george wimpey plc annual general meeting 2007 thursday 26 april 2007
TRANSCRIPT
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George Wimpey PlcAnnual General Meeting 2007
Thursday 26 April 2007
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Group OverviewPete Redfern (Chief Executive)
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2006Full year results
£m 2006before
exceptional items
2006exceptional
items
2006total
2005total
Change
Revenue 3,147.4 - 3,147.4 3,003.2 + 5%
Operating profit 422.8 (60.7) 362.1 437.5 - 17%
Interest (51.9) - (51.9) (71.0) - 27%
Profit before tax 370.9 (60.7) 310.2 366.5 - 15%
Tax (114.9) 22.7 (92.2) (113.7)
EPS 64.4 (9.6) 54.8 64.3
NAV per share 426p 389p
DPS 19.4p 17.6p
Dividend cover 2.8x 3.7x
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Completions and pricesFull year results
Completions Ave selling price
No Change £ / $ Change
UK private 11,982 + 12% 186.4 - 1%
UK affordable 1,634 + 15% 94.9 - 4%
UK total 13,616 + 13% 175.4 - 2%
US 4,347 - 12% 319.6 + 1%
GROUP TOTAL 17,963 + 6%
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Segmental analysisFull year 2006
Turnover Operating profit* Operating margin**
£m Change £m Change 2006 2005
UK 2,391.2 + 11% 317.6 + 14% 13.0% 12.9%
US 756.2 - 11% 116.9 - 31% 15.5% 20.0%
Corporate - (11.7)
TOTAL 3,147.4 + 5% 422.8 - 3%
* Before exceptional items
** Operating margin before JVs and exceptional items
Exchange rate in 2006 £:1.84$ 2005 £:1.82$
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Balance sheetFinancing
31 Dec 2006 31 Dec 2005
Shareholders’ funds £m 1,707.1 1,544.4
Net debt £m 387.1 521.9
Capital employed £m 2,094.2 2,066.3
Gearing 23% 34%
Interest cover last 12 months 7.0x 6.2x
Cash interest cover last 12 months 8.3x 8.8x
ROACE 20.3%* 22.3%
* before exceptional costs of £60.7 million
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US housing review
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US housingFinancial summary
2006 2005 Change 2004
Legal completions 4,347 4,921 - 12% 4,422
Ave selling price $319,600 $312,700 + 2% $288,900
Revenue $m 1,389.1 1,538.8 - 10% 1,277.3
Operating profit $m 214.7 308.3 - 30% 188.3
Operating margin 15.5% 20.0% - 4.5pp 14.7%
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• 2006 started with soft market conditions, steadily worsened through to Q4
• Tough market conditions caused by– increased interest rates– affordability– investors cancelling homes under contract– overstocking of inventory– incentives/discounting by US competitors
• Consistently weak across Arizona, Florida and Northern California
US housing2006 market conditions
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US housingIndustry comparisons 2006
Company PBIT margins ROACE Land stocks (years)
Morrison Homes 15.5% 24.6% 3.5
Centex 11.7% 11.6% 6.4
DR Horton 14.6% 12.9% 6.1
Hovnanian 5.4% 5.3% 5.3
KB Homes 13.8% 15.8% 5.1
Lennar 14.2% 18.4% 6.8
Pulte 12.7% 13.7% 6.6
Ryland 14.9% 19.4% 4.1
Standard Pacific 17.2% 11.8% 6.0
Toll Brothers 20.4% 14.9% 8.6
Estimates from Credit Suisse, pre-exceptional figures based on latest full year
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US housingPerformance initiatives
• Land– renegotiation of existing land contracts– land buying process
• $20 million targeted cost savings– 5% initial reduction in build costs– initiatives across all areas of the business– outsource second year warranty programme
• Overhead reductions – 20% across the business– ‘right-sizing the business’
• Sales– clear strategy – focus on opening outlets on time– achieve and maintain a consistent sales rate– re-build backlog levels
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UK housing review
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UK housing Financial summary
2006 2005 Change
Legal completions – total 13,616 12,100 + 13%
Private 11,982 10,678 + 12%
Affordable 1,634 1,422 + 15%
Ave selling price – total £175,400 £178,000 - 1%
Private £186,400 £188,600 - 1%
Affordable £94,900 £98,600 - 4%
Revenue £m 2,391.2 2,157.6 + 11%
Operating profit £m 317.6 278.0 + 14%
Operating margin* 13.0% 12.9% + 0.1pp
*Excluding JV results
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UK housing Delivery on promises
H1 2006 low point of margin Gross margin in H2 2.2% ahead
Better H1/2 balancing H1 2006 compared to H1 2005 over 25% improvement
Impact of strong order book Real benefits of stronger negotiating position delivered in H2 2006
Develop our good cost saving performance Significant savings underpinned margins in 2006. New target for 2007
Deal with underperforming businesses The 6 lowest performing businesses in 2005 have increased margins by over 4%
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UK housing Performance initiatives
• Costs– appointed UK Head of Procurement, Peter Williams– over 80 cost reduction initiatives underway or identified– cost savings of £25m targeted for 2007
• Land– 14% growth in UK landbank in 2006– focusing on acquiring more long and medium term sites– building and maintaining a balanced landbank is key to our strategy
• Sales – review of marketing spend effectiveness identified new initiatives to improve brand image– new and improved UK website introduced early 2007– aim to set industry leading standards providing excellence in sales presentation,
management and customer service
• People– aim to attract and retain the very best people in the industry– talent management is the key focus of our people strategy
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UK housing Margin commitments firmed up
H2
2006
H1
2006
H2
2005
H1
2005
Gross margin % 21.5 19.3 20.3 23.5
• Commitment to improvement from H1 2006 ‘low point’ delivered
• Clear statement of future operating margin targets:
– 14% in 2007
– ongoing growth to 16% over 2-3 years
– longer term target of 18%
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Sustainable developmentTaking a proactive stance
• Recently listed as one of the Global 100 Most Sustainable Companies
• Appointed as the house building and construction representative on theCBI Task Force on Climate Change
• Established an internal team to meet the Government’s recently publishedvoluntary ‘Code for Sustainable Homes’ which includes the target to build all new homes as ‘Zero Carbon’ by 2016
• Working in partnership with Building Research Establishment (BRE), and other industry experts, to beat this target and lead the industry to deliver fully sustainable new homes and communities
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The merger
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• Improves margin growth in the UK– George Wimpey’s cost efficiency and business structure
– Taylor Woodrow’s strategic land development skills
– the ability to adjust the business model focus to a lower sales rate per outlet
• Provides for economies of scale in the UK– better procurement terms and supply chain efficiencies
– overhead efficiency
– improved land management
• Creates a truly leading business in the US– enhanced strength in target states
– broader brand and product offering
– improved position from which to benefit from a US recovery
• Offers the opportunity to extract material annual synergies in the short term
Taylor Wimpey plc Business benefits
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• Taylor Woodrow shareholders will own 51% of the combined entity, George Wimpey shareholders will own the remaining 49%
• Recommended share for share merger to be effected via a scheme of arrangement of George Wimpey
– posting of documentation – by early May 2007
– court meeting and EGM – by end May 2007
– completion – Summer 2007
• George Wimpey shareholders on the register on the dividend record date (2 March 2007) to receive George Wimpey final dividend of 13.10p per share
• Taylor Woodrow shareholders on the register on the dividend record date (25 May 2007) to receive Taylor Woodrow final dividend of 9.75p per share
• Combined business to be re-named - Taylor Wimpey plc
Taylor Wimpey plc The merger terms
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• An enhanced UK business with an improved margin growth profile
• An enhanced US business, with critical mass and a broader brand and product offering
• Strong land position with attractive strategic landbank
• Scope for operational efficiencies and ongoing cost saving programmes
• Strong financial position, allowing for improved growth in the UK and US
Taylor Wimpey plc Summary
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Outcome of Proxy VotingJohn Robinson (Chairman)
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Proxy vote for Resolution 1
Resolution 1:
To Receive the Directors’ Report and Accounts
Total Votes 294,506,307
Votes in favour 290,984,963
Votes against 912,786
Abstentions 2,608,558
In the case of all resolutions, votes in favour include votes exercisable at the Chairman’s discretion
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Proxy vote for Resolution 2
Resolution 2:
To Approve a Dividend
Total Votes 294,506,307
Votes in favour 294,170,417
Votes against 152
Abstentions 335,738
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Proxy vote for Resolution 3
Resolution 3:
To Reappoint Andrew Carr-Locke
Total Votes 294,506,307
Votes in favour 294,354,760
Votes against 142,350
Abstentions 9,197
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Proxy vote for Resolution 4
Resolution 4:
To Reappoint Christine Cross
Total Votes 294,506,307
Votes in favour 294,332,693
Votes against 162,487
Abstentions 11,127
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Proxy vote for Resolution 5
Resolution 5:
To Reappoint Baroness Dean of Thornton-le-Fylde
Total Votes 294,506,307
Votes in favour 292,351,183
Votes against 2,139,918
Abstentions 15,206
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Proxy vote for Resolution 6
Resolution 6:
To Reappoint Ian Sutcliffe
Total Votes 294,506,307
Votes in favour 294,106,871
Votes against 140,029
Abstentions 259,407
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Proxy vote for Resolution 7
Resolution 7:
To Reappoint Price WaterhouseCoopers LLP as Auditors
Total Votes 294,506,307
Votes in favour 291,236,946
Votes against 3,212,634
Abstentions 56,727
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Proxy vote for Resolution 8
Resolution 8:
To Give the Directors Authority to Allot Shares
Total Votes 294,506,307
Votes in favour 288,955,210
Votes against 5,541,890
Abstentions 9,207
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Proxy vote for Resolution 9
Resolution 9:
To Disapply Pre-Emption Rights
Total Votes 294,506,307
Votes in favour 291,081,800
Votes against 3,384,394
Abstentions 40,113
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Proxy vote for Resolution 10
Resolution 10:
To Empower the Company to Make Market Purchases of its Shares
Total Votes 294,506,307
Votes in favour 294,466,113
Votes against 34,628
Abstentions 5,566
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Proxy vote for Resolution 11
Resolution 11:
To Approve the New Three Year Morrison Homes Long Term Incentive Plan for the President of Morrison Homes
Total Votes 294,506,307
Votes in favour 289,010,247
Votes against 2,102,315
Abstentions 3,393,745
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Proxy vote for Resolution 12
Resolution 12:
To Approve the Remuneration Report of the Company
Total Votes 294,506,307
Votes in favour 282,980,300
Votes against 4,999,092
Abstentions 6,526,915
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Proxy vote for Resolution 13
Resolution 13:
To Authorise the Company to use E-Communications
Total Votes 294,506,307
Votes in favour 293,374,644
Votes against 736,565
Abstentions 395,098
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George Wimpey PlcAnnual General Meeting 2007
Thursday 26 April 2007