • H2 orders expected to be below record H2 2003 levels • Full year volumes likely to be similar to 2003 US • Economy and market remain strong, though slowing from recent record pace to sustainable levels • >90% of full year target completions now reserved or completed at margins ahead of 2003 • Land position in place to support rapid growth in H2 and beyond Based on current market conditions full year results are expected to be around the top end of market expectations 45

  45. Forthcoming events • 12 / 13 October 2004 • dinner and site visit for analysts • 22 December 2004 • pre-close trading update • 22 February 2005 • 2004 preliminary results announcement • 6 September 2005 • H1 2005 interim results 46

  46. Appendix To interim results presentation for half year to 30 June 2004 Wednesday 28 July 2004

  47. Published results £m H1 2004 H1 2003 Operating profit 181.6 148.0 Interest charge (23.1) (25.3) Profit before tax 158.5 122.7 Interest cover last 12 months 9.4x 8.5x 48

  48. Cash flow summary6 months to Jun 2004 H1 2004 H1 2003* £m Operating profit 182 148 Land spend (462) (482) Land realisations 278 254 Other working capital (136) (156) Tax (55) (54) Interest paid (23) (19) FREE CASH FLOW (216) (309) Acquisitions - (120) Dividends (16) (15) Cash inflow / (outflow) before financing (232) (444) * restated for UITF 38 49

  49. Group reservations Reservations Ave sites Per outlet / per week H1 2004 H1 2003 H1 2004 H1 2003 H1 2004 H1 2003 GW private 6,062 6,371 256 280 0.91 0.88 Laing private 579 530 38 35 0.59 0.58 - - GW affordable - - 706 263 - - - - Laing affordable 129 70 UK TOTAL 7,476 7,234 294 315 - - US TOTAL 2,932 1,938 104 103 1.08 0.73 GROUP TOTAL 10,408 9,172 398 418 - - 50

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