Transcript We now have

Unlocking the Value
Peter Johnson
George Wimpey PLC
27 April 2001
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.
• 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.
Agenda
• Wimpey today - where we start from
• The sources of value and how we will unlock them
Wimpey Today
Wimpey today
• 2000 Results - P&L Account
2000
1999
% Change
1702
1527
+11%
Operating Profit £m
170
119
+43%
Profit Before Tax £m
146
113
+30%
24
22
N/A
Earnings per Share p
30.0
24.5
+22%
Dividend per Share p
7.5
6.6
+14%
Revenue £m
Tax %
Wimpey today
• 2000 Results - Balance Sheet
2000
1999
Shareholders Funds
£m
673
584
Net Debt £m
220
179
Capital Employed £m
893
763
Shareholders Funds
p
182
158
Gearing %
33
31
Interest Cover
7.1
7.4
Wimpey today
• 2000 Completions
Completions
No.
% Change
UK PD
UK Social
UK Total
USA Total
Group Total
Average Price
£/$000’s
% Change
10823
-7%
£112
+16%
614
-19%
£50
+6%
11437
-8%
£109
+16%
2638
+2%
$227
+15%
14175
-5%
£116
+16%
Wimpey today
• Segmental Analysis
Revenue
% Change
£m
Operating Profit
% Change
£m
Operating Margin
% Change
%
1254
+8.0%
143
+40%
11.4
+2.6%
USA
405
+22%
35
+29%
8.6
+0.5%
Corp.
43
Group
1702
+37%
10.0
+2.0%
UK
(7)
+10%
170
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
Land
Strengthening our land bank
• We were
– competing internally
– reacting to local demands of
regions
– trying to get 29 regions to critical
mass
• 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
– rationing on first come first
served basis
• Result was
• Result is
– we are buying land where we
– land in the wrong place
– bought at poor margins
want it
– at much better margins
Strengthening our land bank
• Completions Before and After
– Regional Businesses now up to critical mass
2001 Before
No of BU’s
2001 After
Ave. PC’s per BU
No of BU’s
Ave. PC’s per BU
Scotland
4
390
2
780
North
8
420
6
560
Midlands
8
390
6
520
South
9
370
7
480
29
390
21
540
UK Total
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%)
Short Term Land
Short Term Land Bank at end 2000 (Plots)
Total = 33,450 Plots
Edinburgh
Glasgow
6,100
Newcastle
7,900
Leeds
2,250
Liverpool
Manchester
6,550
Birmingham
4,200
2,800
Bristol
London
3,650
Short Term Land
Short Term Land Bank at end 2000 (Years)
Average = 3.1 Years
Edinburgh
Glasgow
4.2
Newcastle
3.7
Leeds
1.9
Liverpool
2.8
Manchester
Birmingham
2.8
2.5
Bristol
London
2.9
Short Term Land
Cost of Short Term Land Bank at end 2000 (£millions)
Total = 689.7m
Edinburgh
Glasgow
42.2m
Newcastle
85.9m
Leeds
50.3m
Liverpool
Manchester
158.6m
Birmingham
161.7m
65.3m
Bristol
London
125.7m
Strategic Land
Strategic Land
• 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
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
South
21.2m
Total
35.8m
Stategic Land
Where is our Strategic Land?
Category 1 Sites
(developable within 2-3 years)
•Total Number of Sites = 89
Edinburgh
Glasgow
•Average estimated plots per site = 150
22
•Total estimated plots = 13350
100%
Newcastle
WITH OPP
6
80%
Leeds
Liverpool
9
Manchester
ALLOCATED in ALP
60%
ALLOCATED in DDLP
Birmingham
13
8
Bristol
40%
London
ALLOCATED in CDLP
20%
NOT ALLOCATED
31
0%
Stategic Land
Where is our Strategic Land?
Category 2 Sites
(developable within 5 years)
•Total Number of Sites = 108
Edinburgh
Glasgow
•Average estimated plots per site = 175
32
•Total estimated plots = 18900
100%
Newcastle
WITH OPP
1
80%
Leeds
Liverpool
22
Manchester
ALLOCATED in DDLP
60%
ALLOCATED in CDLP
Birmingham
12
15
Bristol
40%
STRUCTURE PLAN
London
20%
NOT ALLOCATED
26
0%
Stategic Land
Key Sites
Stategic Land
Key-Sites
Bradbury Estate
A Brownfield Site
Town
Hereford
County
Herefordshire
Gross Area
50 Acres
Net Area
36 Acres
Expected Plots
500
Stategic Land
Sites
Eastanton ManorKey
Farm
- A Greenfield Site
Town
Andover
County
Hampshire
Gross Area
253 Acres
Net Area
109 Acres
Expected Plots
1350
Building
Building high quality and reducing costs
• We build well
• Our competitors say so
• The NHBC says so
• The facts confirm they’re right
Building high quality and reducing costs
NHBC Quality Awards
90
80
70
60
1999
50
2000
40
30
20
10
0
George
Wimpey
Barratt
Wilson
McAlpine
Bellway
Redrow
Beazer
Berkeley
Persimmon
Bryant
Building high quality and reducing costs
NHBC Top 100 Site Manager Awards
30
25
1999
20
2000
15
10
5
0
George
Wimpey
Barratt
Wilcon
McAlpine
Bellway
Redrow
Beazer
Berkeley
Persimmon
Bryant
Building high quality and reducing costs
Housing Forum Customer Satisfaction Survey
George Wimpey
UK
National
Average
Recommend without being asked
29%
20%
I am pleased I bought this home
94%
85%
Quality of construction is very good
46%
36%
Overall I am very satisfied
56%
45%
Overall I am fairly or very satisfied
93%
87%
Survey involved over 10,000 Home Buyers Nationally
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
Building high quality and reducing costs
House Design
• We were using
– Wimpey central design:
• We now have
– local design (per McLean)
• expensive design features
• savings identified
• not adapted to local markets
• adapted locally
• costly to adapt to PPG3
• easier for PPG3
• benchmark costs
Building high quality and reducing costs
Redesign of Vaudeville House Type by Leicester Office
-Reduction
-Positioning
of special
roof complexity
features
- £500 - £1000
£600
Before
Front
After
Right
Building high quality and reducing costs
Redesign of Vaudeville House Type by Leicester Office
-Reduction
-Reduction
Total
of
ofSaving
roof
special
complexity
=features
£2,100 --£1000
600
Before
Front
After
Right
Building high quality and reducing costs
Procurement
• We were using
– Wimpey central buying:
• inflexible service
• not suited to local needs
• inhibited upgrades
• high prices
Building high quality and reducing costs
Procurement
• 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
Building high quality and reducing costs
Procurement
• We were using
– Wimpey central buying:
• inflexible service
• not suited to local needs
• inhibited upgrades
• We now have
– Product Consultation Groups
• national deals supported by
regional management
• national scale with knowledge
on the ground
• high prices
• procurement co-ordinated with
site/sub-contractor needs
• benchmarking of costs
Product
Product - Range
• Continued increase in product selling price
• Continued progression to larger house types
• Continued increase in Bespoke
Product - Range
Movement of product range to higher selling prices
40
35
30
98
99
00
25
% 20
15
10
5
0
0-50
51-75
76-100
101-125 126-150
House Price Bands (£000's)
151+
Product - Range
Product Mix
60%
50%
98
99
00
40%
% 30%
20%
10%
0%
5 Bed
4 Bed
3 Bed
3 Bed Semi
/ Terraced
2 Bed
Flats
Improved selling and marketing
• We were
– 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
• We 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
Product - Options
Top 10 Options for 2000
Take up as
% of PC’s
Option
>40%
Downlights
Kitchen Flooring - Ceramic
Carpets
25%-40%
Electrical Sockets/Pointing
Coving
Glazed Doors
20%-25%
Garden Landscaping
Burglar Alarms
Fire Surrounds
Additional Lighting
Margin on Options between 20% and 30%
Product - Options
Options Project Team
• Taking ideas from regions to form consistent approach
e.g.
– Double Garage Sales Centre - Yorkshire
Product - Options
Options Project Team
• Taking ideas from regions to form consistent approach
e.g.
– Double Garage Sales Centre - Yorkshire
– Car Style Specification Sheet - Bristol
Product - Options
Options Project Team
• 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
Product - Options
Options Project Team
• 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
Product - Options
Sales of Options per House in 2000 (£’s)
National Average = £3,100
Edinburgh
Glasgow
£2,750
Newcastle
£2,800
Leeds
£2,600
Liverpool
Manchester
£2,950
Birmingham
£4,100
£3,100
Bristol
London
£3,500
Product - Options
Sales of Options as Percentage of House Price in 2000
National Average = 2.8%
Edinburgh
Glasgow
3.1%
Newcastle
3.1%
Leeds
2.9%
Liverpool
Manchester
2.6%
Birmingham
2.9%
2.8%
Bristol
London
2.2%
Overheads
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%
Getting the benefits from restructuring
Summary of Redundancies
WHH Top Management
10
Central & Duplicated
Functions
35
9 Closed BU’s
235
New Staff Profile
100
Handover Staff (Apr/May)
Total
55
435
Getting the benefits from restructuring
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
Distribution of Remaining Offices
Edinburgh
Glasgow
Business Unit
Newcastle
Leeds
Liverpool
Manchester
Birmingham
Bristol
London
Getting the benefits from restructuring
• Completions Before and After
– Regional Businesses now up to critical mass
2001 Before
No of BU’s
2001 After
Ave. PC’s per BU
No of BU’s
Ave. PC’s per BU
Scotland
4
390
2
780
North
8
420
6
560
Midlands
8
390
6
520
South
9
370
7
480
29
390
21
540
UK Total
USA
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
USA - a growth opportunity
Current Morrison Markets
Sacramento
East Bay Area
San Joaquin Valley
Phoenix
Austin
San Antonio
Dallas/Ft Worth
Houston
Atlanta
Jacksonville
Orlando
Tampa
Sarasota
USA - a growth opportunity
Where the Jobs are.
Job Growth Rates over the Last 4 Quarters
Source: The Meyers Group, Inc. 2001
Sarasota, Florida
5.9%
Tucson, Arizona
5.4%
Austin, Texas
4.7%
Tampa, Florida
4.9%
Orlando, Florida
5.1%
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
USA - Regional Analysis
Orlando
Local economy satistics
Population
Population (000,000's)
1.70
Average population change = 3.2%
1.60
1.50
Average employment change = 4.7%
1.40
1.30
Average Income change = 3.7%
1.20
1.10
1.00
1998
1999
2000
Median Household Income
900
Household Income (000's)
Total Employment (000's)
Total Employment
1,000
800
700
600
500
400
55
50
45
40
35
30
1998
1999
2000
1998
1999
2000
USA - Regional Analysis
Orlando
Largest Private Employers
Company
Employees
Industry
Walt Disney World
55,000
Tourism
Publix Supermarkets
15,141
Retail Grocery
Florida Hospital
11,210
Healthcare
Winn Dixie Stores, inc.
8,978
Retail Grocery
Harris Corporation
8,500
Aerospace
Orlando Regional Healthcare
8,200
Healthcare
Universal Studios Florida
7,000
Tourism
Central Florida Investments
5,000
Financial
Central Florida Healthcare
4,500
Healthcare
Sun Trust Bank
4,244
Financial
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600
Pu
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1000
M
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H
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USA - Regional Analysis
Orlando
Top 10 House Builders
800
561
400
200
0
USA - Regional Analysis
Orlando Market Position
100%
764
1,234
80%
1,090
223
2,030
60%
40%
2,375
62
45
20%
0%
0-100
101-125
2,637
95
1,629
27
Total Market: 11,759
Morrison Homes: 452
126-150
151-175
176-200
201-250
251+
USA - Regional Analysis
Orlando Market Segmentation
251+
201-250
176-200
151-175
126-150
101-125
0-100
North
0-100
South
101-125
East
126-150
151-175
West
176-200
NE
201-250
Lake/NE Polk
251+
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
$3m
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%
Partners and people
Partners & People
• we are able to attract top quality partners
– suppliers and subcontractors
– partners in major development schemes
– our own staff and management
Partners & People
Years within George Wimpey
30
Total Regional Management
25
Managing Directors
20
15
10
5
0
0-5
5-10
10-15
15-20
20-25
25-30
30-35
35+
Partners & People
Age of Regional Management
30
Total Regional Management
25
Managing Directors
20
15
10
5
0
20-30
30-35
35-40
40-45
45-50
50-55
55-60
60+
Partners & People
Strengthening our Staff
• 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
What this means for
our shareholders
What this means for our shareholders
• 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
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.
• 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.