interim results for half year ended 30 june 2002
DESCRIPTION
Interim Results for half year ended 30 June 2002. Wednesday 4 September 2002. Agenda. WelcomeJohn Robinson IntroductionPeter Johnson H1 financial review Andrew Carr-Locke UK business reviewKeith Cushen US business reviewPeter Johnson Next steps and outlookPeter Johnson. 2. - PowerPoint PPT PresentationTRANSCRIPT
Interim Results for half year ended 30 June 2002
Wednesday 4 September 2002
Agenda
Welcome John Robinson
Introduction Peter Johnson
H1 financial review Andrew Carr-Locke
UK business review Keith Cushen
US business review Peter Johnson
Next steps and outlook Peter Johnson
2
Our objectives today:to demonstrate that
the actions taken over the past 21 months are bearing fruit
the UK restructuring programme is complete
the cost base is much improved
the landbank is getting into good shape
the culture is transformed
Morrison Homes goes from strength to strength
George Wimpey Plc has potential for significant further profit growth
results for 2002 are likely to be well ahead of market expectations
3
2002 H1 financial review
Andrew Carr-Locke
Group Finance Director
First half results
º restated for FRS 19 * before June 2001 exceptional items of £14.2m
20021st half
1,018
105.5
%change
+ 44
+ 59
20011st half °
707
66.2
Revenue £ m
Operating profit * £ m
86.3
15.7
3.2
+ 63
+ 56
+ 10
53.1
10.1
2.9
Earnings per share * p
Dividend per share p
Profit before tax * £ m
Interest charge £ m (19.2) (13.1) + 47
ROACE % 21.2 16.8
5
Segmental analysis
£ m%
change£ m%
change2001
1st half2002
1st half
793
225
1,018
+ 6890.5
+ 2519.1
(4.1)
+ 59105.5
+ 55
+ 19
+ 44
US ˜
GROUP
UK
Corporate
10.511.4
8.18.5
9.410.4
Revenue Operating profit * Operating margin ‘%
* before exceptionals ‘ after fair value adjustments ˜ exchange rate in 2002 $/£=1.45
6
First half completions
No%
change‘000%
change
5,298
405
+ 19£140
+ 4£63
+ 27
+ 71UK - social
UK - pd
5,703 + 30UK - total
Completions Average selling price
7,028 + 27GROUP
1,325 + 4$245+ 16US
7
UK margin analysis
£m%
to sales£m%
to sales
161.2 21.2108.720.3Gross profit
2002 1st half 2001 1st half
(70.7) 10.7(54.7)8.9Overhead costs
90.5 10.554.011.4Operating profitafter FVIs
5.7 --0.7Fair value items
Operating profitbefore FVIs
96.2 12.1 54.0 10.5
8
Impact of FRS 19
86.3
(27.6)
32
15.6
38.9
(8.8)
23
-
20021st half
20011st half
previously published
20011st halfrestated
38.9
(12.4)
32
30.6
Profit before tax £ m
Tax £ m
Tax rate %
Balance sheet tax asset £ m
9
UK pensions
1999 valuation £47 m surplusactuarial valuation £45 m deficit on unchanged assumptionsactuarial valuation £74 m deficit on conservative assumptions
defined benefit scheme -
closed to new members from 1 January 2002
benefits/contributions modified from 1 January 2003
following consultation
2002 SSAP 24 charge £13 m as expected in March
10
Cash flow highlights
2002
106
(237)
2001
52
(261)
Operating profit after exceptionals
(85) (15)Acquisitions
(25)
(28)
(43)
(14)
(30)
(181)
Tax
CASH OUTFLOW BEFORE FINANCING
Funding costs
Land spend
243
(17)
148
(61)
Land realisations
Other working capital
£ m
11
Balance sheet capital employed
2002June
2001June £ m
23 18
1,093
337
16
(59)
831
305
31
(50)
Deferred consideration
ASSETS EMPLOYED
Fixed assets
Land (net of creditors)
Other current assets
Tax and provisions
Deferred tax
(161)
1,249
0
1,135
12
Balance sheet financing
2002June
833
416
1,249
2001June
725
410
1,135
Shareholders funds
Interest cover (times)
Gearing
Net debt £ m
Capital employed £ m
£ m
50%
5.5
57%
5.1
Interest cover (times) net of imputed interest 8.2 5.1
13
Landowned and controlled
‡ at 12 month build rate
Total land value £ m
Short term land bank in years ‡
Short term plots
Plot change since prior December
June 2002
1,133
42,303
+ 1,736
3.3
June 2001
790
31,920
- 1,530
3.0
June2002
120
12,536
+ 301
4.1
June 2001
116
11,500
+ 1,530
4.1
UK US
14
Financial summary
UK operating margin† increased from 10.5% to 12.1%
Group PBT* up 63% to £86 m
gearing 50% vs 57%
interest cover 8 times before imputed McAlpine charge
12 month ROACE up to 21.2% from 16.8%
12 month ROE up to 18.4% from 15.0%
* before exceptionals † before fair value adjustments
15
UK business performance
Keith Cushen
George Wimpey UK Managing Director
Financial summary
+ 30
+ 55
+ 19
+ 68
4,9974,398
532512
109118
54.454.0
10.210.5
5,703
793
140
90.5
12.1
ASP £000
Completions
Operating margin * %
Revenue £ m
Operating profit £ m
2001 - 20021st half
% change
20001st half
20011st half
20021st half
2001full year
11,537
1,406
123
173.6
12.4
* Before Fair Value Items
17
Market and sales
national market strong throughout H1
benefit of additional outlets from McAlpine acquisition
visitor levels 33% higher than H1 2001
first half selling rates increased by 12%
limited exposure to Central London
<4% of George Wimpey sales to buy-to-let
18
Restructuring complete
£40 m overhead savings following integration of Wimpey Homes
and McLean Homes and acquisition of McAlpine Homes fully achieved
£20 m of build cost savings identified and in hand
majority now on track to be achieved in 2002
new organisation structure in place for whole of H1 2002
Wimpey Homes, McLean Homes and McAlpine Homes now fully
integrated and benefits being achieved ahead of expectations
19
McAlpine Homes fully integrated
build time being reduced from 24 weeks to George Wimpey standard
13 - 15 weeks
high inherited levels of work in progress reduced
large range of McAlpine house types being rationalised
George Wimpey processes introduced
house types being value engineered
prefabricated components introduced, eg:
-floor and joist sets
-plastic plumbing
-door sets
options being introduced to continuing sites20
Restructuring plus McAlpine transforming the business
short term landbank refocusedbetter balance of prime and secondary locationsland purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,00015% of sales in H1 in excess of £200,000land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met land now being bought at significantly better margins
21
Land repositioning
Midlands
North
South
3.3 years42,303 plotsLandbank at June 2002
49%
19%
42%
22%
32%36%
Dec2000
Dec2001
41%
22%
37%
June2002
Owned and controlled plots
28%
35%
37%
1st half2002
LPE approved plots
34%
29%
37%
1st half2001
22
Restructuring plus McAlpine transforming the business
short term landbank refocusedbetter balance of prime and secondary locationsland purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,00015% of sales in H1 in excess of £200,000land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met land now being bought at significantly better margins
23
Selling price increase
%change
+ 30
+ 1
+ 18
+ 19
+ 55
20021st half
5,703
1,062
132.3
140
793
20011st half
4,398
1,051
112.6
118
512
Completions
TURNOVER £ m
Average square footage per unit
Average selling price £ per square foot
Average selling price per unit £000
24
Restructuring plus McAlpine transforming the business
short term landbank refocusedbetter balance of prime and secondary locationsland purchased in H1 2002 sustains new geographic mix
average selling price up 19% to £140,00015% of sales in H1 in excess of £200,000land purchased in H1 2002 supports higher priced products
>90% of land requirements for 2003 now met land now being bought at significantly better margins
25
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
H1 2000 H2 2000 H1 2001 H2 2001 YTD 2002
PBIT %
Land purchase margins
26
George Wimpeymargin improvement plan
Reducing costs
land being acquired on improved margins
benchmarking across all businesses driving cost improvement
purchasing efficiencies being achieved
value engineering reducing build costs
continued introduction of prefabricated components
27
George Wimpey margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locationslarge increase in proportion of apartments soldnumber of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 200128
Product mix and price range
20001st half
%
6
72
24
4
20021st half
%
18
50
35
15
20011st half
%
9
67
26
7
Completions from - apartments
Completions > £200,000
1410 131 and 2 bed houses
Completions £0 -125,000
Completions £125,000 - 200,000
2926 263 bed houses
5146 524 + bed houses
29
George Wimpey margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locationslarge increase in proportion of apartments soldnumber of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 200130
Options revenue per completion
3,717
1,690
3,224
+ 13
- 2
3,295
Total George Wimpey
Former George Wimpey outlets
Former McAlpine outlets
20021st half
£
%change
20011st half
£
17.1 + 2513.7TOTAL SALES REVENUE £ m
0
3,295
31
George Wimpey margin improvement plan
Increasing achieved selling prices
entry into higher priced product and locationslarge increase in proportion of apartments soldnumber of legals over £200,000 increased by 177%
development of customer options
new upgraded options marketing suites introduced
new products trialled and introduced
relationships with suppliers being developed
options introduced to ongoing McAlpine sites
average selling prices on order book >£153,000
up 23% on order book at August 200132
George Wimpey average selling price
Half yearly average selling prices
0
20
40
60
80
100
120
140
160
H1 2000 H2 2000 H1 2001 H2 2001 H1 2002 Order Book
£ '000
33
George Wimpey
One business one brand
new brand developed to support single business focus on customer
new brand will be rolled out during H2 2002
all rebranding costs charged to H1 profits
new customer management and service procedures introduced to raise
service levels to best in the industry
34
US business performance
Peter Johnson
Chief Executive
Financial summary
+ 16
+ 20
+ 4
+ 25
9471,142
221272
224236
12.222.1
5.58.1
1,325
326
245
27.7
8.5
ASP $000
Legal completions
Operating margin %
Revenue $ m
Operating profit $ m
2001 - 20021st half
% change
20001st half
20011st half
20021st half
2001full year
2,900
693
238
66.4
9.6
36
Market
US economyrecovery slower and more uncertain than expectedunemployment has remained below 6% throughout H1 200230 year mortgage rate at a 32 year low of 6.22%
US Housing market2002 revised forecast stronger than anticipated
single family starts up 3.6% to ~1.32 million unitssupported by strong underlying demographic trends
Morrison MarketsAtlanta, Dallas and Phoenix markets affected by low net job growth Florida and California markets strong throughout H1
37
Morrison Homes sales performance
average number of outlets up 22% on H1 2001
visitor levels up 54% on H1 2001
selling rate 10% down on very strong H1 2001
selling prices up 4% on H1 2001
average square foot unchanged
$ per square foot up from $98 to $102
38
Morrison Homes margin improvement plan
H1 margin 8.5% vs 2001 8.1% and 2000 5.5%
return on capital >20% for second year running
cost reduction/efficiency initiatives introduced
purchasing initiatives to benefit from regional strengths
house type value engineering introduced
systems improvement to reduce build times
strategy refocus to leverage existing overheads
39
Morrison Homes margin improvement plan
improved market offering
new products introduced into strong executive entry level market
continued development of customer options and services
-extension of Signature Selection Centers
-options up 3.6% to $24,200 per customer, 9.9% of sales
-Morrison Financial Services and Title businesses expanded
40
Next steps
Peter Johnson
Chief Executive
Next steps
UK focus remains on long term margin growth rather than volume
UK margin growth from
improved land purchase terms
tight cost control
growth in higher price product
growth in options
US focus on margin and volume growth through expansion within
existing markets
US business and future strategy to be presented by Morrison
management team at investor seminar on 4 October
42
Outlook
Peter Johnson
Chief Executive
Outlook: current trading
visitor levels in July and August remain strong:
up 31% on 2001 in the UK
up 43% on 2001 in the US
the order book at the end of August is also very strong:
in the UK up 23% by volume and 50% by value on August 2001
the asp on the UK order book up 23% on August 2001 to > £153,000
in the US up 10% by volume and 19% by value on August 2001
the asp on the US order book up 8% on August 2001 to $261,000
44
Outlook
healthy conditions have continued in George Wimpey markets
affordability remains good and demand high in UK and US
visitor levels remain strong
costs remain under good control in both businesses
our forward order books are at record levels
current completions are showing improved margins
barring unforeseen events, the result for the year should be well ahead
of current market forecasts
45
Appendix
To Interim Results Presentation for half year to 30 June 2002
4 September 2002
Published results
20011st half
20021st half
66.2105.5
(13.1)(19.2)
53.186.3
(14.2)-
38.986.3
5.18.2
Operating profit before exceptionals
Profit before tax
Interest cover before exceptionals
Interest charge
Exceptionals
£ m
PBT before exceptionals
47
Cash flow highlights
2002
106
(237)
243
(17)
(85)
(25)
(28)
(43)
2001
52
(261)
148
(61)
(15)
(14)
(30)
(181)
Operating Profit after Exceptionals
Acquisitions
Tax
CASH OUTFLOW BEFORE FINANCING
Funding Costs
Land Spend
Land Realisations
Other Working Capital
£m
48
Balance sheet
2002June
833
416
1,249
23
2001June
725
410
1,135
18
1,093
337
16
(59)
831
305
31
(50)
Shareholders funds
Deferred consideration
ASSETS EMPLOYED
Shareholders funds
Gearing
Net debt
CAPITAL EMPLOYED
Fixed assets
£m
Land (net of creditors)
Other current assets
Tax and provisions
Deferred tax
(161)
1,249
50%
222p
0
1,135
57%
195p
49
World-wide sales
7,597
284
7,881
1,884
9,765
271308
--
271308
89109
360417
5,978
282
6,260
1,698
7,958
UK - total
UK -pd
GROUP
UK - social
US
20021st half
20011st half
20021st half
20011st half
20011st half
20021st half
0.850.95
--
--
0.730.66
0.850.90
Sales Ave sites Selling rateper outlet / week
50
UK housing PD activity analysis
308
1,062
132.3
283 277
1,027 1,036
125.1 118.2
271
1,051
112.6Average selling price £ / sq ft
Average number of sites
Average house size sq ft
20021st half
20012nd half
2001Year
20011st half
51
UK housing turnover analysis
20012nd half
2001Year
6,768 10,929
125.1 122.6
847 1,339
381 608
60 61
23 37
24 30
1,406894
20021st half
5,298
140.4
744
405
63
25
20011st half
4,161
118.3
492
237
60
14
24
793
6
512
PD - volume
ave price £000
turnover £ m
TOTAL £ m
Other turnover (mainly land sales)
ave price £000
turnover £ m
Partnership - volume
52
UK housing margin analysis
20012nd half
2001Year
20.1 20.5
179.7 288.4
(22.1) (44.8)
(38.0) (70.0)
119.6 173.6
13.4 12.4
0.9 0.9
12.413.5
20021st half
20.3
161.2
(27.8)
(42.9)
90.5
11.4
5.7
12.1
20011st half
21.2
108.7
(22.7)
(32.0)
54.0
10.5
-
10.5
Gross margin %
OPERATING PROFIT £ m
Operating margin %
OP MARGIN % before FVI
Fair value items (FVI) £ m
Gross profit £ m
Selling expenses £ m
Overhead costs £ m
53
UK housing product mix
20012nd half
%
2001Year
%
12 11
12 12
19 19
8 8
49 50
20021st half
%
18
10
19
7
100
20011st half
%
9
13
18
8
52
Flats
4 and 5 bedroom houses
1 and 2 bedroom houses
3 bed semi / terraced
3 bed detached
46
100 100100
54
UK housing geographic mix
20021st half
12
28
24
25
100
20012nd half
2001Year
13 13
33 32
21 22
23 23
10 10
20011st half
13
29
25
23
10
Scotland
South West / Wales
North
Midlands
South East
11
100 100100
% LEGALS BY AREA
55
UK housing price mix
20021st half
1
10
20
20012nd half
2001Year
0 2
15 15
25 26
20011st half
3
15
29
0 - 50
51 - 75
76 - 100
% LEGALS BY PRICE £000
19
11
23 22
17 15
20
13126 - 150
101 - 125
17
8 88151 - 175
7
100
5 5
7 7
5
7201 +
176 - 200
15
100 100100
56
UK housing long term land
3,550
12,750
16,300
7888
2225
100113
22
78
100TOTAL
Freehold
Option
6531
3517
10048
2002 1st half 2001 1st half
Gross Acres %
Value£ m% %
Value£ m%
GrossAcres
232,500
778,200
10010,700
57
UK housing short term land
20012nd half
2001Year
23,860 24,000
15,256 19,277
(6,768) (10,929)
32,348 32,348
8,219 8,219
40,567 40,567
20021st half
32,348
2,738
(5,298)
29,788
12,515
42,303
20011st half
24,000
4,021
(4,141)
23,860
8,060
31,920
Start of period
Controlled
TOTAL LAND BANK
Net additions
Legal completions
End of period
OWNED PLOTS
58
UK housing land
32,348 24,0001,06232.8Opening land bank
2002 1st half 2001 1st half
Plots PlotsValue£ m
Cost perplot
£000
Value£ m
Cost perplot
£00068828.7
(5,298)
29,788
(4,161)(190)
23,8601020
(35.9)
34.2END OF PERIOD
Legal completions
(108)(26.0)
74231.1
4,139
(1,401)
4,040192
(19)(44)
46.4
(31.4)Land sales / LT land
Additions 16741.3
(5)-
59
US housing PD activity analysis
109
2,393
102.4
105 97
2,356 2,372
101.4 100.2
20021st half
20012nd half
2001Year
20011st half
89
2,396
98.4
Average no of sites
Average house size sq ft
Average selling price $/sq ft
60
US housing turnover analysis
1,758 2,900
20012nd half
2001Year
239 238
420 689
1 4
421 693
1,325
20021st half
20011st half
1,142PD - volume
245
324
236
269
ave price $000
turnover $ m
2
326
3
272
Other - $ m
TOTAL $ m
61
US housing margin analysis
20012nd half
2001Year
21.9 21.6
91.9 149.1
0.1 0.3
92.0 149.4
(25.0) (41.9)
(22.7) (41.1)
44.3 66.4
9.610.5
20021st half
21.1
68.3
1.5
69.8
(20.3)
(21.8)
20011st half
21.2
57.2
0.2
57.4
(16.9)
(18.4)
27.7
8.5
22.1
8.1
PD - margin %
Selling expenses $ m
Overhead costs $ m
Operating margin %
OPERATING PROFIT $ m
profit $ m
Other - profit $ m
TOTAL GROSS PROFIT $ m
62
US housing legals
535 853
20012nd half
2001Year
666 1,048
298 535
259 464
1,758 2,900
433
20021st half
20011st half
318Western US
509
219
382
237
Florida
Texas
164
1,325
205
1,142
Georgia
TOTAL
63
US housing short term land
20021st half
10,160
1,801
(1,325)
10,636
1900
12,536
20012nd half
2001Year
9,860 8,330
2,058 4,730
(1,758) (2,900)
10,160 10,160
2,075 2,075
12,235 12,235
20011st half
8,330
2,672
(1,142)
9,860
1,640
11,500
56 65 13267
Owned start of period
Controlled
TOTAL LAND BANK
LAND SPEND $ m
net additions
legal completions
end of period
64