GEORGE WIMPEY PLC WIMPEY GEORGE 2004 ANNUAL REPORT AND ACCOUNTS AND REPORT ANNUAL 2004
SECURING OUR FUTURE GEORGE WIMPEY PLC ANNUAL REPORT AND ACCOUNTS
FIND OUT MORE… 2004 Further details of George Wimpey Plc are available on-line at www.georgewimpeyplc.co.uk
George Wimpey Plc Manning House 22 Carlisle Place London SW1P 1JA Tel +44 (0)20 7802 9888 www.georgewimpeyplc.co.uk SHAREHOLDER INFORMATION 73
TABLE OF CONTENTS 34 BOARD OF DIRECTORS 50 GROUP CASH FLOW STATEMENT ANNUAL GENERAL MEETING PRIVATE SHAREHOLDERS 01 FINANCIAL HIGHLIGHTS 36 DIRECTORS’ REPORT 51 ACCOUNTING POLICIES 14 April 2005 11:30am at If you have a query about your holding of George Wimpey Plc shares 02 GROUP OVERVIEW 38 CORPORATE GOVERNANCE 52 NOTES TO THE ACCOUNTS THE ROYAL COLLEGE OF PHYSICIANS, or need to change your details, for example address or payment 04 CHAIRMAN’S STATEMENT 41 REMUNERATION REPORT 65 FIVE YEAR REVIEW 06 CHIEF EXECUTIVE’S REVIEW 47 AUDITORS’ REPORT 66 NOTICE OF MEETING 11 ST ANDREWS PLACE, REGENTS PARK, LONDON NW1 4LE of dividend requirements, please contact the Registrars at the 11 OPERATING AND FINANCIAL REVIEW 48 GROUP PROFIT AND LOSS ACCOUNT 69 BUSINESS DIRECTORY address shown. 31 CORPORATE SOCIAL RESPONSIBILITY 49 BALANCE SHEET 73 SHAREHOLDER INFORMATION RESULTS WEBSITE 2004 year end results – 22 February 2005 Further details of the Group’s activities and products can be seen on its 2005 half year results – 6 September 2005 website at www.georgewimpeyplc.co.uk. Services available include: DIVIDENDS • email alert service Final Dividend – subject to approval at the Annual General Meeting, a final recommended dividend of 10.8 pence will be payable on • download Company reports 13 May 2005 to ordinary shareholders whose names appear in the • access press releases register of members at the close of business on 4 March 2005. The ex-dividend date is 2 March 2005. • download investor presentations SHAREHOLDER INFORMATION George Wimpey Plc is a dedicated housebuilding company with Interim Dividend – dates to be announced in July 2005 • view investor presentation via webcasts Once these dates have been approved they will be displayed • interactive share price charting tool operations in the UK and US.We have unparalleled experience in on our website www.georgewimpeyplc.co.uk GROUP COMPANY SECRETARY AND REGISTERED OFFICE our industry and combine the financial strengths of an international The scrip dividend scheme introduced by the Company in 2002 James Jordan continues to be available to shareholders. For more information, please Manning House developer with the focus of small regional businesses. contact Lloyds TSB Registrars. 22 Carlisle Place London SHAREHOLDERS’ SERVICES SW1P 1JA We aim to achieve leadership in our sector and be the housebuilder The Company continues to encourage private shareholders. email: [email protected] Shareview dealing Tel: +44 (0) 20 7802 9888 of choice for our shareholders, our customers, our employees and On the Company’s behalf, Lloyds TSB Registrars operate a phone or internet based low cost share sales service in George Wimpey Plc REGISTERED NUMBER sub-contractors and the communities in which we operate. Our focus shares.The telephone service is available on 0870 850 0852 and the 1397926 internet based service at the website, www.shareview.co.uk/dealing. is to consistently create and deliver value for our shareholders and REGISTRARS Postal share dealing service Lloyds TSB Registrars customers alike. Cazenove & Co also offer a low cost postal share dealing service on The Causeway behalf of the Company. Worthing West Sussex For any further details on either service please contact the Group BN99 6DA Company Secretary at the Registered Office or by telephone on +44 (0) 20 7802 9888. Tel: 0870 600 3970 TURNOVER (£M) OPERATING PROFIT (£M) * PROFIT BEFORE TAX (£M) * Corporate Individual Savings Account (ISA) You can see more details of your shareholding on Lloyds TSB Registrars This service is available to George Wimpey shareholders. ISAs are a website on www.shareview.co.uk useful way of holding your shares as any gains made on the value of 1,702.01,895.9 2,600.1 2,878.5 3,005.7 INVESTOR RELATIONS CONTACT 170.2213.1 329.7 429.8 500.7 146.1180.9 291.8 378.2 450.7 the shares held in the George Wimpey Corporate ISA are free of Capital Terri Wright Gains Tax when sold. 2,750 500 500 email: [email protected] For further information, contact The Share Centre on Tel: +44 (0) 20 7802 9888 2,200 400 400 +44 (0) 1296 41 41 44 or by e-mail to [email protected]. Alternatively, you can visit their website at www.share.co.uk. 1,650 300 300 ShareGift Shareholders with a small number of shares, the value of which makes 1,100 200 200 it uneconomic to sell them, may wish to consider donating them to charity through ShareGift, a registered charity administered by The Orr 550 100 100 Mackintosh Foundation. A ShareGift donation form can be obtained 0 0 0 from Lloyds TSB Registrars. Further information about ShareGift is Published by Black Sun Plc available at www.sharegift.org or by writing to: ShareGift,The Orr Photography by Richard Olivier and Tom Salyer Mackintosh Foundation, 24 Grosvenor Gardens, London SW1W 0DH. Printed by Royle Corporate Print 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 £3bn+ £500m+ £450m+ www.georgewimpeyplc.co.uk
+15% CAGR over four years +31% CAGR over four years +32% CAGR over four years
* Before exceptional costs of £5.9 million in 2002 and £28.9 million in 2001 FINANCIAL HIGHLIGHTS 1 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 2004 2003 % CHANGE
Group profit before tax £450.7m £378.2m + 19% Group operating profits £500.7m £429.8m + 16% – George Wimpey £365.8m £330.1m + 11% – Laing Homes £43.1m £41.7m + 3% – Morrison Homes $188.0m $118.6m + 59% Operating margins – George Wimpey 18.5% 17.1% – Laing Homes 13.3% 12.4% – Morrison Homes 14.6% 11.9% Group return on average capital 27.4% 28.5% – UK 25.8% 27.0% – US 33.8% 25.9%
BASIC EARNINGS PER SHARE (PENCE) * DIVIDEND PER SHARE (PENCE) SHAREHOLDERS’ FUNDS PER SHARE (PENCE)
26.632.8 52.2 68.5 80.8 7.58.25 9.1 12.25 16.0 191210 250 304 368
75 15 375
60 12 300
45 9 225
30 6 150
15 3 75
0 0 0
00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 80.8p 16.0p 368p www.georgewimpeyplc.co.uk
+18% on 2003 +31% on 2003 +21% on 2003 2 GEORGE WIMPEY PLC – GROUP OVERVIEW
We are Britain’s largest housebuilder. In 2004 we sold over 16,500 homes in the UK and US.We have national coverage in the UK and build in 11 of the strongest housing markets in the US.We pride ourselves on industry leading standards of health and safety, build quality and customer service and satisfaction. GROUP OVERVIEW GROUP OUR UK BUSINESS
In the UK we are constantly developing our long track record of successful development by continuing to create new and sustainable communities. Across both brands we are committed to delivering the very best in quality, innovation and service for our customers.
George Wimpey is our core brand operating nationally across the UK.The George Wimpey brand was formed in 2002 from the merger of Wimpey Homes, McLean Homes and McAlpine Homes. Our 22 regional George Wimpey businesses build a range of products from one bedroom starter homes, to inner city apartments and large detached family homes.
Laing Homes was acquired from John Laing Plc in 2002, providing the UK business with a second brand as a vehicle for growth. Regional offices Today Laing Homes operates from five regional businesses across George Wimpey the Midlands and South East and builds a range of homes with an Laing Homes emphasis on design.
OUR US BUSINESS GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT
Our US business, Morrison Homes, has built a strong reputation for excellence by delivering high levels of customer satisfaction and building quality homes. As a result of this Morrison has been recognised as America’s Best Builder. Morrison Homes operates through 11 regional Divisions, located Divisional offices across six States in the Southeast, Southwest and West, building Morrison Homes a range of attached and single family homes. 3 GROUP OVERVIEW GROUP UK KEY FACTS UK COMPLETIONS UK OPERATING PROFIT (£M)
• We sold 12,232 homes in the UK in 2004 11,43711,537 13,720 12,909 12,232 142.5173.6 290.2 371.8 408.9 • The average selling price of a George Wimpey home was £182,000 12,500 375 • The average selling price of a Laing 10,000 300 home was £320,000 7,500 225 • George Wimpey achieved an 18.5% operating margin 5,000 150 Laing Homes achieved a 13.3% • 2,500 75 operating margin • Satisfied customers matter to us 0 0 – 86% of George Wimpey customers would recommend us to friends 00 01 02 03 04 00 01 02 03 04 and family – 86% of Laing Homes customers would recommend us to friends and family • Our site managers won 61 NHBC Pride in the Job Quality Awards, 17 Seals of NHBC Pride in the Job Building for Life – Daily Mail Greenleaf What House Awards – Excellence and one Regional Award Awards – 61 Quality, Gold Award Housing Awards – Silver in Best House and 17 Top 100 Seals of English Partnerships Bronze in Best Volume Excellence, one Award and Design for Housebuilder categories Regional Award Homes Award
US KEY FACTS US COMPLETIONS US OPERATING PROFIT ($M)
• We sold 4,422 homes in the US in 2004, 2,6382,900 3,197 3,661 4,422 53.066.4 80.7 118.6 188.0 21% more than last year and 68% more than in 2000. Morrison is set to deliver 3,750 175 significant volume growth in the coming years 3,000 140 • The average selling price of a Morrison 2,250 105 home was $289,000 1,500 70 • Morrison Homes achieved a 14.6% www.georgewimpeyplc.co.uk operating margin 750 35 • 86% of Morrison Homes customers would 0 0 recommend us to friends and family and 22% of our US home owners were 00 01 02 03 04 00 01 02 03 04 recommended by satisfied customers 4 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT JOHN ROBINSON, CHAIRMAN “THE PAST FOUR YEARS HAVE BEEN YEARS OF REMARKABLE GROWTH FOR GEORGE WIMPEY”
I am delighted to be able to announce yet that these actions have placed George Wimpey another year of further progress and record in a stronger position from which to respond to financial results for George Wimpey Plc. the changing conditions we have experienced since the UK housing market started to slow The past four years have been years of during the second half of 2004. In the UK our remarkable growth for George Wimpey, four focus on cost control and careful land buying years in which we have taken a number of will help us sustain the improvement we have important management decisions to secure the achieved over the past few years in our long term success of our business.We believe operating margins. Our US business, Morrison Homes, has achieved an excellent growth performance in recent years and has been steadily building its position to take advantage TOTAL SHAREHOLDER RETURN (£) of the strong market conditions in the US. Our scale and diversity provide us with GEORGE WIMPEY PLC PEER GROUP FTSE 250 opportunities to rebalance our business interests so we can take advantage of strengths GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT in different markets.This will ensure we achieve 400 the Board’s key objective of delivering value for our shareholders. 300 GROUP RESULTS Despite the slower market conditions 200 experienced in the UK during the second half of the year, the Group achieved a further 100 significant improvement in financial performance and indeed delivered profits which exceeded market expectations at 0 the time of our interim results, despite the subsequent market downturn. Although 1999 2000 2001 2002 2003 2004 Group turnover increased by only 4% to £3,005.7 million, profit before tax rose by 19% to £450.7 million. 5 CHAIRMAN’S STATEMENT In July 2003, the Board stated that it believed EXTERNAL BENCHMARK shareholders should benefit more fully from the improvement that has been achieved in the Company’s performance and that it therefore proposed increasing the dividend “GEORGE WIMPEY HAS TOP DECILE CORPORATE ahead of growth in earnings per share for a GOVERNANCE ASSESSMENT AND IS NEAR THE TOP period of time. Although the strong market we have seen in the UK over the past few OF ITS SECTOR. IT HAS POSITIVE GOVERNANCE years is unlikely to continue in 2005, the Board believes the underlying strength of the MOMENTUM, ALSO AT THE TOP END OF ITS SECTOR” business gives it the confidence to continue this policy. It is therefore proposing an increase of 28% in the final dividend to 10.8 pence per share.This follows a 37% increase in the interim dividend announced in July. If approved at our Annual General Meeting on 14 April 2005, this would bring the total dividend for the year to 16 pence per share, a rise of 31% on 2003, and dividend cover FROM ‘BEYOND THE NUMBERS – CORPORATE GOVERNANCE IN THE UK’ DEUTSCHE BANK FEBRUARY 2004 would remain secure at 5.1 times based on 2004 earnings per share.The Board’s proposal would mean dividends per share would have more than doubled in the past four years. shareholders to take advantage of this service the stronger end of our expectations.We are CORPORATE GOVERNANCE AND THE BOARD where possible. Full details are set out in the currently operating from 12% more outlets We continue to strive to act as a responsible Form of Proxy. than at the same time last year. Pricing has company and achieving the highest levels of been broadly stable, with the use of incentives corporate governance remains a priority for I was delighted to welcome Peter Redfern to generally below the levels seen last autumn. the Board. I am therefore pleased to report the Board as an Executive Director in October. that in a recent survey Deutsche Bank judged Peter took over responsibility for the total UK The outlook in the US remains strong.Visitor George Wimpey to be in the top 10% of housing business at the beginning of this year levels and selling rates are both ahead of the the FTSE 350 companies in its Corporate and the Board has been delighted with the same period last year.We have the land in Governance standards. I am also very pleased way in which he has established himself in place to support continuing strong volume to be able to state that throughout 2004 the this demanding role. His operational growth in 2005. Board operated in full compliance with the knowledge will play a vital part in ensuring Overall, the Group remains well placed Combined Code on Corporate Governance. that the Board’s broad spread of knowledge through the actions of recent years to During the year our Corporate Social and experience is used to best effect in Responsibility Committee has overseen the providing support for our businesses. respond to the needs of its markets in 2005. CSR activities of our companies to ensure we EMPLOYEES respond appropriately to the global challenges On behalf of the Board I would like to offer of delivering sustainable development. sincerest thanks to all our employees in the I can also report that I led a comprehensive UK and the US for their continuing hard work. review of the performance of the Board and It is their dedication and enthusiasm that of the Board Committees during the year. underpin our future success and I am proud Not only does this process enable me to of their commitment to making sure our www.georgewimpeyplc.co.uk ensure each Board member is able to bring business remains a real leader in our sector. to our Board any ideas or experiences gained OUTLOOK from other Boards but it also enables me to At the time of writing this report, after only ensure each Board member is able to seven weeks of trading, it is premature to contribute in full. draw firm conclusions on the market outlook In line with best practice, we are introducing a in the UK, especially with a general election facility to allow shareholders to register proxy expected in the spring. However, visitor votes electronically this year. I would like to levels and interest in this period have been John Robinson take this opportunity to encourage encouraging and reservations have been at Chairman 6 CHIEF EXECUTIVE’S REVIEW CHIEF EXECUTIVE’S REVIEW PETER JOHNSON, CHIEF EXECUTIVE “WE BENEFIT GREATLY FROM HAVING THE ABILITY TO BALANCE INVESTMENT BETWEEN OUR UK AND US BUSINESSES”
Over the past four years, George Wimpey’s pre-tax profits have grown more than three times, with our core UK operating margins up from 11.4% to 18.5% and those in Morrison Homes up from 8.6% to 14.6%. Although helped by strong market conditions in both the UK and US, this remarkable improvement has been achieved by clear and effective management actions that have put us in a good position to address the changing markets we face today. FIVE YEAR DIVISIONAL OPERATING PROFITS (£M) OUR UK STRATEGY In the UK whilst driving short term financial GEORGE WIMPEY LAING HOMES MORRISON HOMES improvement, we also took the actions to ensure George Wimpey and Laing Homes GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT were well prepared to enter the more challenging markets that were bound to 500 arrive eventually. And, as our markets do get harder, we are preparing our plans for 400 102.7 72.3 43.1 growth so that we can respond quickly 41.7 as confidence returns. 300 53.8 20.0 The long period of rapidly rising UK house 200 prices came to an end during the summer. 46.1 34.9 Since then the market has been subdued, 100 with customers slow to commit against a OPERATING PROFIT (£000s) background of five interest rate rises and press 0 142.5 173.6 270.2 330.1 365.8 speculation about house prices. However, the longer term outlook remains healthy as long 2000 2001 2002 2003 2004 as general economic conditions are stable.The market remains undersupplied and 7 CHIEF EXECUTIVE’S REVIEW historically low interest rates ensure affordability UK PRIVATE HOUSING COMPLETIONS SINCE 1970 (‘000s) remains satisfactory. In the shorter term, however, any price increases in the market GOVERNMENT ESTIMATE OF ANNUAL NEW PRIVATE HOUSEHOLD REQUIREMENTS UNTIL 2021 PRIVATE HOUSING COMPLETIONS are likely to be modest. 250 This means our focus must remain on performance improvement. During 2004, we prioritised sustaining our operating margins 200 over volume.We raised our land purchase ANNUAL ‘SUPPLY GAP’ hurdle rates and ensured our assumptions 150 about future selling prices and costs were cautious.We were particularly selective about 100 which deals to do during the last quarter. Business focus continues to be on attacking costs which have risen in recent years, driven 50 by increasing regulations and taxes. Plans are in place to achieve cost savings of £20 million 0 during 2005.We have made sure the presentation of our new homes to our customers is as good as we can make it. 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 We will keep to the same priorities and disciplines in 2005. During 2004 we have seen further changes in our business environment, many driven create not just housing but Sustainable by Government.Whilst these will have a Communities if the extra housing required significant impact on our business, we are is to enhance and not damage our society. confident that we are well placed to respond We wholeheartedly endorse this view and to them. have embraced it wherever we have been able to. In both the Operating and Financial MEETING THE DEMAND CRISIS Review and our separate Corporate Social During recent years housing output has not Responsibility Report, we report on some responded to the strong demand we have of the actions we have taken to address seen. In 2003 the Government commissioned this agenda and demonstrate some of a report from Kate Barker to find out why. In our achievements. her report published in March 2004 Ms Barker confirmed that the UK’s sclerotic planning DELIVERING CUSTOMER EXCELLENCE system was to blame.The Government has We are proud that we continue to excel still to resolve how it will implement her amongst major housebuilders in our standards proposals but in the meantime the planning of customer satisfaction.We achieve these environment has deteriorated further. results by investing in our people, equipping George Wimpey alone could have built them with the right skills and giving them the some additional 2,500 homes in 2004 had right levels of support and resource. All who applications recommended for approval work with us know the priority we place on by planning officers not been rejected by health and safety and product quality. Of planning committees. If implemented, course, we still make mistakes. But we use www.georgewimpeyplc.co.uk Ms Barker’s report offers the potential of them to learn and to improve. sustained volume growth. However, today MODERN METHODS OF CONSTRUCTION the whole industry faces the challenge of Continuous improvement is the focus of our sustaining volume in a slower market with business and our culture.We have the scale lengthening planning delays. and experience to employ a wide variety of CREATING SUSTAINABLE COMMUNITIES traditional and innovative approaches to Both Ms Barker in her report and the construction and aim always to employ that Government in its various proposals have which is most appropriate, taking into stressed the need to improve design and account our needs for safe working practices, 8 CHIEF EXECUTIVE’S REVIEW CONTINUED CHIEF EXECUTIVE’S REVIEW MORRISON HOMES FIVE YEAR REVIEW in Central Florida and will establish a new Division in Sarasota in 2005. In Central Florida we have successfully developed a range of 2000 2001 2002 2003 2004 ‘townhomes’,affordable attached products suitable for higher density developments. TURNOVER ($M) 615 693 806 998 1,290 We are introducing these in other regions.
OPERATING PROFIT ($M) 53.0 66.4 80.7 118.6 188.0 We benefit greatly from having the ability to balance investment between our UK and OPERATING MARGIN (%) 8.6% 9.6% 10.0% 11.9% 14.6% US businesses and will continue to do so COMPLETIONS 2,638 2,900 3,197 3,661 4,422 depending on their ability to sustain long term returns in excess of our cost of capital. ASP ($) 227,000 238,000 252,000 270,000 289,000 MANAGING FOR THE FUTURE Management succession has proceeded smoothly and successfully in the UK and the US. Both Peter Redfern in the UK and Steve Parker in the US have a strong team customer satisfaction, good design and build of experienced senior managers to support efficiency.We share this experience across the them, whilst Stu Cline continues to give Steve Group and transfer good practice wherever wise leadership.The George Wimpey UK Board possible.We are major users of prefabricated has a total of over 150 years and the Morrison components. However, we do not have the Homes Leadership Team over 50 years of skills of a building component manufacturer company experience between them. and do not intend to produce such It is that experience mirrored across our components ourselves. 38 regional companies in the UK and US that has created the strong business we have US BUSINESS ENVIRONMENT The US offers us a far more positive business today. I would like to end by thanking all my environment.The outlook in our markets is colleagues again for their tireless support good and, whilst development controls are and the commitment that has delivered the increasing, the political environment is pro- progress we have made over the past four years. development. As housing supply responds more easily to demand, price inflation in the US has been lower than in the UK. Morrison’s markets benefit from positive demographic trends, internal migration and some of the highest rates of employment growth in the US.
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT OUR US STRATEGY Because of this, we have maximised Morrison Peter Johnson Homes’ growth. In three years completions Group Chief Executive have grown over 30% to 4,422 and profits have more than doubled. However, we have scaled back our activities in Atlanta, where industry returns are below our own targets, and will exit that market during 2005. Our detailed plans to achieve growth are set out in the Operating and Financial Review.We have broadened our Northern Californian business with a new Division in the lower priced Central Valley, south of Sacramento, and will develop this position further.We continue to strengthen our powerful position PROTECTING AND ENHANCING THE NATURAL ENVIRONMENT QUEEN ELIZABETH PARK, GUILDFORD At Queen Elizabeth Park we have been working with the community to make new development acceptable.We have created a new village planned with meticulous care.
CASE STUDY
process and regular meetings are still held to inform and involve them. A surgery, a health and fitness centre, food stores, cafes, office accommodation and community facilities all form part of the development to help meet residents’ needs.
BUILDING FOR THE ENVIRONMENT About 1,000 existing trees were retained within the open spaces of the development. Approximately 6.8 hectares of the development have been laid out as public open spaces including a new ‘village green’.The preservation of existing woodlands maximises the natural diversity of flora and fauna.
Queen Elizabeth Park, Guildford is a large mixed use site which has been designed AWARDS to include areas of woodland preservation • 2004 Building for Life Award Gold Standard and public open spaces. • 2004 Evening Standard Best New Family BUILDING ON BROWNFIELD LAND Home Award The development was a former MOD • Your New Home Best Development barracks, the largest brownfield site in the for Family Living Borough of Guildford.The 23 hectare site provides 525 new homes, 183 (35%) of which will be affordable and will provide 25% of the Borough’s housing requirements through to 2006. FACTS AND FIGURES • All 525 homes received ‘very good’ BUILDING FOR THE COMMUNITY EcoHomes rating Community involvement is vital if our new developments are to respond to local need • 37 dwellings per hectare and we are to create sustainable communities. • 35% affordable homes At Queen Elizabeth Park the local community was involved throughout the planning • 101 average SAP rating %
OF OUR UK HOMES ARE BUILT 68ON BROWNFIELD LAND OPERATING AND FINANCIAL REVIEW – UK HOUSING 11 OPERATING – UK HOUSING AND FINANCIAL REVIEW PETER REDFERN, CHIEF EXECUTIVE GEORGE WIMPEY UK “DESPITE A MORE CHALLENGING MARKET, 2004 HAS BEEN ANOTHER YEAR OF EXCELLENT PROGRESS”
Despite a more challenging market, especially a period which is likely to be marked by in the second half, 2004 has been another more subdued pricing. year of excellent progress for our UK housing business. Management was very focused on UK HOUSING MARKET the basics of the business – selective land The UK housing market remained generally acquisition, cost control, sales presentation strong during early 2004, though the and customer satisfaction. As a result, weakness in the higher priced market, operating margins improved further in both identified during 2003, continued.This affected George Wimpey and Laing Homes and the Laing Homes and some of the southern business was strengthened as it entered regions of George Wimpey. By late summer
UK TURNOVER AND OPERATING PROFIT (£M)
TURNOVER OPERATING PROFIT
408.9 2,120 360 371.8
1,840 290.2 270 www.georgewimpeyplc.co.uk
1,560 180 173.6 TURNOVER 142.5 OPERATING PROFIT 1,280 90
1,000 1,254.0 1,406.1 2,061.8 2,270.0 2,300.6 0
2000 2001 2002 2003 2004 12 OPERATING AND FINANCIAL REVIEW – UK HOUSING CONTINUED OPERATING – UK HOUSING AND FINANCIAL REVIEW UK OPERATING MARGINS BEFORE EXCEPTIONALS (%)
GEORGE WIMPEY LAING HOMES
18 16 14 12 10 8 6 4 2 0 11.4 12.3 14.0 17.1 12.4 18.5 13.3
2000 2001 2002 2003 2004
the market in general had slowed sharply Turnover for the George Wimpey brand across the country and showed no real increased 2% to £1,976 million (2003: £1,933 improvement during the autumn. Customers million).Total completions were 6% lower at took longer to commit to their purchase and 11,122, with private development completions found it increasingly difficult to achieve their 8% lower at 10,345. Operating profit rose asking price for second hand properties. by 11% to £365.8 million (2003: £330.1 million) and has doubled in just three years. Operating Despite this, most forecasters believe that margins rose yet again to 18.5% from 17.1% the UK housing market continues to be in 2003. significantly undersupplied. Official estimates continue to indicate that Great Britain needs Turnover for the Laing Homes brand was many more new homes each year to meet £324.7 million, a reduction of 4% (2003: underlying demand than are currently being £336.8 million).Total completions were up 1% built .The Government has, as yet, done little to 1,110, private development completions were down 5%. Operating profit was up to implement the recommendations made 3% to £43.1 million (2003: £41.7 million), with by Kate Barker. Furthermore, the underlying
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT operating margins making some further economic background remains positive.The progress to 13.3% from 12.4% in 2003. cost of borrowing, and hence the burden of mortgage service costs, remains low by OUTLETS AND COMPLETIONS historic standards. Unemployment is low The average number of outlets open during and wage growth has been steady. the year was 295 (2003: 309) which was depressed due to continuing delays in FINANCIAL REVIEW processing new sites through the planning In 2004 turnover for the total UK housing system. A particular issue has been local division increased by 1% to £2,301 million authorities rejecting planning applications (2003: £2,270 million).With further even when they have officer recommendation. improvements in operating margins in However, going into 2005, due to increased both George Wimpey and Laing Homes, land buying during 2003 and early 2004, we operating profits grew 10% to £408.9 million had 309 outlets open, a 5% increase on the (2003: £371.8 million). Return on average beginning of 2004. By late February we were capital employed remained a healthy operating from 325 outlets, 12% more than 25.8% compared to 27.0% in 2003. in the same week in 2004. 13 OPERATING – UK HOUSING AND FINANCIAL REVIEW UK PRIVATE COMPLETIONS 2004 UK AVERAGE SELLING PRICES*
NORTH SOUTH CITY 2002 2003 2004 3,582 (32%) 2,898 (26%) 289 (3%) MIDLANDS LAING 3,576 (31%) 929 (8%) NORTH £119,000 £148,000 £170,000
MIDS £143,000 £161,000 £169,000
SOUTH £188,000 £198,000 £207,000
CITY – £190,000 £249,000
LAING – £315,000 £320,000
*Private development
Visitor levels throughout the year remained the East Midlands and Scotland. Satellites PRICES AND COSTS healthy, although average visitor levels in the have proven a cost-effective way of For George Wimpey, average selling prices second half fell below those achieved in the establishing an additional market presence for the year were up 8% to £182,000, with the very strong market of the previous year. both in George Wimpey and in Morrison whole of this price increase gained during Homes in the US. the first half. Average selling prices during the The total number of completions was 12,232 second half remained broadly flat on the (2003: 12,909) and the total number of private The Laing Homes regional businesses were first half. For Laing Homes, average selling development completions was 11,274 (2003: restructured at the beginning of the year to prices rose 2% to £320,000 as planned 12,203).The reduction in total completions improve overhead recovery. Each is still below reductions in the sales of higher priced came from a lower average number of outlets ideal scale and hence they provide significant homes were balanced by reductions in open through the year and selling rates in the potential for future volume growth.The Laing the volume of smaller apartments. second half that were below the exceptionally Homes presence today remains limited to strong performance in 2003. In addition, we Southeast England and parts of the Midlands. The use of incentives increased during the rejected a significant number of investment We have identified target markets in the second half of 2004 to support selling rates in reservations at the year end rather than East and Southwest of England, as well as in the slower markets we experienced.These renegotiate the terms of sale. In the weaker Scotland, that will be developed as market were focused on specific plots, which were market conditions we experienced, our focus conditions allow. more difficult to sell, and on particular was to maintain our improvement in Over the past three years, we have developed customer groups, such as first time buyers.The operating margins rather than deliver use of part exchange was tightly controlled maximum volumes. an expertise in inner city developments. However, in light of very competitive market and accounted for less than 3% of sales.The Together, the George Wimpey and Laing book value of part exchange properties owned conditions in a number of city centres we www.georgewimpeyplc.co.uk Homes brands give a wide spread across the have limited our exposure to this market. at the year end was £25.6 million (2003: £28.4 UK market and provide the potential for At the end of the year we entered into a joint million).The use of part exchange has been significant organic volume growth as the venture agreement with a subsidiary of further reduced in the first weeks of 2005. market and availability of land permit. Barclays PLC for the development of The Cost inflation was contained as labour cost George Wimpey remains evenly split across Great Northern Tower, our high-rise apartment increases slowed, benefiting from the supply the North (including Scotland), the Midlands building in central Manchester. Sales on this of skilled and good quality labour from the and the South of Great Britain. As market development are proceeding well.We will European Union and Eastern Europe. Costs conditions permit, we will continue to grow continue to develop such opportunities were also helped by the continued this business through the establishment through joint ventures when appropriate development of the use of prefabricated of additional satellite operations in Sussex, opportunities arise. components wherever these provided an 14 OPERATING AND FINANCIAL REVIEW – UK HOUSING CONTINUED OPERATING – UK HOUSING AND FINANCIAL REVIEW UK PRIVATE DEVELOPMENT PRICE POINTS 2004 UK OWNED AND CONTROLLED PLOTS 2004
GEORGE WIMPEY LAING HOMES
3,000 NORTH SOUTH CITY 15,396 (30%) 15,297 (30%) 2,658 (5%) 85% OF PRIVATE COMPLETIONS MIDLANDS LAING BELOW £250,0000 2,500 12,716 (25%) 5,052 (10%)
2,000 66% OF PRIVATE COMPLETIONS 1,500 BELOW £200,000
1,000 NUMBER OF COMPLETIONS 500
0
£0-50k£50-100k £100-150k £150-200k £200-250k £250-300k £300-500k £500k+
economic solution to our construction needs. We continue to limit our exposure to higher Material costs rose broadly in line with inflation, priced properties, with 36% of our homes with increases in steel and other commodity priced at less than £150,000 and more than prices having limited impact. However, 85% priced below £250,000. increases in landfill tax and aggregates tax, We pride ourselves on the quality and design together with changes to building regulations of our new homes and on building and in the rules controlling the disposal of communities which meet our customers’ waste materials from brownfield sites, requirements. In the NHBC Pride in the Job continued to impact overall costs, as did the Awards, 61 of our site managers received number of bespoke designs required by local Quality Awards, 17 of these received Top 100 planning conditions. Our drive to increase Seals of Excellence, and Tommy Flynn from the efficiencies of new house types to meet George Wimpey West Scotland was the current planning requirements gives us Regional Award winner for Scotland. For yet an opportunity to counteract some of another year we achieved a better overall these costs in 2005 and beyond. performance than any of our competitors.
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT PRODUCT MIX Increasingly the UK Government has been The mix of products built across our pushing to improve both the standards of businesses continues to be influenced by the design for new housing and also the impact requirements of PPG3, central Government’s new housing has on existing communities. Our guidance on Housing Policy. However, we extensive experience puts us in an excellent continue to strive to maintain a product range position to respond to these challenges and that meets the needs and preferences of our we have been increasingly involved in customers and provides good affordability in designing and building a range of sustainable the market. communities.These communities are built on brownfield land and offer residents the The proportion of sales accounted for by four opportunity to live and work in the same area. and five bedroom detached houses fell They incorporate Home Zone principles where during the year to 37% (2003: 42%), with the the emphasis is on people not cars and where proportion of apartments rising to 31% (2003: the homes are built to high environmental 26%). For 2004 the average size of our standards with low energy consumption.These products was 1,033 sq ft (2003: 1,067 sq ft). developments are planned and designed after 15 OPERATING – UK HOUSING AND FINANCIAL REVIEW GEORGE WIMPEY – TOTAL COMPLETIONS VS LANDBANK GROWTH
SHORT TERM PLOTS TOTAL COMPLETIONS
52,500 25,000
45,000 20,000
37,500 15,000 COMPLETIONS SHORT TERM PLOTS
30,000 10,000
1999 2000 2001 2002 2003 2004
extensive consultation to ensure they meet the For the George Wimpey brand the average requirements of both new and existing local plot cost increased by 6% to £42,600 (2003: residents. Examples of these projects are £40,000) and for Laing Homes the average highlighted within this report. Our ability to plot cost was £72,400 (2003: £90,400), partially respond to local authorities’ requirements to reflecting a changed mix. build more sustainable communities places We have been able to increase the average us in a good position for the future. scope of sites acquired during the year. For LANDBANK George Wimpey the average scope of sites Improving both the quality and length of our acquired was 92 units (2003: 80 units) and for landbank on the right terms remains one of Laing Homes it stayed stable at around 60 our top priorities. However, in a weakening units.The average coverage of sites increased market we have been careful to secure our at George Wimpey, rising from around 17,250 future land needs without overpaying.We sq ft per acre (excluding high-rise, inner city raised our land purchase hurdle rates in the developments) to 17,902 sq ft per acre. At year and increased the premium we seek on Laing Homes it fell from about 27,000 sq ft higher risk developments, such as apartments, per acre to 22,000 sq ft per acre. bespoke developments and unconditional The strategic landbank continues to provide a land purchases, to ensure we sustain the flow of plots into the short term landbank with margin improvements we have achieved over 1,079 plots transferred during the year.The the past few years. During the last quarter of strategic landbank now totals 17,571 acres the year we were particularly selective as the and includes around 13,500 plots allocated www.georgewimpeyplc.co.uk land market in places was slow to adjust to in local plans for future development. the changed market for housing. QUALITY AND CUSTOMERS During the year the short term owned and George Wimpey UK aims to provide levels of controlled landbank for the total UK business customer satisfaction which set us apart from increased by 5% to 51,119 plots compared to the rest of the sector. Ms Barker criticised the 48,608 plots at the end of 2003 and 50,901 housebuilding industry for the low levels of plots at the end of June 2004. Planning customer satisfaction it delivers. She permission was achieved on almost 15,000 recommended that the industry should aim to plots during the year. improve the proportion of its customers who 16 OPERATING AND FINANCIAL REVIEW – UK HOUSING CONTINUED OPERATING – UK HOUSING AND FINANCIAL REVIEW UK CUSTOMER RECOMMENDATION RATES (%)
GEORGE WIMPEY 2003 INDUSTRY AVERAGE = 46% BARKER 2007 TARGET = 75%
80
60
40
20
0
Dec 03Jan 04 Feb 04 Mar 04 Apr 04 May 04 Jun 04 Jul 04 Aug 04 Sep 04 Oct 04 Nov 04
would recommend their builder to friends or review other ways in which we can offer our family from the average of only 46% recorded customers a wider range of optional extras in the 2003 Housing Forum survey to at least from retail centres that best suit the type and 75%. George Wimpey has been reporting its location of the home they are buying.The results on this measure for a number of years, total revenue from the sale of optional extras and can report that during 2004 86% of our during 2004 was approximately £60 million, an UK customers said they would recommend average of £5,296 per customer. George us to their friends or family. Wimpey customers spend on average £5,535 per plot and Laing Homes customers £2,633 To make sure we continue to achieve industry per plot.There remains particular scope within leading levels of customer service, last year the Laing Homes brand to grow this further. every employee took part in our ‘Growing Wiser’ training programme, highlighting the GOING FORWARD importance of customer service in every In the longer term, the fundamentals aspect of the business.This programme built supporting the housing market remain good: on lessons learnt from the successful interest rates are likely to stay low by historic GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT transformation of customer satisfaction levels standards, employment is healthy and the in our West Scotland business. Alongside this, housing market continues to be undersupplied. our detailed customer care management Whilst external cost pressures remain, labour system is aimed at ensuring all customers cost increases have moderated significantly.The receive consistently high levels of service and business focus continues to be on cost provides us with benchmarking data so areas management and plans are in place to achieve of improvement can be identified at a cost savings of £20 million during 2005. regional or national level. A key part of ensuring our customers receive excellent service is to provide them with a range of optional extras to help them customise their new homes. Four regional businesses now handle the selection and sale of optional extras for all their homes through central selection centres. In addition we continue to DELIVERINGCAPACITY CONSISTENT FOR GROWTH: GROWTH GREYSTONE,GREYSTONE, ORLANDO, ORLANDO FLORIDA Morrison Homes has built its first townhome development ‘Greystone’ in Orlando, Florida.
CASE STUDY
SECURING LAND FOR THE FUTURE EXPANDING THE PRODUCT RANGE Morrison Homes has been able to achieve a Morrison Homes aims to be a leading rapid rate of organic growth over the past housebuilder in each of its markets and has few years because the strong markets in a clear strategy of growth to achieve this. which it operates are supported by positive demographic trends, employment and To continue to increase market share economic growth.To ensure this rate of Morrison has been developing new ranges of growth is sustained the business has built slightly smaller, more efficient products across up an excellent landbank, creating a strong all its businesses to complement their existing foundation for the future. ranges of very popular single family homes. In central Florida the higher density townhome In Orlando, by developing the new product was introduced to the market in 2004. townhome product, Morrison is able to build communities in A+ locations within the city COMPETITIVE ADVANTAGE THROUGH limits which would not have been suitable CUSTOMER SATISFACTION for their traditional single family homes.This The Morrison Homes brand is recognised for provides the business with a greater range excellence in customer service.This comes of land opportunities to consider. from providing customers with excellent levels of service during the purchase process and also from building high quality products in good locations.
At Greystone, a gated community, customers are able to buy a well designed product with the features they feel are important.The development has a swimming pool and fitness area at the Clubhouse, which also provides a community space for all residents. %
OF MORRISON’S CUSTOMERS 86WOULD RECOMMEND THEM TO FRIENDS AND FAMILY OPERATING AND FINANCIAL REVIEW – US HOUSING 19 OPERATING – US HOUSING AND FINANCIAL REVIEW STEWART CLINE, PRESIDENT MORRISON HOMES “ONCE AGAIN MORRISON HOMES HAS DELIVERED AN EXCELLENT PERFORMANCE BASED SOLELY ON ORGANIC GROWTH”
US HOUSING demographic trends, employment and In 2004 Morrison Homes once again delivered economic growth over the next few years. a very strong performance. Operating profits grew by 59% in dollar terms and operating MARKET margins were up from 11.9% to 14.6%. All The US economy continues to grow at a this growth was organic. At the same time moderate rate. GDP growth in 2004 was 4.4%, Morrison has been positioning itself to grow, compared to 3.1% in the UK and 2.0% in the with good positions in States which are Eurozone. Consumer confidence improved expected to benefit the most from positive through the year, reaching a high of 106.1
US HOUSING MARKET STATISTICS (MILLIONS)
SINGLE FAMILY HOME STARTS NEW HOME SALES SOURCE: NAHB
1.5
1.0 www.georgewimpeyplc.co.uk
0.5
0
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 20 OPERATING AND FINANCIAL REVIEW – US HOUSING CONTINUED OPERATING – US HOUSING AND FINANCIAL REVIEW MORRISON HOMES’ MARKETS 2004 US OPERATING MARGINS (%)
8.69.6 10.0 11.9 14.6 SINGLE FAMILY 14 MORRISON HOME MARKET STATE STATE MARKET PERMITS RANK* RANK 12
10 ORLANDO 27,490 #9 8 TAMPA 23,010 #10 JACKSONVILLE 14,500 #19 6 SARASOTA 10,990 #32 4 FLORIDA 184,540 #1 2 SACRAMENTO 16,840 #13 0 CENTRAL VALLEY 12,779 #23 CALIFORNIA 150,710 #2 HOUSTON 38,770 #5 00 01 02 03 04 DALLAS/FT WORTH 45,460 #3 AUSTIN 14,330 #20 TEXAS 141,810 #3 PHOENIX 56,900 #1 demand. Central Florida was significantly ARIZONA 78,840 #5 affected by the impact of four hurricanes in ATLANTA 56,030 #2 the late summer, which resulted in shortages GEORGIA 85,120 #4 of both materials and labour throughout the DENVER 15,770 #16 last quarter. COLORADO 38,160 #12 Morrison Homes markets in Central Florida * 173 Total US Markets and Phoenix remained particularly robust throughout 2004.The Northern California TOTAL MORRISON STATES 679,180 markets in Sacramento and the Central Valley started the year very strongly but moderated TOTAL US 1,573,000 to a more normal level in the second half of TOTAL UK HOUSING COMPLETIONS 2003 171,593 the year. In Denver and Texas, with the exception of Houston, the economy and housing markets remained slower than expected throughout 2004. GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT FINANCIAL OVERVIEW During the year Morrison Homes turnover increased 29% to $1,290.2 million (2003: $997.8 million) on the back of a 21% rise in in July and ending the year at 102.3. Job Starts at 1.600 million and New Home Sales the number of completions to 4,422 (2003: growth ended the year the highest since at 1.186 million.The first half of the year was 3,661).With operating margins up sharply 1999. Unemployment and interest rates particularly strong with the second half from 11.9% to 14.6%, operating profit rose remain low. In 2005 job growth is projected returning to a more normal, sustainable 59% to $188.0 million (2003: $118.6 million). to be in the range of 2-2.2 million, with healthy market.The housing market was Significant price increases were achieved in 25% of this growth being in Florida, California supported by continuing low 30 year fixed some markets whilst costs were carefully and Texas. rate mortgages which ranged from 5.7% managed and volume growth led to to 6.4% during the year. improved overhead absorption. The US housing market continues to be at historically high levels, benefiting from good A major challenge for homebuilders came In sterling, these results were adversely underlying demographic trends. 2004 was from shortages of labour and materials, affected by the weakening dollar throughout another record year for Single Family Home particularly in markets with very high housing the year.They have been translated into 21 OPERATING – US HOUSING AND FINANCIAL REVIEW US TURNOVER AND OPERATING PROFIT ($M) US COMPLETIONS 2004
TURNOVER OPERATING PROFIT
SOUTHEAST SOUTHWEST WEST 188.0 2,092 (47%) 1,200 (27%) 1,130 (26%) 1,120 160
840 120 118.6
560 80 80.7 TURNOVER 66.4
280 53.0 40 OPERATING PROFIT
0 615 693 806 998 1,290 0
2000 2001 2002 2003 2004
sterling at an average rate of $1.83/£1 market. Plans are in hand to exit this business Average selling prices rose by 7% to $288,900 compared with $1.64/£1 used in 2003. In during 2005. During 2004 the Atlanta business during the year (2003: $270,000) with sterling terms profits increased by 42% to completed 312 homes with a turnover of $79 Northern California, Central Florida and £102.7 million (2003: £72.3 million). million, operating profits of $4 million and a Phoenix seeing price increases above 10%. return on average capital employed of 11%. Price increases in Denver, Atlanta and most Over the last three years Morrison has grown The value of assets employed as at of Texas were comparatively subdued.The turnover by 60% and has more than doubled 31 December 2004 was $26 million. average size of a Morrison home was broadly operating profits. Further investment into land unchanged at 2,386 sq ft (2003: 2,430 sq ft). to support plans for continued growth has The numbers for Atlanta are included in resulted in a 21.3% increase in average assets the Southeast in the regional chart.The To support Morrison’s growth within its existing employed to $556.2 million. Despite this results for the Phoenix Division have been geographic markets, new ranges of slightly increased level of investment the business included in the Southwest region, reflecting smaller, more affordable products have been achieved a return on average capital employed a more logical allocation and revised introduced across all markets during 2004.The of 33.8%, well ahead of the cost of capital. management responsibilities. introduction of the new attached, higher density townhome product has been particularly Controlling costs has been a major focus for OUTLETS AND COMPLETIONS successful in the Orlando and Tampa markets Morrison’s management teams during the The final number of completions was affected and this product will play an increasing part in year, particularly as material producers have by extensive construction delays in Florida the growth of the Southeast Region. tried to push through price increases in the following the hurricanes, which caused at face of strong worldwide demand for least 150 to be delayed into 2005. Despite LANDBANK products such as steel and cement whilst this, the number of completions grew by Morrison Homes has sustained a rapid rate lumber prices also increased significantly. A 21% to 4,422. of organic growth because of the strength of constant programme of value engineering, the markets in which it operates and its strong www.georgewimpeyplc.co.uk careful management of construction Average outlets at 100 were slightly below landbank. During 2004 we continued to add programmes and the introduction of regional the previous year but with very strong to the short term landbank at a rate to support purchasing councils ensure that Morrison markets in Northern California, Central Florida the growth plans over the coming years.The takes advantage of all opportunities for and Phoenix, Arizona some outlets sold out number of owned and controlled plots procurement savings. faster than anticipated.Visitor levels were increased by 27% to 21,579 (2003: 16,967 particularly high, with the average number plots).With the exception of the Atlanta Over the last two years, Morrison has reduced of visitors per outlet up 25% on 2003.Very business, this increase has been spread across its investment into the Atlanta business whilst good conversion rates resulted in a 29% all markets and gives Morrison all the land it undertaking a review to establish whether it increase in the average sales rate to 0.93 requires to deliver its growth target for 2005 could earn adequate long term returns in this sales per outlet per week. and most of what it needs for 2006. 22 OPERATING AND FINANCIAL REVIEW – US HOUSING CONTINUED OPERATING – US HOUSING AND FINANCIAL REVIEW US TOTAL COMPLETIONS VS LANDBANK GROWTH The centralised Signature Selection Centers available across all Divisions continue to add value for our customers. On average customers OWNED AND CONTROLLED PLOTS TOTAL COMPLETIONS spent $28,000 per sale (2003: $27,400), which represents approximately 10% of turnover. During the year we researched further 20,000 15,000 opportunities to develop the sale of options. During 2005 new products and packages will be introduced along with improvements to 15,000 10,000 our Signature Selection Centers and our own procedures to increase sales and margins.
10,000 5,000 The new morrisonhomes.com website has been launched which has an increased focus TOTAL COMPLETIONS on providing our customers with the
OWNED AND CONTROLLED PLOTS 5,000 0 information they need at each stage of buying a new home. During 2004 43% more people visited our website than in the previous year. 1999 2000 2001 2002 2003 2004 Morrison Financial Services and Morrison Title continued to be valuable parts of our business, with 61% of customers arranging their mortgages through us and in Texas and CUSTOMER SERVICE Florida, Morrison Title provided title services Morrison Homes continues to focus on for 90% of customers. maintaining competitive advantage through GOING FORWARD its approach to customer satisfaction. During Although short term interest rates are the year Morrison’s ‘would you recommend’ expected to rise, the US housing market is customer satisfaction score averaged 86.3%, forecast to remain strong throughout 2005, with five of its Divisions achieving their supported by positive demographic trends, internal goal of over 90%. Morrison measures employment and economic growth. Morrison customer satisfaction continuously and has is well positioned in the markets that will its own procedures to ensure lessons learnt benefit most from this. are incorporated into the business. Its Seven Points of Contact with the customer – from Morrison Homes has achieved a rapid rate of reservation through to completion of its growth in recent years and is well placed with comprehensive two year warranty period – a strong landbank, healthy market conditions provide the basis of a continuing relationship and a tight control of costs to ensure this between the company and its customers. continues over the coming years. GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT INNOVATIVE DESIGN FOR HIGH-DENSITY LIVING STAITHS SOUTH BANK, GATESHEAD Creating a community to share by matching local need with great design
CASE STUDY
The Staiths South Bank, Gateshead puts great design and community values within the reach of everyday people
CREATING INNOVATIVE DESIGN FOR HIGH-DENSITY URBAN LIVING Working in conjunction with Wayne and Gerardine Hemingway, a dynamic new concept in housing has been created at Staiths. 800 homes will be built using 28 completely new house types offering customers the choice of an open-plan or a more traditional living space.
A greater emphasis has been placed on good design. A variety of elevational concepts and treatments have been created and ‘engineering solutions’ to housing have been avoided.
Creating a shared community the development is based on Home Zone principles and on shared community values. People take priority over cars, homes are AWARDS grouped into clusters of 16-25 properties Shortlisted for the Deputy Prime Minister’s with pocket parks and shared areas. All the Award for Sustainable Communities facilities are designed to encourage social interaction and to create a sense of community.The development received a Home Zone grant – the only one to be given to new build in the Northeast – which FACTS AND FIGURES helped to equip the communal areas. • Reducing the impact on the environment CREATING ENVIRONMENTAL SUSTAINABILITY – All residents are within 400 metres Trees from the site’s former use as the Garden of a bus stop Festival have been retained and replanted. – All residents are within 30 metres Special arrangements have been made to of a recycling point protect the wildlife.The salt marsh on the edge of the Tyne which forms part of the development is being protected as a nature reserve. New footpaths have been created 43DWELLINGS PER HECTARE to give residents access to this area. OPERATING AND FINANCIAL REVIEW – GROUP FINANCIAL REVIEW 25 OPERATING FINANCIAL REVIEW – GROUP AND FINANCIAL REVIEW ANDREW CARR-LOCKE, GROUP FINANCE DIRECTOR “ONCE AGAIN, GEORGE WIMPEY HAS BEEN ABLE TO REPORT A SET OF EXCELLENT RESULTS FOR THE YEAR”
GROUP SUMMARY With strong growth in operating profit and Group turnover, profit before tax and earnings slightly reduced interest costs, profit before per share all showed progress and yet again tax rose by 19% to £450.7 million. achieved all time records. Profit before tax was The tax charge for the year totalled more than three times the level achieved just £139.7 million, representing an average four years ago in 2000. Operating margins in tax rate of 31% as anticipated.This rate both George Wimpey and Morrison Homes is expected to be sustained in 2005. continued their growth of recent years reaching new heights. Earnings per share rose to 80.8 pence, an 18% increase over 2003. Reflecting our stated Group turnover increased by 4% to policy of reducing our dividend cover over £3,005.7 million exceeding £3 billion for time, the Board is recommending a final the first time.With the additional benefit dividend of 10.8 pence per share bringing of margin improvements on both sides of the full year dividend to 16.0 pence per share, the Atlantic operating profit rose by 16% to an increase of 31%. £500.7 million. Despite continued investment into the landbank, return on average capital Average net debt for the year was of the order employed was 27.4% and remains substantially of £881 million compared to £809 million above our cost of capital. in 2003. However, 2003 benefited from an average deferred payment outstanding of Interest costs totalled £49.7 million, slightly £125 million relating to the acquisition of
down on 2003’s expense of £51.6 million, Laing Homes. www.georgewimpeyplc.co.uk which included £7.6 million imputed interest on deferred consideration relating to the Interest cover stood at 10.1 times, a further acquisition of Laing Homes. Despite higher improvement on 2003’s cover of 8.3 times. short term market rates and higher average Another indication of the Group’s growing debt, a competitive banking market together financial strength is a reduction in gearing (net with a strengthening balance sheet enabled debt to shareholders’ funds) from 45% on 31 the Group to moderate the increase in its December 2003 to 36% on 31 December 2004. effective cost of borrowing.The effective BALANCE SHEET/CASH FLOW interest rate of 5.5% was slightly up on the Shareholders’ funds have continued to grow, rate of 5.4% experienced in 2003. rising strongly to £1,439.1 million.This 26 OPERATING AND FINANCIAL REVIEW – GROUP FINANCIAL REVIEW CONTINUED OPERATING FINANCIAL REVIEW – GROUP AND FINANCIAL REVIEW GEARING (%) SHAREHOLDERS’ FUNDS PER SHARE (PENCE)
3149 40 45 36 191210 250 304 368
350 40 300
30 250 200 20 150
100 10 50
0 0
0001 02 03 04 0001 02 03 04
represents a £270.7 million or 23% increase SECOND HALF RESULTS employment levels rising. Morrison Homes’ over the value of shareholders’ funds at the In the six months ending 31 December 2004 second half completions at 2,708 increased by start of 2004. Expressed on a per share basis, Group turnover at £1,785.8 million was broadly 26% over the final six months of 2003 despite shareholders’ funds increased by 64 pence to level with the corresponding period in 2003. some disruption due to the hurricanes in 368 pence. Improved margins gave impetus to operating Florida. Average selling prices increased to profits which grew by 13% to £319.1 million $296,000 compared with $273,000 in the The increase in net assets employed, which after absorbing a £7.8 million adverse profit corresponding period in 2003, more than rose by £262.4 million to £1,960.0 million, translation effect of a weaker dollar. Interest offsetting cost inflation pressures. Consequently was therefore financed by retained earnings costs at £26.6 million were in line with 2003. operating profit increased by a substantial with net debt reducing slightly in the year Consequently profit before tax for the second 74% to $127.9 million. to £520.9 million (2003: £529.2 million).The half rose by 14% to £292.2 million. increase in net assets employed is, in the FINANCIAL AND TREASURY POLICIES main, due to further investment in our land In the UK consumer sentiment was affected The Group has financed its growth in recent position, with the total value of our land assets by the cumulative effect of five successive years through a combination of retained rising by £211.9 million to £1,940.5 million. interest rate increases and uncertainty on profits, bank loans and long term loans in the Land, in accordance with accounting the future direction of house prices fuelled form of US$ private placements with a group GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT guidelines, is valued at the lower of historic by comment from the Governor of the Bank of US insurance companies. All loans and cost or realisable value.We continue to make of England and media speculation. Sales and banking relationships are managed centrally use of deferred land payment opportunities hence completions slowed in stark contrast through the Group Treasury Department. when it is economic to do so.The land to the last six months of 2003 which had We continue to use derivatives to generate creditor balance of £281.5 million represents seen exceptionally buoyant conditions. the appropriate balance between fixed, a slight reduction on 2003 and stands at During this period we were careful to focus capped and floating interest rate profiles. It is 15% of land value (2003: 17%). on maintaining the improvement in margins not our policy to trade actively in derivatives The Group generated a net cash inflow, after achieved over the past few years rather than or to use more complex derivatives. payment of dividends and financing costs, of pursuing volume. As a result completions The Group’s Treasury Committee is responsible £8.3 million.The funds generated from our fell by 13% compared to the second half for developing and recommending policy to strong earnings performance have been of 2003 whilst operating profit increased by the Board and for monitoring our finance risks. principally used to finance increased 3% to £253.1 million. investment in land and work in progress, pay In the US, market conditions remained The main risks arising from our financing our tax and interest obligations and raise our generally strong with the 30 year fixed instruments are liquidity, interest rate and dividends paid to shareholders by 33%. mortgage rate continuing below 6% and foreign exchange currency risk. 27 OPERATING FINANCIAL REVIEW – GROUP AND FINANCIAL REVIEW CASH FLOW HIGHLIGHTS 2004 (£M) Currency Risk: Our principal currency risk is the translation exposure of our investment in Morrison Homes. Our policy is to match as far OPERATING PROFIT 500.7 as practicable our dollar denominated assets LAND SPEND (935.1) with dollar denominated debt.
LAND REALISATIONS 702.1 Consequently movement in the sterling/dollar exchange rate has had little effect on the OTHER WORKING CAPITAL MOVEMENTS (91.5) Group’s shareholders’ funds, though it did CASH INFLOW FROM OPERATIONS 176.2 affect the sterling value of year end debt as well as reported turnover and profit before tax. INTEREST (49.2) The Board has also given consideration to the TAX (91.3) management of risk related to major inner DIVIDENDS (33.7) city schemes.These schemes are different in nature to normal housing or to schemes OTHER MOVEMENTS 6.3 involving smaller apartment blocks where REDUCTION IN NET DEBT 8.3 both construction and sales can be more evenly phased.Whilst such developments represent an attractive and growing market opportunity, they involve significantly higher financial commitment and risk, relating both to the phasing of sales and construction and to the inclusion of commercial space within Liquidity Risk:The Group maintains adequate borrowings, interest rate swaps and options. the programme. committed borrowing facilities to ensure that The most adverse scenario for the Group is seasonal borrowing can be accommodated a significant increase in interest rates which It is therefore the Group’s policy to develop whilst maintaining prudent headroom and a would weaken the housing market at the a proportion of such schemes with an range of development plans can be financed. same time as increasing borrowing costs. appropriate joint venture partner in order As can be seen from note 17 to the accounts To mitigate this risk the Group has arranged to reduce the extent of our equity exposure. the Group had committed bank facilities of that approximately 79% of its year end debt In addition to an equity partner, debt facilities £945 million at the end of 2004. It also had long is at fixed interest rates. are arranged for these joint ventures on a term debt raised in the US private placement project specific non recourse base. During market of £303 million with maturities ranging The advent of International Accounting 2004 two such joint venture companies were up to 14 years. Standard 39 has caused considerable established involving a financial partner in debate within the accounting, treasury Manchester and a trade partner in London. We took the opportunity presented by and broader business communities in the favourable conditions in the UK banking UK and Continental Europe. George Wimpey ACCOUNTING STANDARDS AND PENSIONS market to replace some of our established has contributed to this debate through its The 2004 Annual Report has been produced bank facilities with a new £500 million membership of The Hundred Group of in accordance with standards issued by the syndicated bank facility on better terms. All Finance Directors and the CBI (Confederation Accounting Standards Board.There have been other bank arrangements have also been of British Industry).We have also consulted no new standards issued during 2004 which renegotiated on improved terms.This has affect these accounts.The accounts have been achieved as a consequence of the widely in determining our own policy. Some of the instruments we currently use do not been prepared on a basis which is consistent Group’s strengthened credit standing in the with the accounting policies adopted for 2003
meet the highly prescriptive conditions www.georgewimpeyplc.co.uk eyes of our debt providers and a record of as modified in order to comply with the delivering against our promises. needed to adopt hedge accounting.We have decided to continue to use these instruments pronouncement of the Urgent Issues Tax The combined effects of these actions has and consequently not to adopt hedge Force Number 38 ‘Accounting for ESOP Trusts’. enabled the Group to maintain the average accounting for interest hedging instruments. The effect of this adoption, which is not material in the context of the accounts as a maturity of its committed facilities at in excess Our principal focus is to manage the of five years whilst mitigating the impact of whole, is detailed in note 27 to the accounts. underlying economic exposure rather than hardening short term interest rates. our reported accounts. It should be recognised We are well prepared for the adoption of Interest Rate Risk:We aim to limit our exposure that this may generate a degree of volatility international accounting standards in 2005. to fluctuations in the cash interest cost of in our reported interest costs.The Board has As commented on in last year’s Annual Report servicing our debt by using fixed interest rate decided to keep this matter under review. our core policies on turnover and profit 28 OPERATING AND FINANCIAL REVIEW – GROUP FINANCIAL REVIEW CONTINUED
OPERATING FINANCIAL REVIEW – GROUP AND FINANCIAL REVIEW recognition are unaffected. In particular our Under the pension scheme rules an actuarial prudent policy of only recognising revenue valuation of the scheme was carried out and profits once the sale of a house is legally based upon data as at April 2002.This showed completed will continue.There will be minor a deficit of £74 million below that required to changes relating to the size and recognition cover the benefits accrued to members after of the cost of share based incentive schemes allowing for expected future increases in and accounting for long term land acquisition earnings.This valuation will be updated contracts. Goodwill relating to the acquisitions during 2005 based upon data as at April 2005. of Richardson Homes, Denver and Laing The Company has taken several major steps Homes will no longer be amortised but subject to address the shortfall and risk exposure in to an annual impairment test. However, the pension scheme over the last few years. goodwill paid on these acquisitions was very The balance of the fund in UK and overseas modest and was valued at £4.7 million at the equities has been reduced and we had just end of 2004. As commented on in the Interest 31% of funds in equities at the end of 2004. Rate Risk section on page 27, we will be The defined benefit scheme was closed to focusing on policies which manage the new members on 1 January 2002. Employee economic rather than the accounting risk of contributions have been increased.The interest rate movements.We may therefore favourable arrangements for early retirement experience some volatility in reported interest for employees and deferred members have costs under International Accounting also been amended.The normal service cost Standard 39. to the company has now fallen to 13.2% of pensionable payroll. In 2004 we invested an As expected the new international additional £15 million in cash (2003: £10 accounting pensions standard, IAS 19, has million) to contribute towards reducing the many aspects which are similar to FRS17, deficit.With all these measures in place, we whilst offering a number of options for remain confident that the pension deficit is implementation.We are waiting to review being responsibly addressed. emerging best practice in this area before deciding which option to implement. The 2004 accounts have been prepared, consistent with previous years, by following the principles laid out in SSAP24. Details of the accounting effect of SSAP24 and FRS17 are shown in note 8 to the accounts. In summary, under FRS17 the UK pension Andrew Carr-Locke scheme has assets (at current market value) of Group Finance Director £590 million and liabilities (discounted at the
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT AA rated corporate bond yield required by the standard) of £775 million.This results in a gross deficit of £185 million which is partially offset by a deferred tax asset of £55 million giving a net deficit of £130 million.This compares to a net deficit at the end of 2003 of £130 million. Whilst the deficit would have been reduced as a result of the decision made early in the year to amend the terms on which deferred pensioners may take early retirement to bring them in line with the practice adopted for those retiring from employment, we have recognised the evidence of increased liability arising from greater longevity and have therefore used more conservative assumptions in this important area. PROMOTING EFFICIENT USE OF LAND AND RESOURCES 29 THE METRO,SLOUGH OPERATING FINANCIAL REVIEW – GROUP AND FINANCIAL REVIEW www.georgewimpeyplc.co.uk High-density housing using environmentally friendly designs and materials
CASE STUDY
The Metro in Slough, Berkshire is a landmark, high-density scheme of integrated mixed tenures.
EFFICIENT DEVELOPMENT 134 new homes have been built on the 1.62 hectare site, giving a density of 97 units per hectare.The Metro provides a range of new homes; split level live/work units; two and three bedroom flats and duplexes and four bedroom townhouses.The homes are for open market and discounted open market sale, shared ownership and rent.
Home Zone principles reduce the dominance of the car and increase the level of natural surveillance creating a safe, crime-free community.
INNOVATIVE USE OF MATERIALS harvesting. Sustainable urban drainage The scheme has been constructed using systems allow rainwater to soak away prefabricated timber-framed wall, floor and back into the natural watercourse. roof components.Timber frames are clad with maintenance-free external wall Windows, glazing and insulation all exceed finishes.Two roofing materials are used the U-values set out in current building on site, one is 100% recyclable the other regulations. Carbon dioxide intensive is 60% crushed waste slate. components have been avoided and aluminium products chosen over uPVC. Careful design and better on-site construction practices led to significant The development is designed to reductions in waste materials. Redundant reduce CO2 emissions by providing buildings and concrete hardstanding were good natural daylighting and all reused for road bases and backfill. maximisation of solar gain.
MINIMISING THE IMPACT ON THE ENVIRONMENT In addition energy-efficient light fittings, The development is able to reduce water space heating and some photovoltaic cells consumption by using low-capacity flush are provided. Recycling facilities are also toilets, spray-head taps and rainwater provided for residents use.
% AVERAGE SAP RATING
OF METRO CUSTOMERS WOULD RECOMMEND 10GEORGE WIMPEY TO FRIENDS 0 AND FAMILY 105 CORPORATE SOCIAL RESPONSIBILITY 31 CORPORATE SOCIAL RESPONSIBILITY CHRISTINE CROSS, CHAIR CSR COMMITTEE “WE REMAIN COMMITTED TO MONITORING, REVIEWING, REPORTING ON AND IMPROVING OUR CSR PERFORMANCE”
CSR MANAGEMENT SYSTEM Since 2002, we have published a Corporate performance.We will continue to ensure Social Responsibility (CSR) Report alongside that our policies are practiced, strengthened our Annual Report and Accounts.This year’s and embedded throughout our business report, entitled ‘Securing our future’,is our in 2005 and beyond. DEVELOP STRATEGY third report on corporate responsibility and CSR MANAGEMENT AND POLICIES sustainability issues and performance. Ethics and governance underpin our Group IMPLEMENT The report covers the Group’s operations approach to CSR. Our five key areas of focus during the 12 month period ended in 2004 were health and safety; environment; MEASURE AND MONITOR 31 December 2004 and includes our major community; employees and customer care. CSR targets for 2005. It describes our approach We explored Group CSR-related supply chain REPORT to CSR and includes major achievements issues during 2004 and will introduce supply and new developments.The report also chain management as a new section in our SEEK INTERNAL AND EXTERNAL provides measurements for more than 2005 CSR Report. FEEDBACK 25 Key Performance Indicators. Ultimate responsibility for CSR within our IDENTIFY RISKS Our CSR practices are our response to Group rests with the CSR Committee and AND OPPORTUNITIES the immense challenges of sustainable the Plc Board. Chaired by Non Executive development, defined by the UK Government Director Christine Cross, the CSR Committee REVIEW APPROACH AND PERFORMANCE as ‘integrating economic, environmental and meets at least three times per year and is social policies to ensure a better quality of life responsible for strategy, policies, reporting,
for everyone, now and for future generations’. performance and monitoring. It is tasked with www.georgewimpeyplc.co.uk Following implementation, our CSR policies ensuring that corporate responsibility activity As a Group, we focus on areas that we are monitored and reviewed in order to is adequately resourced, has appropriate consider to be within the boundaries of our continuously improve our approach to CSR standing within the Group and is aligned responsibilities and that make business sense. strategy and performance to the needs of the business.The CSR We believe that a focus on ethics, governance Committee also highlights significant social, and corporate responsibility helps to secure environmental and ethical (SEE) risks and the long term success and competitiveness opportunities for the attention of the Board. of our business. Major SEE risks and controls are also We are committed to monitoring, reviewing, considered by the Audit Committee and reporting on and improving our CSR the Board, as appropriate. 32 CORPORATE SOCIAL RESPONSIBILITY CONTINUED CORPORATE SOCIAL RESPONSIBILITY GROUP CSR FRAMEWORK: OUR SIX CORE AREAS OF FOCUS
Ethics, values and governance underpin everything George Wimpey does and determines the Group’s approach to all aspects of the business. Our CSR Framework focuses on six key areas:
SUPPLY CHAIN MANAGEMENT
WE WILL INTRODUCE SUPPLY CUSTOMER CARE CHAIN MANAGEMENT AS HEALTH AND SAFETY A KEY SECTION IN OUR 2005 REPORT
TO OFFER OUR CUSTOMERS TO ENSURE THE HEALTH AND SAFETY UNRIVALLED AND CONSISTENT OF OUR WORKFORCE AND THOSE WHO QUALITY OF PRODUCT AND SERVICE COME INTO CONTACT WITH OUR OPERATING SITES AND HOMES GEORGE WIMPEY CSR GROUP FRAMEWORK
EMPLOYEES ENVIRONMENT
TO PROVIDE FULFILLING AND TO MINIMISE ADVERSE IMPACTS
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT REWARDING CAREERS WHILE TAKING STEPS TO FOR OUR EMPLOYEES COMMUNITY PROTECT AND ENHANCE THE NATURAL ENVIRONMENT
TO HAVE A POSITIVE IMPACT ON THE COMMUNITIES IN WHICH WE OPERATE 33
The CSR section of our website includes Environment a fundamental part of our continuing CORPORATE SOCIAL RESPONSIBILITY statements on health and safety by R G • 1,453 UK homes built to the Building Research business success. In the UK, we completed our Wilbrey in the UK and PROSAFE in the US. It Establishment’s EcoHomes standards. second bi-annual staff satisfaction survey.We also includes a verification statement by RSK • The Sacramento Division of Morrison Homes will increase investment in employee training ENSR on our UK Environmental Management won a building industry energy efficiency and development in 2005. System and comments from Wastefile on award for ‘zero-energy’ homes Morrison Homes launched a virtual university waste management.To strengthen assurance, in California. to improve employee training.We will roll out George Wimpey UK is working towards the new curriculum for the university in 2005 Housebuilders have a significant impact upon ISO14001 certification in 2005. and will continue to enhance training and the environment, both on the communities in STAKEHOLDER ENGAGEMENT development programmes. which we operate and those further afield We strive to be a responsive Company and that are affected by the sourcing and Customer Care enter into dialogue with our stakeholders on a manufacture of the materials we use. • George Wimpey and Laing Homes won wide range of business and CSR issues.We have 61 Quality Awards (more than any other In the UK, we undertook a pilot sustainability defined our primary stakeholders as follows: housebuilder) at the National House Building survey of major suppliers and will survey the Council’s Pride in the Job Awards. • Shareholders remainder of our suppliers in 2005.We are • Customers also working towards ISO14001 certification • 86% of US customers would recommend for our Environmental Management System. us to friends and family. • Employees and sub-contractors Two Morrison Homes Divisions received US Our aim is to offer our customers unrivalled and • Communities in which we operate Government Energy Star Accreditation for consistent quality of product and service.We • Suppliers and business partners building energy-efficient homes. In 2005, we focus on continuously improving the quality of will continue to work towards converting all our build, finish and customer communication. • Local, regional and national government of our new homes to Freon-free HVAC systems. As well as introducing a new Customer • Trade and industry bodies Community Charter, all of our UK employees took part in • Planners and regulators • 1,428 UK homes received Considerate Growing Wiser, a new customer care training Constructors Scheme accreditation in 2004. initiative.We will train sub-contractors and • Charities and groups interested suppliers on Growing Wiser during 2005. in sustainable housing • 68% of UK homes were built on brownfield land. Morrison Homes introduced a new Customer 2004 CSR REPORT HIGHLIGHTS Communication Management System to Health and Safety We aim to have a positive impact on the provide enhanced customer care capabilities • 87% of UK staff think that health and communities in which we operate.We focus as well as comprehensive tracking and safety is the number one priority in on building safe, pleasant and sustainable reporting.We will continue to enhance this George Wimpey UK. communities; land regeneration; building with system in 2005. care; affordable housing; supporting charitable • We required every Morrison Homes’ new initiatives and engaging with stakeholders. FIND OUT MORE builder to attend an Occupational Safety Our CSR Report and supplementary and Health Administration (OSHA) In 2004, we developed a Construction Code of information are available on-line at certification programme within 90 days Practice to clarify the standards we expect of www.georgewimpeyplc.co.uk/csr.We of employment. employees and sub-contractors on all of our welcome feedback on our CSR Report and UK and US sites.We also analysed the mix of Health and safety is of the utmost importance on our approach to issues of sustainable our charitable activities in order to maximise to each of our companies and we take our business practice. the benefits of our charitable contributions. responsibilities in this area extremely seriously. www.georgewimpeyplc.co.uk Employees In the UK, we launched a major national safety • 62% of UK employees rate us above average awareness campaign for sub-contractors and or one of the best companies they know or their operatives.We will roll out this campaign have worked for. across the UK in 2005. • 83% of staff think Morrison Homes is Morrison Homes worked with sub-contractors a great place to work. and suppliers to implement improved fall protection programmes and, in 2005, we will We focus on investing in our employees introduce a national safety award and annual and developing their potential. Employees safety audit for every Division. are our most valuable resource and they are 34 BOARD OF DIRECTORS
1 2 BOARD OF DIRECTORS
3 4
5 6
7 8 9 GEORGE GEORGE PLCWIMPEY ANNUAL REPOR
10 T 2004 35
1 JOHN H ROBINSON 5 STEWART M CLINE 8 PETER REDFERN BOARD OF DIRECTORS Chairman President, Morrison Homes Chief Executive, George Wimpey UK John has been Chairman since 1999, originally Stu joined Morrison Homes in 1994 as Pete joined George Wimpey as Finance joining George Wimpey as a Non Executive President and was appointed to the Board of Director of George Wimpey UK in January Director in September 1998. He is also George Wimpey in December 2000. Prior to 2001. Prior to joining George Wimpey Pete was Chairman of Affinity Healthcare Limited, joining Morrison he was with the Ryland Finance Director of Rugby Cement. In January Bespak plc, Paragon Health Care Group Group for 22 years, concluding as President of 2004 he became the Managing Director of Limited and is an operating partner at Duke their South West Region. Age 59. George Wimpey UK and in October 2004 Pete Street Capital. John has previously been was appointed Chief Executive of the UK Chairman and Chief Executive of Smith & 6 CHRISTINE CROSS Business and joined the Plc Board. Age 34. Nephew PLC and Chairman of Low & Bonar Non Executive Director Plc, Railtrack PLC and UK Coal PLC. John is Chris was appointed in December 2002. She is 9 DAVID WILLIAMS Chairman of the Governing Council of the a retail consultant and was previously Group Non Executive Director University of Hull. Age 64. Business Development Director at Tesco, from David was appointed in May 2001. He is 1989 to 2003. Chris holds a visiting currently Finance Director of Bunzl plc, and 2 PETER M JOHNSON professorship at the University of Ulster. She is was appointed to this position in 1991. In Group Chief Executive a Non Executive Director of Sobeys PLC in January 2005 David joined The Peninsular and Peter was appointed in October 2000, having Canada and in January 2005 was appointed as Oriental Steam Navigation Company (P&O) as previously been Chief Executive of The Rugby a Non Executive Director of Next plc. Age 53. a Non Executive Director. Previously David has Group PLC and prior to that a Director of held Non Executive positions at Dewhirst Redland PLC. He is a Non Executive Director of 7 BARONESS DEAN OF THORNTON-LE-FYLDE Group Plc and Medeva PLC. Age 59. DS Smith Plc. In 2005 Peter joined the Board of Non Executive Director The House Builders Federation Ltd and he is Brenda was appointed in October 2003. She is Group Company Secretary also a member of the Council for Industry and a member of the House of Lords and active in 10 JAMES J JORDAN Higher Education (CIHE). Age 57. a range of public areas. During 2004 she was James, a solicitor, was appointed Group appointed as a Non Executive Director of Company Secretary in February 2002. Age 43. 3 J MICHAEL BLACKBURN Dawson Holdings PLC and joined the Board of Non Executive Director the New Covent Garden Market Authority. Mike was appointed in September 1999. Brenda is also a member of the General Previously Chief Executive of Halifax plc, he is Insurance Standards Council Board, part of the AUDIT COMMITTEE a Non Executive Director of Freeport Plc. Mike Financial Services Authority. She retired as Current members: David Williams (Committee is the designated Senior Independent Chairman of the Housing Corporation in 2003 Chair), Christine Cross and Brenda Dean. Director. Age 63. and has previously held Non Executive positions with Take Care plc, Chamberlain CORPORATE SOCIAL RESPONSIBILITY COMMITTEE 4 ANDREW CARR-LOCKE Phipps Plc and Inveresk plc. Age 61. Current members: Christine Cross (Committee Group Finance Director Chair), Brenda Dean, Peter Redfern and Andrew was appointed in May 2001. Stewart Cline. Previously he was Group Finance Director of Courtaulds Textiles Plc. Andrew is a Non NOMINATIONS COMMITTEE Executive Director at AWG Plc. Age 51. Current members: John Robinson (Committee Chair), Peter Johnson, Michael Blackburn and Brenda Dean.
REMUNERATION COMMITTEE www.georgewimpeyplc.co.uk Current members: Michael Blackburn (Committee Chair), David Williams and Christine Cross. 36 DIRECTORS’ REPORT
The Directors submit to the members their Report and Accounts of SHARE CAPITAL the Company for the year ended 31 December 2004.The report on At the 2004 Annual General Meeting authority was given to the Corporate Governance and the Remuneration Report on pages 38 and Company to purchase up to a maximum of 10% of its own shares.This 41 respectively, form part of this Directors’ Report. authority expires at the conclusion of the forthcoming Annual General Meeting, at which a special resolution will be proposed to renew the PRINCIPAL ACTIVITIES AND BUSINESS authority for a further year. During 2004 the Group’s principal activities were in housing and land development under the George Wimpey, Laing Homes and Morrison The Board has no present intention of exercising this authority but will, Homes brand names. A summary of the results of these activities is set as is its practice, keep the matter under review. Purchases will only be out in note 1 on page 52. Further details of the Company’s activities made if the Directors consider that they are in the best interests of and future developments are described on pages 2 to 30. shareholders generally and if the purchase(s) could be expected to result in an increase in earnings per share taking into account other PROFIT AND DIVIDENDS available investment opportunities. In exercising this authority, the The profit for the financial year of £311.0 million is reported in the Board may cancel the shares that have been bought back or hold profit and loss account on page 48. An interim dividend of 5.2 pence them in treasury (or a combination of both). Holding bought back IETR’REPORT DIRECTORS’ per share, amounting to £20.1 million, was paid on 22 October 2004 shares in treasury provides the Company with the ability to sell or and the Directors recommend a final dividend at the rate of 10.8 pence transfer them quickly and cost effectively and also provides flexibility per share amounting to £42.3 million.This, when added to the interim in using such shares for employee schemes. If any such shares are dividend, will make a total of 16 pence per share or £62.4 million in used, the Company will, so long as required under the guidelines of aggregate attributable to the year.This leaves a surplus of £248.6 the Association of British Insurers Investment Committee, count them million which has been transferred to reserves. towards the limits in the schemes as if they were newly issued shares. The Company introduced a scrip dividend scheme in 2002 and this will Options were outstanding as at 1 February 2005 to subscribe for a continue to operate unless and until the Board determines otherwise. total number of 8,798,764 ordinary shares, or 2.25% of the issued share Further information on the scheme is set out on page 73. capital. If the authority to purchase shares is ever used in full (and the DIRECTORS purchased shares cancelled), the proportion of issued share capital Biographical details of the Board of Directors are shown on page 35. represented by this figure would be 2.5%. In accordance with the Articles of Association, one third of the An ordinary resolution will be proposed at the Annual General Meeting Directors who are subject to retirement by rotation are required to to authorise the Directors, in accordance with section 80 of the retire at each Annual General Meeting. Accordingly, Peter Johnson, Companies Act 1985, to allot shares in the Company up to an aggregate Andrew Carr-Locke and Christine Cross, being three of the longest nominal amount of £32,649,568 for a further period of five years. serving members since their last appointment or re-appointment, A special resolution will be proposed at that Meeting to enable the will retire and offer themselves for re-election. Directors to allot shares for cash (by way of rights or scrip dividend or in an amount equal to but not more than £4,897,435 in aggregate of Also in accordance with the Articles of Association, Directors who have the nominal value of the Company’s issued share capital) without been appointed to the Board since the last Annual General Meeting regard to the pre-emption rights of the Companies Act. must be re-appointed at the subsequent Annual General Meeting. Accordingly, Peter Redfern, who was appointed a Director on 12 EMPLOYEE SHARE SCHEMES October 2004, will retire at the Annual General Meeting and offer The Company operates a Savings Related Share Option Scheme for its himself for re-appointment. UK employees and an Executive Share Option Scheme for all UK regional board directors.The limit that may be issued under each Scheme is The beneficial and non-beneficial interests of the Directors in shares the lower of 20,000,000 and 5% of the issued ordinary share capital of of the Company, disclosed to the Company, are set out below: the Company.
Shares at Shares at Options were granted during the year to participating employees 01/01/2004 31/12/2004 over 1,172,994 shares at 306.4 pence under the Savings Related Share Option Scheme. J H Robinson 29,770 29,770 P M Johnson 229,886 296,684 Options were granted during the year to selected executives over S M Cline 10,000 10,000 690,561 shares at 407 pence and 685,481 shares at 420.08 pence under A C P Carr-Locke 25,000 25,000 the Executive Share Option Scheme. P T Redfern (On appointment) 0 0 The number of options outstanding at 31 December 2004 under the J M Blackburn 6,023 11,227 Savings Related Share Option Scheme was 4,744,532, exercisable
GEORGE GEORGE PLCWIMPEY ANNUAL 2005 REPORT D M Williams 5,230 5,408 between now and 2010 at between 96 pence and 306.4 pence per C Cross 3,454 3,454 share and, for the Executive Share Option Scheme, 4,321,304 shares B Dean 0 1,000 exercisable between now and 2014 at 98 pence to 420.08 pence per share.The number of options outstanding under both schemes was Interests of the Directors in options over the shares of the Company 9,065,836 shares of which 2.77% are for the account of the Executive are shown on page 45. As beneficiaries under the Trust which holds Directors. shares to satisfy awards under the George Wimpey Long Term The George Wimpey Plc Executive Incentive Scheme up to 2000 Incentive Plan, each of Peter Johnson, Andrew Carr-Locke, Stewart required participants to invest part of their annual cash bonus in shares Cline and Peter Redfern had an interest as at 31 December 2004 in of the Company to be held in trust for three years and then released to the 2,980,228 shares held by that Trust. the executive with an additional 50% in matching shares. For bonus There has been no change in the interests of the Directors between payments after 1999 where the executive elected to keep the shares in 31 December 2004 and the date of signing of the accounts, 22 February Trust for a further two years, the matching award is increased to 75%. It is intended that the Scheme will now run its course, and close when all 2005, except that the interests of Messrs Johnson, Carr-Locke, Redfern current obligations have been fulfilled. No current Directors participate and Cline in the shares held by the Trust reduced from 2,980,228 to in this Scheme. zero.This reduction is as a result of the vesting of all of the shares held by the Trust to participants in the George Wimpey Long Term As at 31 December 2004, the Trust held a total of 3,122,272 shares with Incentive Plan on 22 February 2005 which included Messrs Johnson, a market value of £12,629,590.24 of which 2,980,228 shares were for Carr-Locke and Redfern – see page 46 of the Remuneration Report. the account of the Long Term Incentive Plan and 142,044 shares were DIRECTORS’ REPORT CONTINUED 37
for the account of the Executive Incentive Share Scheme. at a 20% discount to the market price at the time of grant, in three or five years’ time. SUBSTANTIAL SHAREHOLDINGS As at 2 February 2005 the Company had been notified of the following EQUAL OPPORTUNITIES interests in accordance with sections 198 to 208 of the Companies The Company is committed to equality of opportunity in all its Act 1985. employment practices, policies and procedures.To this end, within the framework of the law, we are committed, wherever practicable, to % Issued achieving and maintaining a workforce which broadly reflects the local Number of Shares Share Capital catchment area within which we operate. No employee or potential Axa S.A. (Various funds) 74,531,677 19.03 employee will therefore receive less favourable treatment due to their Barclays Global Investors 52,946,504 13.52 race, creed, colour, nationality, ethnic origin, religion, political or other M&G Investment Management Ltd 27,706,480 7.07 opinion, affiliation, gender, sexual orientation, marital status, family Legal & General Investment Mgmt Ltd 14,755,919 3.77 connections, membership or non membership of a trade union, or, Fidelity Management & Research Co 14,564,980 3.72 unless justifiable, disability.
EMPLOYMENT OF DISABLED PERSONS REPORT DIRECTORS’ CREDITOR PAYMENT POLICY The Company is committed to ensuring that people with disabilities The Company’s policy and practice, for itself and its businesses, is to are supported and encouraged to apply for employment with the agree in advance the terms and conditions for business transactions Company and to achieve progress through the Company.They will be with suppliers and sub-contractors. Payment is generally made on this treated so that they have an equal opportunity, so far as it is justifiable, basis, subject to terms and conditions being met by the suppliers and to be selected, trained and promoted. Every reasonable effort will be sub-contractors.The number of creditor days as at 31 December 2004 made to enable disabled persons to be retained in the employment was 30 days (2003: 30 days). of the Company by investigating the possibility of making reasonable adjustments to the job, workplace or equipment. The Company had no trade creditors at 31 December 2004. CHARITABLE CONTRIBUTIONS RESEARCH AND DEVELOPMENT Contributions for charitable purposes were made during the year George Wimpey continues to employ a wide variety of traditional and amounting to £505,905 (2003: £484,591).The Charitable Contributions innovative approaches to construction where appropriate, taking into Committee, an executive committee under the chairmanship of account our needs for safe working practices, customer satisfaction, Andrew Carr-Locke, considers charitable contributions made by the good design and build efficiency.We have the scale and experience to Company and also monitors quarterly both UK and US charitable exploit modern methods of construction where they can suitably meet contributions which have been made by the regional businesses. the needs of our customers and employees to the highest standard. Donations are made in accordance with the policy laid down by the During 2004 George Wimpey strengthened its commitment to Board and the guidelines adopted by the Committee. Other members improving and advancing its construction methods through the of the Committee throughout the year included Peter Redfern, Anna establishment of a partnership with the School of the Built Environment Edgeworth (Group HR Director), James Jordan and Terri Wright (Group at The University of Nottingham; the number one ranked University in Communications Manager).The Secretary to this Committee is Karen the UK in the study of Architecture and Building Technology. Atterbury, Assistant Company Secretary. The George Wimpey Lectureship in Construction Technology will DIRECTORS’ RESPONSIBILITIES enable the School to increase its already formidable research resources The Directors are required by UK Company Law to prepare financial in the areas of sustainable design, renewable energy systems and statements for each financial year which give a true and fair view of innovative building techniques.This will, in turn, give George Wimpey the state of affairs of the Company and the Group as at the end of access to this invaluable resource and enable the Company to take the financial year and of the profit of the Group for that year.In further steps in advancing its contribution to sustainable communities preparing the financial statements, appropriate accounting policies and energy-efficient housing. have been used and applied consistently, and reasonable and prudent judgements and estimates have been made.The financial statements EMPLOYEE INVOLVEMENT AND COMMUNICATION are prepared in accordance with relevant applicable accounting The Company is committed to ensuring open and regular standards.The Directors are responsible for maintaining adequate communication throughout the Group on both business-related accounting records, for safeguarding the assets of the Group and issues and issues of general interest.The intranet has once again been for preventing and detecting fraud and other irregularities. upgraded and continues to be a valuable communications tool and an important facility for providing all employees with access to a wide A copy of the financial statements of the Company is placed on the range of information.We continue to cascade information throughout George Wimpey Plc website (www.georgewimpeyplc.co.uk). Executive the business supported by management presentations. management is responsible for the maintenance and integrity of the Company’s website. Information published on the internet is accessible During the year the Board visited local businesses in both the UK and in many countries with different legal requirements. Legislation in the US, meeting staff on site and in regional offices.The Board spent time United Kingdom governing the preparation and dissemination of with staff at all levels and discussed a range of topics related to their financial statements may differ from legislation in other jurisdictions. businesses. In addition, Directors carry out regular visits to all parts of AUDITORS the business and hold informal discussions with employees, helping www.georgewimpeyplc.co.uk In accordance with Section 384 of the Companies Act 1985, a them to better understand the Company’s objectives, and listen to resolution for the re-appointment of PricewaterhouseCoopers LLP feedback from employees on any issues they may have. will be proposed at the Annual General Meeting on 14 April 2005. The Company produces an internal quarterly magazine for all employees By Order of the Board called ‘InHouse’.The magazine, edited independently, receives contributions from all businesses throughout the Group and aims to keep staff informed of new developments and initiatives, employee and business issues as well as social events and employee achievements. The Company’s Savings Related Share Option Scheme, open to all staff in the UK with over six months’ service, was again made available during the year and taken up by 1,157 employees. It is intended to make a further issue in 2005. Under this Scheme, employees may acquire shares, James J Jordan 38 CORPORATE GOVERNANCE
INTRODUCTION themselves for re-election at the forthcoming Annual General Meeting. The Board is fully committed to high standards of corporate Any new Directors appointed during the year must seek re-appointment governance throughout the Group.The Listing Rules of the Financial at the next Annual General Meeting. Accordingly, Peter Redfern will Services Authority require the Company to include a statement so seek re-appointment at the forthcoming Annual General Meeting. as to allow shareholders to evaluate how it has applied the principles of good governance as set out in Section 1 of the 2003 Combined An induction programme is provided for new Directors which includes Code on Corporate Governance (‘the Combined Code’).This report, the provision of a comprehensive set of background information on together with the information set out in the Remuneration Report on the Group and the corporate governance policies and procedures in pages 41 to 46, is published pursuant to the Combined Code which operation. New Non Executive Directors are also provided with the deals with directors, directors’ remuneration, relations with and opportunity of attending a training course on the role and accountability to shareholders and the audit of the Company.Together, responsibilities of holding such a position. these sections explain how the Company has applied the principles Formal agendas and reports for Board and Committee meetings are in Section 1 of the Combined Code. provided to Directors one week prior to the meeting, thus allowing STATEMENT OF COMPLIANCE sufficient time for detailed review and consideration of the documents CORPORATE GOVERNANCE The Board considers that it has complied with Section 1 of the beforehand.The Chairman and Group Chief Executive maintain regular Combined Code throughout the year. contact with all Directors. James Jordan is the Group Company Secretary and he attends all Board and Board Committee meetings. THE BOARD OF DIRECTORS All Directors have direct access to the Group Company Secretary for During 2004, the Board consisted of the Chairman (John Robinson), the advice and services.The Group Company Secretary is responsible for Group Chief Executive (Peter Johnson), three other Executive Directors ensuring that the correct procedures are followed at all Board and (including Peter Redfern who was appointed to the Board on 12 October Committee meetings. He reports directly to the Chairman and the 2004) and four Non Executive Directors.Throughout the year, in line Group Chief Executive. with the Combined Code, excluding the Chairman, at least half of the Board was comprised of independent Non Executive Directors. The Board has adopted a procedure whereby any Director may seek, A list of Directors with details of their biographies is set out on page 35. through the office of the Group Company Secretary, independent professional advice, at the Company’s expense, in furtherance of his The business and management of the Company is the collective or her duties. responsibility of the whole Board. At each meeting the Board reviews the performance of each of its trading businesses in detail and during During 2004 the Board carried out a self appraisal.The Chairman each year it undertakes a strategic review.There is a formal written led the process which included meeting separately with each Director schedule of matters reserved for consideration and approval by the and also with the Group Company Secretary to discuss and appraise Board and these include the annual budget, major land purchases and his or her performance, the performance of the Board and each of its investment proposals, the approval of annual and interim results and Committees.The Senior Non Executive Director carried out a formal a review of the overall system of internal control and risk management. appraisal of the Chairman and, as part of this process, also liaised with This list was revised and updated by the Board during 2004 as part each Director and the Group Company Secretary . of an overall review of the terms of reference applicable to the Board BOARD COMMITTEES and its Committees, which also took into account the requirements Nomination Committee of the Combined Code.The terms of reference can be found on the Current Members: John Robinson (Committee Chair), Peter Johnson, Company’s investor relations website (www.georgewimpeyplc.co.uk). Michael Blackburn and Brenda Dean who were members throughout There are four standing Board Committees: Audit, Remuneration, the year. Nomination and Corporate Social Responsibility. Each of these Consisting of the Chairman, Group Chief Executive, the Senior Committees operates within clearly defined terms of reference Independent Non Executive Director and one other independent and reports back to the Board. Additional information on each Non Executive Director, the Committee meets as and when necessary of these Committees is set out later in this section and, also, in the to consider the appointment of new Executive and Non Executive Remuneration Report in respect of the Remuneration Committee. Directors. A rigorous process is in place for the appointment of new During 2004 the Board met formally, as a whole, 10 times.Twice yearly Directors involving the use of external recruitment consultants the Board spends time with a business unit in the UK and the US followed by meetings with both the Committee and subsequently which includes site visits, presentations from local management and with the Board as a whole, together with the Group Company the opportunity to meet employees. Secretary.This ensures that the selection process is both formal and objective.The Committee has formal terms of reference and meets as During the year, there were no absences from any Board meetings and when appropriate but at least once a year to comprehensively except that David Williams was unable to attend the February meeting. review succession planning at both Board and senior management level across the Group. GEORGE GEORGE PLCWIMPEY ANNUAL 2005 REPORT During the year, each of the Non Executive Directors has at all times acted independently of management and has had no relationships During the year, the Committee met on three occasions and there which would materially interfere with the exercise of their were no absences. independent judgement and decision making.The Board is of the view that the Non Executive Directors play an important role in upholding Audit Committee corporate governance and in ensuring that no individual or group Current Members: David Williams (Committee Chair), Christine Cross dominates the Board’s decision making process. and Brenda Dean who were members throughout the year. The roles of the Chairman and the Group Chief Executive are The Committee consists of three independent Non Executive Directors. separately held and there is a clear division of responsibilities between David Williams is the Group Finance Director of Bunzl plc (appointed in each position which was documented during 2004. 1991) and the Board is satisfied, in line with the Combined Code, that he has both current and relevant financial experience to chair this Michael Blackburn is the Senior Independent Non Executive Director Committee.The Chairman, Group Chief Executive, Group Finance and served throughout the year in this recognised position. Director and senior management attend Committee meetings for One third of the Directors must submit themselves for re-election each specific items at the invitation of the Committee Chair. year at the Annual General Meeting in accordance with the Articles of The Committee has formal terms of reference. It receives reports from Association. In addition each Director seeks re-election every three the external auditors, PricewaterhouseCoopers LLP (PwC), the Internal years in accordance with the Combined Code. Accordingly, Peter Audit Department and senior management at each meeting.The Johnson, Andrew Carr-Locke and Christine Cross will retire and offer Committee is responsible for reviewing the external audit process and 39
for monitoring the effectiveness of internal controls. It also considers programme. Presentations are made twice a year to the Company’s UK major accounting issues.The Committee supports the Board in bankers following the announcement of the Company’s preliminary reviewing information which is sent to shareholders to ensure that and interim results.The Company also hosted a number of analyst it presents a balanced assessment of the Company’s position. In events in the UK and US. addition, the Committee reviews the performance and objectivity of PwC, the scope of its work (and that of the Internal Audit The Company’s joint brokers, Cazenove & Co and ABN Amro Hoare Department) and the fees to be paid to PwC for both audit and Govett, attend two Board meetings a year to provide feedback on non-audit related work. the shareholder surveys that they each carry out following the publication of the Company’s results and subsequent meetings During the year the Committee met on three occasions and there with shareholders. were no absences except that Brenda Dean was unable to attend one meeting. The Company is pleased to welcome private and institutional shareholders to its Annual General Meeting.The Board will Corporate Social Responsibility Committee be present at the Meeting to answer questions and will be Current Members: Christine Cross (Committee Chair), Brenda Dean, available both prior to and after the Meeting for discussions Stewart Cline who were members throughout the year and Peter with shareholders. CORPORATE GOVERNANCE Redfern (with effect from 12 October 2004). ACCOUNTABILITY AND AUDIT The Committee consists of two independent Non Executive Directors, The Board believes that the financial statements and reviews the Chairman of Morrison Homes and the Chief Executive of George contained within this document present a balanced and Wimpey UK.The Committee and its membership demonstrate that understandable assessment of the Company’s performance the Company takes Corporate Social Responsibility (CSR) very seriously. and prospects.The sound system of internal control within the The Committee has formal terms of reference and is responsible for Company enables the Board to make this statement. setting the Company’s CSR strategy and policies and for performance monitoring and reporting against identified key performance The Audit Committee has a policy of not using the Company’s indicators in areas such as Health and Safety, Environment, Customer auditor for non-audit work if this could jeopardise the ability of Care, Supply Chain Management, Employees and the Community.The the auditor to provide an independent and objective audit opinion. Committee also highlights significant social, environmental and ethical Following a competitive tender process, PwC currently carries out risks and opportunities for the attention of the Board.The 2004 CSR routine tax compliance work. PwC also assisted the Company in its report entitled ‘Securing our future’ has been sent to all shareholders review of new International Accounting Standards.The Committee and many of our stakeholders, and can also be found on the takes the view that carrying out this non-audit work does not affect Company’s website www.georgewimpeyplc.co.uk.The Company’s PwC’s objectivity or independence due to its routine nature. approach to CSR is also summarised on pages 31 to 33 of this INTERNAL CONTROL Annual Report. The Board has overall responsibility for the Group’s system of internal During the year the Committee met on four occasions and there were control and for reviewing its effectiveness.The implementation and no absences. maintenance of the risk management and internal control systems are the responsibility of the Executive Directors and senior management. Remuneration Committee It is recognised that the system is designed to manage, rather than Current Members: Michael Blackburn (Committee Chair), David Williams eliminate, the risk of failure to achieve business objectives. and Christine Cross who were members throughout the year. Consequently, it can only provide reasonable, and not absolute, The Committee consists of three independent Non Executive Directors. assurance against material mis-statement or loss.The system has Details of the Remuneration Committee and its policies are set out in been in place throughout the period and is regularly reviewed within the Remuneration Report on pages 41 to 46.The Committee has the Turnbull Guidance on Internal Control. formal terms of reference. The Board has reviewed in detail the areas of major risk that the During the year the Committee met on nine occasions and there Group faces in its operations as documented in the Group Risk were no absences. Schedule.This Schedule comprises the key risks and is regularly monitored for ongoing relevance. Specific key operational risks include RELATIONS WITH SHAREHOLDERS AND INVESTORS land purchase, health and safety, the environment and product quality. During the year, the Company has continued to maintain an active The Board, following its review, is satisfied with the process in place for investor relations programme, encouraging constructive two-way risk identification and management. It is satisfied with current control communication with investors, fund managers and analysts. mechanisms and reporting lines that have been in place throughout Presentations are given at the time of both preliminary and interim the year and the programme of continuous improvement initiatives results and at the Annual General Meeting when investors are invited that has been implemented. to attend.Webcasts of both results presentations, along with the question and answer sessions, are made available on the Company’s The Group seeks to maintain high standards of business conduct and website. During 2004, Non Executive Directors attended both the operates under an established internal control framework which can Company’s preliminary and interim results presentations where they be described as follows: were available to meet with shareholders. Organisational Structure www.georgewimpeyplc.co.uk The Company makes full use of its website (www.georgewimpeyplc.co.uk.) The Group operates through a number of operating businesses, each to provide information for shareholders and others interested in with its own management board. Clear reporting lines and delegated George Wimpey as an investment opportunity. authorities are in place.The management and monitoring of risk and performance occurs at multiple levels throughout the Group and the Peter Johnson, Andrew Carr-Locke and Terri Wright (Group use of interactive review processes provides successive assurance Communications Manager) carried out an extensive programme of through the levels of management up to the Board. meetings with institutional shareholders and investors throughout the year within guidance issued by the Financial Services Authority. Land Purchase and Investment Appraisal Meetings were held in London, Edinburgh, Glasgow, Dublin, Paris, There are clearly defined policies and procedures for the purchase of Frankfurt, New York, Boston, Chicago and San Francisco.The Company land and for capital expenditure.These include detailed appraisal and will consider other visits as appropriate or required. review requirements and due diligence procedures which incorporate a detailed environmental appraisal of land prior to acquisition.These Andrew Carr-Locke and David Rallison (Group Treasurer) held meetings procedures are subject to rigorous review and authorisation. across the US with investors in the Company’s US Private Placement 40 CORPORATE GOVERNANCE CONTINUED
Development Activity There is an established framework for managing and controlling all site related activity.This includes extensive health and safety procedures, regular performance monitoring and clear accountability on customer satisfaction. Financial and Operating Reporting There is a developed budgeting system with an annual budget approved by the Board. Profit and cash forecasts are prepared and reviewed on a monthly basis.The performance of each business is reviewed monthly by Divisional and Group management and subsequently reported to the Board against both budget and forecast. Particular emphasis is placed on cash flow, as well as profit and loss and balance sheet reporting, and on key operating issues including health and safety and environmental matters. CORPORATE GOVERNANCE Control Self Assessment During 2004, improved procedures were put in place which required each business to report on a regular basis, through a formal Control Self Assessment process, its compliance with the core policies and key controls governing the Group.This process has also been extended to key non-operational areas. Treasury The principal treasury related risks, decisions and control processes are documented.The Treasury Committee, consisting of Andrew Carr-Locke (Chair), Peter Johnson, Michael Blackburn, David Rallison (Group Treasurer) and Rod Ashford (Group Tax and Insurance Manager), meets quarterly to consider treasury related issues, decisions and control processes. All of the above internal controls are subject to ongoing Internal Audit review.The Internal Audit Department supports the Audit Committee and senior management by independently and objectively reviewing the effectiveness of risk management and the control environment.The Internal Audit methodology is aligned to the key elements of the Group’s internal control framework. All reviews are formally followed-up to ensure agreed actions have been implemented.The results of all Internal Audit reviews are presented and discussed in detail at the Audit Committee. In addition to Audit Committee reporting, Internal Audit findings and conclusions are discussed at both the Group Executive Committee (which meets at least monthly) and consisted during the year of Peter Johnson (Chair), Andrew Carr-Locke, Stewart Cline, Peter Redfern (who joined the Committee with effect from 1 January 2004), Steve Parker (Executive Vice President, Morrison Homes and President from 1 January 2005, who joined the Committee with effect from 1 November 2004) and James Jordan (Group Company Secretary) and at Divisional executive meetings of George Wimpey UK and Morrison Homes. Going Concern The Directors are required under the Combined Code to have satisfied themselves as to the Group’s ability to continue in existence for the foreseeable future. A review has been carried out and the Directors have concluded that the Group has adequate resources and is justified
GEORGE GEORGE PLCWIMPEY ANNUAL 2005 REPORT in using the going concern basis in preparing the financial statements. REMUNERATION REPORT 41
INTRODUCTION AND COMPLIANCE Performance based remuneration comprises an annual cash bonus In preparing this Remuneration Report to shareholders, the Board has and a long term incentive plan.The chart illustrates the mix of followed the requirements of Section 1 of the 2003 Combined Code remuneration assuming target levels of annual performance and the on Corporate Governance (the ‘Combined Code’) and the Directors’ annualised expected value of long term incentive provision. Remuneration Report Regulations 2002 (the ‘Regulations’) contained in schedule 7A of the Companies Act 1985. Pursuant to the Regulations, The Company encourages and facilitates its Executive Directors to take this Report is being put to shareholders for approval at the Annual General on Non Executive positions with other listed public limited companies, Meeting to be held on 14 April 2005.The vote will have advisory status provided that such positions are held within the requirements of the in respect of the remuneration policy and overall remuneration packages Combined Code. Executive Directors are permitted by the Company and will not, therefore, be specific to individual levels of remuneration. to retain their earnings from such positions. Peter Johnson is an independent Non Executive Director of DS Smith Plc where he also THE REMUNERATION COMMITTEE chaired the Audit Committee until December 2004; he received fees Current members: Michael Blackburn (Committee Chair), David Williams amounting to £43,359 during 2004. Andrew Carr-Locke is an and Christine Cross.The Committee, consisting of three independent independent Non Executive Director of AWG Plc and received fees Non Executive Directors, met on nine occasions during the year and
amounting to £32,083 during 2004. REMUNERATION REPORT there were no absences. BASE SALARY CONSULTANTS The salaries of Executive Directors are reviewed annually by the External advice is sought where appropriate and the Remuneration Remuneration Committee which takes into account the Committee has appointed the consulting firm Towers Perrin as its responsibilities, experience, market competitiveness and performance advisor and to provide it with market data and assistance on executive in each position.To ascertain market competitive levels,Towers Perrin compensation, including the Company’s share schemes.Towers Perrin carried out a comprehensive benchmarking exercise which included do not provide any other services to the Company outside other housebuilders (in the UK and US as appropriate) and other remuneration matters. External legal advice is also sought, where FTSE 100/FTSE 250 companies with a similar turnover and/or market appropriate, from Slaughter and May. capitalisation, and advised the Committee on market salary levels in The following people provided material advice, services or assistance to respect of each position. Peter Johnson and Andrew Carr-Locke were the Committee, except in relation to their own specific remuneration: awarded pay increases of 5% and 3.5% respectively with effect from 1 January 2005. Having regard to uncertainties in the housing market John Robinson – Chairman at the time of the award and those anticipated going into 2005, Messrs Peter Johnson – Group Chief Executive Johnson and Carr-Locke each formally elected to waive their salary Anna Edgeworth – Group HR Director increases for the time being. Should market conditions or performance James Jordan – Group Company Secretary make it appropriate during 2005, then following liaison with the POLICY Chairman of the Board and the Chair of the Remuneration Committee, The Company is committed to fostering a performance culture to each may elect to accept the increase and this will be reported on in increase shareholder value and to establish George Wimpey as a next year’s Remuneration Report. All other aspects of their remuneration, leading housebuilder in its competitive markets. In line with these including pension, have continued as though the pay increases were aims, the Remuneration Committee sets the remuneration packages implemented with effect from 1 January 2005. of the Executive Directors at a level designed to attract, motivate and BONUS SCHEMES retain high calibre executives, and to deliver high rewards only on UK attainment of demonstrably sustained superior corporate The UK based Executive Directors participate in an annual cash based performance.This is achieved through a combination of salary, an short term incentive scheme.This rewards current performance on the annual performance bonus, share-based long term incentives and achievement of stretching financial performance targets which are set pension provision.The Committee also sets the remuneration for the annually by the Remuneration Committee, having regard to prior year Group Company Secretary. In addition, and in compliance with the performance and the annual budget approved by the Board.The bonus Combined Code, the Committee monitors and makes recommendations scheme for Peter Johnson and Andrew Carr-Locke is based on achieving on remuneration matters in relation to designated senior management Group profit before tax targets. Peter Redfern participates in a similar in the UK and US at the tier below Board level. scheme except that it is based on the achievement by George Wimpey It is the policy of the Remuneration Committee that a significant UK of targets relating to profit before interest and tax (90%) and customer proportion of each Executive Director’s total compensation is delivered satisfaction (10%). Following the review of peer group practices carried through performance related pay. In fixing base salary it is also the out by the Committee in conjunction with Towers Perrin in 2002, each policy of the Remuneration Committee to reward its Executive Director’s target annual bonus for 2005 will remain, as it was for 2004, Directors at a level set around the median, having regard to levels of at 40% of salary, with a maximum bonus payable of 100%. remuneration within other housebuilders and for other FTSE 100/FTSE US 250 companies with a similar turnover and/or market capitalisation. Stewart Cline is a member of an annual cash bonus scheme which is specifically tailored and linked to the performance and growth of PROPORTION OF FIXED TO PERFORMANCE BASED REMUNERATION Morrison Homes. In line with the outcome of the independent review conducted by the Remuneration Committee in 2002 on the structure CEO and levels of bonus to be applied in the US, the maximum bonus that www.georgewimpeyplc.co.uk can be paid under the scheme to Stewart Cline for 2005, is the same as UK BASED DIRECTORS it was for 2004, namely, 200% of his base salary.The scheme is based on a number of targets which are set by the Remuneration Committee on US BASED DIRECTOR an annual basis relating to return on capital (47.5%), operating margin (47.5%), customer satisfaction (5%) and growth in operating profit.
0% 20% 40% 60% 80% 100% 2004 bonuses were calculated on a percentage of full year's base salary as at 1 January 2004. For Peter Redfern this percentage was 64% and SALARY (ANNUAL) BONUS AND LONG TERM INCENTIVES for Peter Johnson and Andrew Carr-Locke it was 90.7%. Stewart Cline's bonus was based on a calculation of 200% of his US dollar base salary.
The chart above shows the proportion of fixed to performance based Bonus payments are not pensionable for any of the Executive Directors. remuneration. Fixed remuneration comprises annual salary. 42 REMUNERATION REPORT CONTINUED
LONG TERM INCENTIVES options under the Executive Share Option Scheme. Details of past The George Wimpey Long Term Incentive Plan awards to Executive Directors under this Scheme are disclosed in the The Company believes that the George Wimpey Long Term Incentive table on page 45. Plan (George Wimpey LTIP), approved by shareholders at the 2002 Annual General Meeting, effectively aligns both the Company’s Morrison Homes Long Term Incentive Plan business strategy and the long term interest of management with The Morrison Homes Long Term Incentive Plan (Morrison Homes LTIP) those of shareholders.The George Wimpey LTIP is designed to lock-in was approved by shareholders at the 2003 Annual General Meeting. key executives and motivate them through the opportunity to earn Key executives in Morrison Homes, including Stewart Cline, participate significant financial rewards, on the achievement of demanding and in the Morrison Homes LTIP which is a cash based scheme pursuant stretching performance targets, compared to its comparator group (set to which ‘units’ are awarded to each participant following the end of a out below). Awards under the George Wimpey LTIP are made by the financial year.The value of each unit, and therefore the amount of cash Remuneration Committee to a limited number of key executives in the that an individual receives, will depend on growth in profit before UK and the US, including Executive Directors. Neither the Chairman nor interest and tax (‘PBIT’) of Morrison Homes over that financial year.The any Non Executive Director participates in the George Wimpey LTIP. maximum value is achieved if PBIT grows by more than 30%.The
REMUNERATION REPORT amount payable is, however, reduced progressively if Morrison Homes’ The maximum value of any award under the George Wimpey LTIP is Return on Assets (‘RoA’) is less than 20%, so that no amount is payable two times basic salary, except that for 2002 when conditional awards if RoA is less than 15%.The size of awards is determined by the equivalent to three times basic salary were made.These were set Remuneration Committee which recognises the need to link awards against more stretching and demanding performance targets as and the rewarding of ongoing performance with the creation of described below.The Committee will review the size of awards to be additional shareholder value. made on an annual basis to ensure that they are appropriate. Awards will not vest unless the pre-determined performance conditions are The value of the cash award is paid out over a four year period satisfied over a three year period (the performance period). commencing one year after the end of the relevant financial year, with 20% of the cash award being paid in each of the first three years of that The performance condition measures the Company’s total shareholder return (‘TSR’) over the three year performance period against a specific period and the remaining 40% in the final year of that period, thus comparator group of public limited companies made up of 23 making each award back-end loaded. Interest is accrued on the unpaid housebuilding and building materials related companies.The part of the award at a current rate of 6%. Certain executives of Morrison Remuneration Committee believes that TSR is the most appropriate Homes, including Stewart Cline, also participate in the George Wimpey performance measure because it ensures that executives do not receive LTIP and have received conditional awards of shares under that scheme. rewards under the George Wimpey LTIP unless the Company has Ongoing participation in the George Wimpey LTIP by Morrison Homes outperformed relative to the designated comparator group companies. executives will be reviewed during 2005 as part of an overall review of the Morrison Homes Bonus and Long Term Incentive Plan arrangements. The comparator group for the George Wimpey LTIP is as set out The review will be designed to ensure that appropriate incentives are in below (and will be reviewed by the Committee from time to time): place to attract, motivate and retain senior executives in the US coupled Baggeridge Brick Gleeson (MJ) Redrow with the need to link any awards with performance that ultimately Barratt Heywood Williams SIG creates additional shareholder value. Bellway John Laing Taylor Woodrow Awards under the Morrison Homes LTIP are usually scaled back Berkeley Kier Travis Perkins for those executives also participating in the George Wimpey LTIP. Bovis Marshalls Westbury However, for 2005, in recognition of the need to retain and motivate BPB McCarthy & Stone Wilson Bowden key Morrison Homes senior management during a year of anticipated Crest Nicholson Persimmon Wolseley growth in the US, the Committee felt that it was entirely appropriate to Galliford Try Pilkington award Stewart Cline and designated senior management an additional For awards to vest in full, the Company’s TSR performance over the award under the Morrison Homes LTIP equivalent to the size of the relevant performance period must equal or exceed the 75th percentile scale back made in 2003 and 2004 under the George Wimpey LTIP to performance as against the comparator group except that, for awards reflect membership of both LTIPs. Accordingly, for 2005, Stewart Cline’s made in 2002, the TSR performance had to be equal to or exceed the award under the Morrison LTIP for 2005 was increased by 1.5x to 3.5x 85th percentile so as to reflect the higher awards made in that year his base salary as at 1 January 2005. (three times base salary as opposed to two times). No portion of the SHARESAVE SCHEME award will vest if the Company’s TSR performance is less than the 50th percentile, but there will be partial vesting if the Company’s TSR The Company operates a Savings Related Share Option Scheme performance is at least equal to the 50th percentile. At that level of which all UK staff (including UK based Executive Directors) with over performance, awards made in 2002 would have vested at a 20% level six months’ service are eligible to join. Under this scheme, employees and awards made subsequently based on two times salary will vest at may acquire shares at a 20% discount to the market price at the time of grant, in three or five years’ time. GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT a 25% level.There is straight line vesting for levels of performance between the 50th and 75th percentiles (85th percentile in the case NEW POLICIES – SHARE RETENTION AND TARGET DIRECTOR SHAREHOLDINGS of awards made in 2002). In addition to this performance condition, During 2004, the Remuneration Committee implemented a share there is a requirement that the Company’s underlying performance, retention policy with regard to shares awarded under the George as determined by the Remuneration Committee, should be satisfactory. Wimpey LTIP,which took into account the requirements of the Awards under the George Wimpey LTIP are not pensionable. Details Association of British Insurers – Principles and Guidelines on of awards to Executive Directors are set out in the table on page 46. Remuneration.The policy requires Executive Directors to retain, The performance period in respect of the 2002 George Wimpey LTIP for at least 12 months from the date of receipt of shares under the expired on 31 December 2004. Against the comparator group, the George Wimpey LTIP,not less than 50% of the after tax/NI amount Company finished in second place as verified by an independent third of shares received in any year. Senior employee participants in the party – see page 46. As a result of this performance, maximum awards of George Wimpey LTIP are expected to retain at least 25% of the shares shares vested in participants in the 2002 George Wimpey LTIP – see the received on the same basis.With regard to the 2002 George Wimpey notes to the table on page 46 for details of the amount of shares that LTIP,the 25% retention expectation will also apply to Peter Redfern, vested. Due to the requirements of the Model Code, shares were not who was appointed to the Board on 12 October 2004 but, in future received by participating Executive Directors and senior employees until years, the 50% retention requirement will apply in respect of any after the Company came out of its close period on 22 February 2005. shares received by him under the George Wimpey LTIP. Following the introduction of the George Wimpey LTIP in 2002, it The Committee also introduced, during the year, a policy which is Company policy that Executive Directors are no longer granted requires Executive Directors to accumulate, within a five year period 43
from the date that each joined the Board, a shareholding in the In addition, life assurance of four times basic salary and a pension Company broadly equal to their base salary. For Peter Johnson, the of two-thirds of the member’s entitlement for spouses on their Committee set a personal target shareholding broadly equal to death in service, or in retirement, are provided, together with a three times his base salary. children’s allowance of up to 100% of the dependant’s pension for three or more children. The above policies are intended to promote as close an alignment as possible of Executive Directors and senior management with the risks Pensionable salary excludes all bonuses, benefits in kind and incentive and rewards faced by shareholders. Having clear policies in place related remuneration. For early retirement, after age 50 but prior to age provides a framework within which Executive Directors may sell shares 62, pensions will be reduced by an appropriate actuarial factor. received under the George Wimpey LTIP and also in the achieving of target shareholdings and futher sales of shares once such targets have The Directors’ accrued pensions in 2004 are shown on page 44. been met. SERVICE CONTRACTS – EXECUTIVE DIRECTORS A policy was also introduced in 2004 pursuant to which the Chairman It is the Company’s policy that all Executive Directors should have rolling and the Non Executive Directors are required to accumulate within service contracts which can be terminated by either party by giving not a five year period from the date that each joined the Board, a less than 12 months’notice.The UK based Directors, like all employees, are REMUNERATION REPORT shareholding in the Company broadly equal to 50% of each Director’s employed by George Wimpey UK Limited. Stewart Cline is employed by annual fees. Morrison Homes Inc.The Company’s normal retirement age for Executive Directors is 60 and the service contracts terminate automatically when PERFORMANCE GRAPH this age is attained, unless extended by mutual consent. Set out below is a graph which shows the total shareholder return of the Company during the period December 1999 to December 2004 The dates of each service contract are as follows: as against the FTSE 250 (excluding investment companies), based on Peter Johnson – 26 March 2002 30 trading day average values.The Group believes that the FTSE 250 Andrew Carr-Locke – 27 March 2002 is the appropriate comparator index against which to plot its total Stewart Cline – 10 April 2003 shareholder return performance as the Company is a member of Peter Redfern – 12 October 2004 the index together with its key competitors and a broad cross section of leading companies.The graph also shows the performance of the For each Director, the Company may, at its discretion, make a payment Company as against the George Wimpey LTIP comparator group in lieu of notice equal to basic salary and the cost of providing other (see opposite).The graph shows the theoretical growth in the value of benefits under the contract for the period for which the contract a £100 shareholding over the specified period, assuming that dividends would have continued. In the event of a change of control of the are re-invested to purchase additional units of equity. Company, the Director may, within six months of such change, elect to terminate the service contract on three months’ notice and be paid a termination payment of the value of his annual remuneration TOTAL SHAREHOLDER RETURN (£) and benefits package.The purpose of this change of control provision is to ensure that the Director is not disincentivised should such
GEORGE WIMPEY PLC PEER GROUP FTSE 250 a situation so arise. THE CHAIRMAN/NON EXECUTIVE DIRECTORS
400 The Remuneration Committee has the responsibility of setting the remuneration of the Chairman, any alteration to which is then submitted to the Board for approval in the absence of the Chairman. 300 Towers Perrin provide independent advice on appropriate levels of remuneration for the Chairman and provide data on remuneration 200 paid to Chairmen of FTSE 100 and 250 companies with similar turnover and/or market capitalisation. 100 The Remuneration of the Non Executive Directors is determined by the Board.Towers Perrin provide independent advice on appropriate 0 levels of remuneration which includes data on the same basis as for the Chairman. Remuneration is paid in the form of fixed fees, which are reviewed annually. Non Executive Directors are invited, but not 99 00 01 02 03 04 obliged, to use any increase in their remuneration to purchase shares in the Company. Neither the Chairman nor the Non Executive Directors participate PENSIONS in any incentive or share schemes. Some UK based Executive Directors and other designated managers Neither the Chairman nor the Non Executive Directors have service are members of the Executive section of the George Wimpey Staff contracts.The services of John Robinson, Michael Blackburn and Pension Scheme (‘the Scheme’).The Scheme is a funded, Inland Christine Cross are contracted to the Company under consultancy Revenue approved, final salary occupational pension scheme and all agreements dated 5 April 2001, 1 April 2000 and 11 January 2004 www.georgewimpeyplc.co.uk members contribute 5% or 8% of salary. Executive members cease respectively.The agreements provide that each Director will continue to contribute once they have achieved 30 years’ pensionable service. to serve the Company unless terminated by not less than six months’ Pensions in payment are guaranteed to increase in line with the Retail notice given by either party. However, in the event that a Director is Price Index to a maximum of 5% per annum. not re-elected as a Director by the Company’s shareholders, or is The Scheme provides Executive members with a pension of up to removed from office by them in accordance with the Company’s two-thirds of pensionable salary on retirement at age 62, subject Articles of Association, then the relevant agreement will terminate to the member having completed 30 years’ pensionable service. with no provision for compensation. The Company provides Peter Johnson with a pension allowance by David Williams and Brenda Dean have letters of appointment dated additional payments to him, amounting to 40% (£214,200) of his basic 1 May 2001 and 7 October 2003 respectively.These engagements salary. Andrew Carr-Locke similarly receives a pension allowance also continue until terminated by not less than six months’ notice amounting to 35% (£105,000) of his basic salary. A payment of £22,320 given by either party or otherwise in accordance with the Company’s was paid into a US cash plan for Stewart Cline. Articles of Association. 44 REMUNERATION REPORT CONTINUED
The following tables and accompanying notes constitute the auditable part of the Remuneration Report as defined in Part 3, Schedule 7a of the Companies Act 1985. THE REMUNERATION PAID TO THE DIRECTORS IN 2004 WAS:
Salary/ Performance Deferred Other Total Total Fees Bonus Bonus Benefits1 2004 2003 £££££ £ Chairman J H Robinson (appointed 28/09/1998) 190,000–––190,000 176,743 Executive Directors P M Johnson (appointed 17/10/2000) 535,500 485,698 – 248,534 1,269,732 1,255,374 S M Cline2 (appointed 11/12/2000) 274,508 523,281 549,445 36,222 1,383,456 1,511,433 A C P Carr-Locke (appointed 14/05/2001) 300,000 272,100 – 123,604 695,704 687,760 3
REMUNERATION REPORT P T Redfern (appointed 12/10/2004) 58,414 169,600 – 5,034 233,048 – Non Executive Directors J M Blackburn (appointed 14/09/1999) 41,250 – – – 41,250 37,618 C Cross (appointed 19/12/2002) 38,750 – – – 38,750 31,191 B Dean (appointed 07/10/2003) 33,750 – – – 33,750 7,016 D M Williams (appointed 01/05/2001) 38,750 – – – 38,750 34,000 Total 1,510,922 1,450,679 549,445 413,394 3,924,440 3,741,135
NOTES: 1 Other benefits include the provision of a Company car (or car allowance in lieu of a car), private health insurance and in the case of Peter Johnson and Andrew Carr-Locke an annual pension allowance of £214,200 and £105,000 respectively based on 40% and 35% of their base salaries. A payment of £22,320 was paid into a US Cash Plan in respect of Stewart Cline. 2 The deferred bonus was paid under the Morrison Homes Long Term Compensation Plan, which was replaced during 2003 by the Morrison Homes Long Term Incentive Plan which was approved by shareholders at the 2003 Annual General Meeting and also through the participation by Stewart Cline in the George Wimpey LTIP (subject to the scaling back of awards as explained on page 42). Under the Morrison Homes Long Term Compensation Plan, units were granted annually at the beginning of the year and then valued at the end of that first year. Payments to participants commence one year after the valuation of the units and conclude four years after the first year payment. Stewart Cline’s current interest in the scheme amounts to $2,561,572. No equity is involved in the Plan. As reported in the 2003 Report, upon winding up of this plan, units previously awarded under the Plan have vested but will not become payable any earlier as a result of such vesting except in accordance with the rules of the Plan. Details of awards made under the Morrison Homes Long Term Incentive Plan are set out on page 46. 3 The bonus figure of £169,600 is calculated by reference to Peter Redfern’s salary as at 1 January 2004 and has not been pro-rated to take into account his date of appointment to the Board. Further details of the bonus scheme are set out on page 41.
DETAILS OF DIRECTORS’ ACCRUED PENSIONS ARE AS FOLLOWS:
Total Total Increase in Value of Increase in Transfer Value Transfer Value Pension Pension Accrued Increase in Transfer Value Net of Net of Director’s Accrued Accrued Pension Accrued Net ofDirector’s Director’s Contributions as at as at in Year1 Pension Director’s Contributions Contributions Paid During 31/12/03 £p.a. 31/12/04 £p.a. £ £ Contributions as at 31/12/03 as at 31/12/04 2004 Executive Directors P M Johnson 5,363 7,225 1,696 27,000 18,513 81,400 115,100 15,187 A C P Carr-Locke 8,800 12,467 3,394 45,000 41,613 110,200 167,000 15,187 P T Redfern 9,900 13,600 3,393 27,800 14,000 70,800 111,300 26,500
NOTES: Calculated in accordance with Actuarial Guidance Note GN11. Peter Redfern was appointed to the Board on 12 October 2004. At this date his accrued pension was £13,033 p.a.The estimated transfer value of this accrued pension as at 12 October 2004 was £94,900. He paid pension contributions of £5,271 from 12 October 2004. 1 Figures are stated net of inflation. GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT 45
DIRECTORS’ INTERESTS IN OPTIONS OVER SHARES AS AT 31 DECEMBER 2004
Options at Granted Lapsed Exercised Options at ExerciseOption Exercise period Net Name 01/01/2004 2004 2004 2004 31/12/2004 Price (p) From To Worth1 Executive Directors P M Johnson Executive Scheme 107,962 – – 107,962 – 185.25 14/03/2004 13/03/2011 – 98,522 – – 98,522 – 203.00 15/08/2004 14/08/2011 – Savings Related 10,817 – – – 10,817 156.00 01/12/2006 31/05/2007 26,880.25 Total 217,301 – – 206,484 10,817 26,880.25 S M Cline Executive Scheme 55,840 – – 55,840 – 117.00 05/03/1998 04/03/2005 – 52,009 – – – 52,009 141.00 25/03/1999 24/03/2006 137,043.72
52,195 – – – 52,195 140.50 26/02/2000 25/02/2007 137,794.80 REMUNERATION REPORT Total 160,044 – – 55,840 104,204 274,838.52
P T Redfern2 Savings Related 6,209–––6,209 156.00 01/12/2004 31/05/2005 15,429.37 Total 6,209 – – – 6,209 15,429.37 A C P Carr-Locke Executive Scheme 123,152 – – – 123,152 203.00 15/08/2004 14/08/2011 248,151.28 Savings Related 7,191–––7,191 228.40 01/12/2007 31/05/2008 12,663.35 Total 130,343 – – – 130,343 260,814.63
NOTES: 1 Based on the market price of 404.5p as at 31 December 2004. The following Directors exercised share options under the Executive Share Option Plan during 2004 and the details are as follows: Peter Johnson exercised 107,962 options on 19 March 2004 on which date the mid market close price was 435p and 98,522 options on 6 September 2004 on which date the mid market close price was 428.5p. Stewart Cline exercised 55,840 options on 6 September 2004 on which date the mid market close price was 428.5p. The performance condition for the George Wimpey Executive Share Option Plan is based on the Company attaining a total shareholder return performance level which is above median in a defined comparator group.The group is the same group as that used for the LTIP and listed on page 42. The mid market close price as at 31 December 2004 was 404.5p and the range during 2004 was between 340.0p and 456.5p. All options were granted at nil cost. 2 Peter Redfern was appointed to the Board on 12 October 2004. www.georgewimpeyplc.co.uk 46 REMUNERATION REPORT CONTINUED
DIRECTORS’ INTERESTS IN CONDITIONAL SHARES AWARDED UNDER THE GEORGE WIMPEY LONG TERM INCENTIVE PLAN (‘GEORGE WIMPEY LTIP’) AS AT 31 DECEMBER 2004
Conditionally Awarded Vested 16/05/2002 1/05/2003 26/05/2004 (Market value (Market value (Market value Awards held at on award 285p) on award 242p) on award 403.91p) Number Date of Award 31/12/2004 Executive Directors P M Johnson 613,636 410,027 265,158 – – 1,288,821 A C P Carr-Locke 361,364 226,908 148,548 – – 736,820 S M Cline – 181,776 101,562 – – 283,338 P T Redfern 156,818 119,425 131,217 – – 407,460
NOTES: Awards made pursuant to the George Wimpey LTIP do not vest in whole or in part unless pre-determined performance conditions are satisfied over a three year period.The REMUNERATION REPORT awards are therefore conditional awards and the table above sets out the maximum number of shares that can be awarded.The performance conditions are explained in detail on page 42.The 2003 conditional awards were made on 1 May 2003 with a performance period of 1 January 2003 to 31 December 2005 and during the year, conditional awards were made on 26 May 2004 with a performance period of 1 January 2004 to 31 December 2006.The number of awards made to each participant was calculated by reference to a formula based on two times salary as at 1 January 2004 using a price of 403.91p, being the value calculated in accordance with the scheme rules. For the 2002 award, for Peter Johnson, Andrew Carr-Locke and Peter Redfern, the formula was based on three times salary as at 1 January 2002 using a share price of 220p, being the value calculated in accordance with the scheme rules. For Stewart Cline, the awards were calculated by reference to a formula based on one and half times his salary as at 1 January 2003 and 1 January 2004.The 2003 George Wimpey LTIP awarded to Stewart Cline was made on 9 May when the market value on award was 250.5p. As reported on page 42, shares conditionally awarded under the 2002 George Wimpey LTIP vested on 22 February 2005. Based on verification from MM& K (an independent consultancy), the Company’s TSR performance during the period 1 January 2002 to 31 December 2004 placed the Company second as against its comparator group, therefore triggering maximum vesting of the shares conditionally awarded.These shares were distributed by the employee trust after the Company’s close period ended on 22 February 2005. Peter Johnson, Andrew Carr-Locke and Peter Redfern received 616,636 shares, 361,364 shares and 156,818 shares respectively and the price on vesting was 449.0p per share. In last year’s Report it was confirmed that Keith Cushen, who retired as a Director on 31 December 2003, would receive a further distribution of shares under the George Wimpey LTIP up to a maximum of 136,364 shares, representing one third of his 2002 conditional allocation of shares subject to the the Company’s TSR performance for the period 1 January 2002 to 31 December 2004. As mentioned above, the TSR performance during this period placed the Company in second place which therefore resulted in maximum vesting of all of the shares conditionally awarded to Keith Cushen.The shares vested on 25 January 2005 and the price on vesting was 403.5p per share.
DIRECTORS’ INTEREST IN THE MORRISON HOMES LONG TERM INCENTIVE PLAN (MORRISON HOMES LTIP) AS AT 31 DECEMBER 2004 Stewart Cline is the only Director participating in the Morrison Homes LTIP.More detailed information on the Morrison Homes LTIP is set out on page 42.The Morrison Homes LTIP is a cash based scheme introduced in 2003, pursuant to which units are awarded to each participant.The value of each unit, and therefore the amount of cash received, will depend upon the growth in the profit before interest and tax of Morrison Homes during the year of the award.The value of the cash award is then paid out over a four year period commencing one year after the end of the relevant financial year, with 20% being paid out over the first three years and 40% in the final year. No equity is involved in the Morrison Homes LTIP.Stewart Cline’s current interest in the Morrison Homes LTIP amounts to $2,021,000 which includes the 2004 award of $1,054,935. This report has been approved by the Board on 22 February 2005 and signed on its behalf by:
Michael Blackburn Chair, Remuneration Committee George Wimpey Plc GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT AUDITORS’ REPORT 47
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GEORGE WIMPEY PLC BASIS OF AUDIT OPINION We have audited the financial statements which comprise the Group We conducted our audit in accordance with auditing standards issued profit and loss account, the balance sheets, the Group cash flow by the Auditing Practices Board. An audit includes examination, on statement, the statement of Group total recognised gains and losses, a test basis, of evidence relevant to the amounts and disclosures in the reconciliation of movement in Group shareholders’ funds, accounting the financial statements and the auditable part of the Remuneration policies and the related notes.We have also audited the disclosures Report. It also includes an assessment of the significant estimates required by Part 3 of Schedule 7A to the Companies Act 1985 contained and judgements made by the Directors in the preparation of the in the Remuneration Report (‘the auditable part’). financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances, consistently applied RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS and adequately disclosed. The Directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom We planned and performed our audit so as to obtain all the law and accounting standards are set out in the statement of Directors’ information and explanations which we considered necessary in order responsibilities on page 37.The Directors are also responsible for to provide us with sufficient evidence to give reasonable assurance preparing the Remuneration Report. that the financial statements and the auditable part of the UIOS REPORT AUDITORS’ Remuneration Report are free from material misstatement, whether Our responsibility is to audit the financial statements and the auditable caused by fraud or other irregularity or error. In forming our opinion part of the Remuneration Report in accordance with relevant legal and we also evaluated the overall adequacy of the presentation of regulatory requirements and United Kingdom Auditing Standards information in the financial statements. issued by the Auditing Practices Board.This report, including the opinion, has been prepared for and only for the Company’s members OPINION as a body in accordance with Section 235 of the Companies Act 1985 In our opinion: and for no other purpose.We do not, in giving this opinion, accept or • the financial statements give a true and fair view of the state of affairs assume responsibility for any other purpose or to any other person to of the Company and the Group at 31 December 2004 and whom this report is shown or into whose hands it may come save of the profit and cash flows of the Group for the year then ended; where expressly agreed by our prior consent in writing. • the financial statements have been properly prepared in accordance We report to you our opinion as to whether the financial statements with the Companies Act 1985; and give a true and fair view and whether the financial statements and the auditable part of the Remuneration Report have been properly prepared • those parts of the Remuneration Report required by Part 3 of in accordance with the Companies Act 1985.We also report Schedule 7A to the Companies Act 1985 have been properly to you if, in our opinion, the Directors’ Report is not consistent with the prepared in accordance with the Companies Act 1985. financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and transactions is not disclosed. We read the other information contained in the annual report and Chartered Accountants and Registered Auditors consider the implications for our report if we become aware of any London apparent misstatements or material inconsistencies with the financial 22 February 2005 statements.The other information comprises only the Chairman’s Statement, Chief Executive’s Review, the Operating and Financial Review, Board of Directors, Corporate Social Responsibility, Directors’ Report, Corporate Governance and the Remuneration Report. We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not.We are not required to consider whether the Board’s statements on control cover all risks and controls, or form an opinion on the effectiveness of the Company’s or Group’s corporate governance procedures or its risk and control procedures. www.georgewimpeyplc.co.uk 48 GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004
Note 2004 2003 £m £m Turnover 1 3,005.7 2,878.5 Cost of sales (2,341.1) (2,284.8) Gross profit 664.6 593.7 Administrative expenses (163.9) (163.9) Group operating profit 2 500.7 429.8 Share of operating loss of joint ventures (0.3) – Profit on ordinary activities before interest 1 500.4 429.8 Interest – net payable 3 (49.7) (51.6) Profit on ordinary activities before taxation 450.7 378.2 GROUP PROFIT AND LOSS PROFIT GROUP ACCOUNT Tax on profit on ordinary activities 4 (139.7) (117.3) Profit for the financial year 311.0 260.9 Dividends 5 (62.4) (46.7) Retained profit for the year 27 248.6 214.2 Earnings per ordinary share – basic 6 80.8p 68.5p Earnings per ordinary share – diluted 6 79.7p 67.1p Dividends per ordinary share 5 16.0p 12.25p
All turnover and profit on ordinary activities arose from continuing operations.
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 December 2004
Note 2004 2003 £m £m Profit for the financial year 311.0 260.9 Currency translation differences on foreign currency net investments 27 (1.7) (1.6) Total recognised gains for the year 309.3 259.3 GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT BALANCE SHEET 49 at 31 December 2004
Group Parent 2004 2003 2004 2003 Note £m £m £m £m Restated Fixed assets Intangible assets 2 4.7 5.2 – – Tangible assets 10 24.2 21.2 – – Investments in subsidiary undertakings 11 – – 1,672.3 1,395.4 Investments in joint ventures: 12 Share of gross assets 39.5 – – – Share of gross liabilities (39.9) – – – Share of net liabilities (0.4) – – – Loans to joint ventures 12 7.4 – – –
35.9 26.4 1,672.3 1,395.4 BALANCE SHEET Current assets Stock 13 2,655.4 2,365.8 – – Debtors 14 133.5 118.8 2,007.8 1,983.7 Cash at bank and in hand 30 19.5 23.6 0.2 0.1 2,808.4 2,508.2 2,008.0 1,983.8 Creditors: amounts falling due within one year 15 (770.4) (735.6) (2,150.1) (1,903.7) Net current assets/(liabilities) 2,038.0 1,772.6 (142.1) 80.1 Total assets less current liabilities 2,073.9 1,799.0 1,530.2 1,475.5 Creditors: amounts falling due after more than one year 16 (608.3) (603.0) (879.8) (857.7) Provisions for liabilities and charges 25 (26.5) (27.6) (3.1) (3.2) Assets employed 1,439.1 1,168.4 647.3 614.6 Represented by: Capital and reserves Called-up share capital 26 97.9 96.0 97.9 96.0 Share premium account 27 111.8 109.2 111.8 109.2 Profit and loss account 27 1,229.4 963.2 437.6 409.4 Equity shareholders’ funds 1,439.1 1,168.4 647.3 614.6 Shareholders’ funds per ordinary share 6 368p 304p Gearing 17 36% 45%
The accounts appearing on pages 48 to 64 were approved by the Board on 22 February 2005 and are signed on their behalf by:
John Robinson Andrew Carr-Locke Chairman Group Finance Director www.georgewimpeyplc.co.uk 50 GROUP CASH FLOW STATEMENT for the year ended 31 December 2004
Note 2004 2003 £m £m Restated Net cash inflow from operating activities before land expenditure 28 1,111.3 1,084.3 Land expenditure (net of decrease in land creditors) 28 (935.1) (853.5) Cash inflow from operating activities 28 176.2 230.8 Returns on investments and servicing of finance 29 (49.2) (43.2) Taxation (91.3) (118.1) Capital expenditure and financial investment 29 (19.0) (6.3) Acquisitions and disposals 29 – (214.7) Equity dividends paid (33.7) (25.4) Cash outflow before use of liquid resources and financing (17.0) (176.9) GROUP CASH FLOW CASH GROUP STATEMENT Management of liquid resources 30 2.4 10.0 Financing 29 13.6 148.9 Decrease in cash in the year (1.0) (18.0) Reconciliation of net cash flow to movement in net debt Decrease in cash in the year 30 (1.0) (18.0) Cash inflow from increase in debt 30 (9.1) (154.0) Cash inflow from decrease in liquid resources 30 (2.4) (10.0) Exchange adjustments 30 20.8 28.4 Movement in net debt in the year 30 8.3 (153.6) Net debt at 1 January 30 (529.2) (375.6) Net debt at 31 December 30 (520.9) (529.2)
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS’ FUNDS for the year ended 31 December 2004
Note 2004 2003 £m £m Restated Profit for the financial year 311.0 260.9 Dividends 5 (62.4) (46.7) 248.6 214.2 Currency translation differences on foreign currency net investments 27 (1.7) (1.6) Shares allotted under employee share schemes 26, 27 4.5 3.4 Credit in respect of employee share schemes 27 0.7 5.3 GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT Shares purchased in respect of employee share schemes – (8.5) Scrip dividend 27 18.6 11.3 Contribution to Quest – (0.3) Net increase in shareholders’ funds 270.7 223.8
1 January – shareholders’ funds as previously stated 1,170.0 943.0 Prior year adjustment (1.6) 1.6 1 January – shareholders’ funds restated 1,168.4 944.6 Shareholders’ funds at 31 December 1,439.1 1,168.4 ACCOUNTING POLICIES 51
BASIS OF PREPARATION DEFERRED TAXATION The Group Accounts are prepared on the historical cost basis Deferred taxation is recognised in respect of all timing differences that of accounting.They have been drawn up in accordance with applicable have originated but not been reversed by the balance sheet date, where accounting standards in the United Kingdom. transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance The Group has adopted UITF 38 (‘Accounting for ESOP Trusts’) during the sheet date. Deferred taxation assets are recognised to the extent that they year. Details of the impact on reserves brought forward are set out in note are regarded as recoverable and have not been discounted. Deferred tax 27.The Balance Sheet at 31 December 2003 has been restated to comply assets and liabilities are calculated using the tax rates that have been with the requirements of UITF 38. enacted or substantively enacted by the balance sheet dates. BASIS OF CONSOLIDATION STOCK The Group Accounts consolidate the accounts of George Wimpey Plc Land held for development and construction work in progress are valued and all its subsidiary undertakings drawn up to 31 December each year. at the lower of cost and net realisable value. Other stock comprises JOINT VENTURES materials, equipment and goods for resale valued at the lower of cost and net realisable value. Cost includes appropriate overheads. The results of undertakings in which the Group holds an interest and ACCOUNTING POLICIES jointly controls with other parties are accounted for using the gross RETIREMENT BENEFITS equity method of accounting. Pension costs are charged to the profit and loss account so as to spread the TURNOVER cost of pensions at a substantially level percentage of payroll costs over the Housing turnover comprises the value of new houses and land sales legally expected lives of members. completed during the year. Other turnover is based on the invoiced value OPERATING LEASES of goods and services supplied during the year.Turnover excludes value Operating lease rentals are charged to the profit and loss account in equal added tax and intra-group turnover. amounts over the lease term. PROFIT FOREIGN CURRENCIES Operating profit comprises new houses and land sales. Housing profit is Transactions in foreign currencies are recorded at the rate ruling at the date taken only when legal completion has taken place. of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at closing rates of exchange or the relevant DEPRECIATION forward rate where applicable. All differences are taken to the profit and Depreciation is provided on all tangible fixed assets at rates calculated loss account. On consolidation, the trading results of overseas subsidiary to write off the cost or valuation of each asset to its residual value evenly undertakings are translated at the average rate for the year and the balance over its expected useful life as follows: sheets at the closing rate. Exchange differences arising on the retranslation Offices occupied by the Group: of opening balance sheets, together with the difference between profit and loss accounts translated at average rates and closing rates, are dealt with • Freehold buildings and long leaseholds in excess of 50 years through reserves. – over 50 years Translation differences on intra-group currency loans and foreign currency • Short leaseholds borrowings, to the extent that they are used to finance or provide a hedge – over the period of the lease. against Group equity investments in foreign enterprises, are taken directly Plant and equipment: to reserves together with the exchange difference on the carrying amount of the related investments. All other translation differences are taken to the • – over the expected useful life of the assets ranging mainly profit and loss account. from 3 to 5 years. FINANCIAL INSTRUMENTS GOODWILL Derivative foreign exchange instruments that are deemed hedges Goodwill arising on consolidation represents the excess of the fair of specific foreign currency assets/liabilities are matched against the value of the consideration given over the fair value of the identifiable underlying asset or liability. Derivative interest rate instruments are matched net assets acquired. Historical goodwill has been written off to reserves within interest payable or receivable over the life of the instrument or in the year in which it arose. Goodwill arising on acquisitions after 1998 relevant interest period. Interest rate instruments are not recognised in the is capitalised, and amortised through the profit and loss account over balance sheet. Changes in fair value of financial instruments are not its useful economic life. recognised in the profit and loss account or balance sheet. www.georgewimpeyplc.co.uk 52 NOTES TO THE ACCOUNTS
1 ANALYSIS BY CLASS OF BUSINESS Group Profit on ordinary Turnover activities before interest Assets employed 2004 2003 2004 2003 2004 2003 £m £m £m £m £m £m Restated UK Housing – George Wimpey 1,975.9 1,933.2 365.5 330.1 1,384.2 1,132.7 – Laing Homes 324.7 336.8 43.1 41.7 324.7 323.1 Total UK 2,300.6 2,270.0 408.6 371.8 1,708.9 1,455.8 US Housing 705.0 608.4 102.7 72.3 320.5 277.7 Corporate 0.1 0.1 (10.9) (14.3) (27.1) (3.7)
NOTESACCOUNTS TO THE 3,005.7 2,878.5 500.4 429.8 2,002.3 1,729.8 Dividends (42.3) (32.2) Net debt (520.9) (529.2) Assets employed 1,439.1 1,168.4
No breakdown by geographical area is shown because the analysis by class of business already follows geographical area in material respects.Turnover by origin is not materially different from turnover by destination. UK housing includes, in respect of share of joint ventures, turnover of £nil (2003: £nil), loss on ordinary activities before interest of £0.3 million (2003: £nil) and assets employed of £0.4 million (liabilities) (2003: £nil). Exchange rates used in respect of the United States $ were 1.83 (2003: 1.64) average and 1.92 (2003: 1.79) for the year end.
2 OPERATING PROFIT Group
2004 2003 £m £m Operating profit is stated after: crediting – government grants receivable – 0.6 charging – rentals under leases for land and buildings (6.7) (6.1) – hire of plant and equipment (19.7) (20.2) – auditors’ remuneration – statutory audit services (parent company £nil (2003: £nil)) (0.4) (0.4) – auditors’ remuneration – other (0.1) (0.1) – depreciation (7.8) (7.3) – amortisation of goodwill (0.4) (0.5)
Other remuneration of the auditors in 2004 comprised £65,000 for taxation compliance services and £70,000 for advice on International Accounting Standards (2003: £0.1 million for taxation compliance services). Goodwill of £4.7 million (2003: £5.2 million) in the balance sheet relates to the acquisitions made in previous years of Laing Homes (amortised over twenty years) and Richardson Homes (Denver) (amortised over ten years) and is stated net of accumulated amortisation of £1.3 million and exchange movements of £0.5 million, of which £0.1 million relates to this year.
3 INTEREST – NET PAYABLE Group
2004 2003 £m £m GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT Interest receivable 3.7 3.3 Interest payable and similar charges Bank loans and overdrafts (31.8) (27.2) Other loans (19.9) (19.7) Share of joint ventures’ interest payable (0.3) – Interest charged on provisions and creditors (1.4) (0.4) (53.4) (47.3) (49.7) (44.0) Interest on discounted deferred consideration – (7.6) (49.7) (51.6)
The interest on discounted deferred consideration in 2003 of £7.6 million related to the Laing Homes acquisition in 2002. 53
4 TAX ON PROFIT ON ORDINARY ACTIVITIES Group
2004 2003 £m £m United Kingdom Corporation tax (100.9) (94.2) Share of joint ventures’ corporation tax 0.2 – Overseas Corporate tax (42.3) (27.8) (143.0) (122.0) Adjustment to prior period tax NOTESACCOUNTS TO THE United Kingdom – corporation tax 4.6 9.2 Current taxation (138.4) (112.8)
Deferred taxation: origination and reversal of timing differences (1.3) (4.5) (139.7) (117.3)
United Kingdom Corporation Tax is provided at 30% (2003: 30%) on taxable profit. Provision has been made for deferred taxation. Based on current tax rates and a similar proportion of UK and US profits, the future tax rate is likely to be at a broadly similar level to this year. The current tax charge for the period is higher than the standard rate of corporation tax in the UK (30%), as explained below:
2004 2003 £m £m Profit on ordinary activities before tax 450.7 378.2 Tax at standard rate of 30% (2003: 30%) 135.2 113.5 Effects of: Higher US tax rate 8.2 5.8 Impact of acquisitions and restructuring – 4.1 Resolution of prior years’ tax issues (4.6) (9.2) Other differences (0.4) (1.4) Current taxation 138.4 112.8
5 DIVIDENDS 2004 2003
Pence per share £m Pence per share £m The following have been paid or proposed Interim paid 5.20 20.1 3.80 14.5 Final proposed (note 15) 10.80 42.3 8.45 32.2 16.00 62.4 12.25 46.7
6 EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share is 80.8 pence (2003: 68.5 pence).The calculation of the basic earnings per ordinary share is based on the profit attributable to ordinary shareholders of £311.0 million (2003: £260.9 million) divided by the average number of shares in issue during the year of 384.8 million (2003: 380.6 million). Diluted earnings per ordinary share is 79.7 pence (2003: 67.1 pence).The calculation is based on the profit attributable to ordinary shareholders divided by the average number of shares in issue plus the dilutive potential ordinary shares amounting to 5.6 million (2003: 8.4 million) shares.The dilutive potential ordinary shares relate to shares allotted under employee share schemes where the fair value price exceeds the option price. www.georgewimpeyplc.co.uk The calculation of shareholders’ funds per ordinary share is based on shareholders’ funds for the Group at the end of the year divided by the number of shares in issue at the end of the year of 391.5 million (2003: 384.1 million). 54 NOTES TO THE ACCOUNTS CONTINUED
7 EMPLOYEE INFORMATION Group
2004 2003 £m £m Staff costs (including Directors) comprise: Salaries and wages 183.8 186.6 Social security costs 17.0 16.3 Other pension costs 13.8 13.5 214.6 216.4
Average number of persons (including Directors) employed by the Group during the year was: Number of Employees United Kingdom 5,069 5,115 NOTESACCOUNTS TO THE Overseas 898 782 5,967 5,897
8 PENSION ARRANGEMENTS The Group operates one defined benefit UK pension scheme and two overseas schemes.The assets of the schemes are held in separate Trustee administered funds.The largest, which is in the UK, is the George Wimpey Staff Pension Scheme (the Scheme), and is of the funded, defined benefit type and is closed to new entrants (for new employees in the UK, George Wimpey pays contributions into stakeholder pension arrangements).The Trustees are George Wimpey Pension Trustees Limited and the Law Debenture Trust Corporation Plc.The Scheme is subject to triennial valuation by independent actuaries, the last such valuation being carried out as at 5 April 2002, using the projected unit method. Details of this valuation are described below. The actuarial assumptions which have the most significant effect are those relating to return on investment, the rate of increase in salaries and the assumed rate of pension increases. In the 5 April 2002 valuation it was assumed that the investment return prior to retirement would exceed price inflation by 4.5% per annum, and post retirement by 3.5% per annum. Salary increases were assumed to exceed price inflation by 2.0% per annum. Pension increases were assumed to be in line with price inflation.The market value of assets was £523 million, and this figure was 8% below the amount required to cover the benefits that had accrued to the members after allowing for expected future increases in earnings.The shortfall under the SSAP 24 assumption is allocated to operating profit over the average remaining service life of current employees. The Group has paid contributions of £22.5 million to the Scheme in 2004. Employee contributions for Laing Homes Scheme members are being phased in up to 1 January 2006. As part of the terms of their transfer these members paid reduced employee contributions equal to 2% in 2004. No significant improvements in benefits were made in 2004. Contributions in respect of non-Laing Homes employees were paid at a rate of 31.8% of scheme salary during 2003 (21.2% of scheme salary from 1 November 2003 for former Laing Homes employees). Contributions to the Scheme in respect of non-Laing Homes employees have been made equivalent to 13.2% of scheme salary plus £15 million in 2004. In respect of former Laing Homes employees, contributions were paid at a rate of 20.2% of scheme salary throughout 2004: The total pension costs for the Group were £13.8 million (2003: £13.5 million) of which £0.6 million (2003: £0.8 million) related to overseas schemes. The prepayment in the balance sheet resulting from the difference in the amounts charged to the profit and loss account and the amounts paid to the Scheme was £26.9 million (2003: £15.4 million) and the deferred tax liability in respect of the prepayment was £8.1 million (2003: £4.6 million). On a Financial Reporting Standard (FRS) 17 basis, the valuation position of the Scheme was updated from the most recent actuarial valuation to 31 December 2004 by a qualified independent actuary.The valuation at 31 December 2004 showed no overall change in the deficit from £130 million at 31 December 2003 after the related deferred tax asset. FRS 17 on Retirement Benefits requires the following disclosures in 2004:
At 31/12/2004 At 31/12/2003 At 31/12/2002 Discount rate 5.4% 5.5% 5.60% Rate of increase in salaries 4.6% 4.5% 4.35% Rate of increase of deferred pensions 2.6% 2.5% 2.35% Rate of increase of pensions in payment 2.6% 2.5% 2.35% Inflation 2.6% 2.5% 2.35% GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT 55
8 PENSION ARRANGEMENTS (CONTINUED) The assets in the Scheme and the expected long term rates of return are set out below: Expected Expected Expected long term Value at long term Value at long term Value at rate of return 31/12/2004 rate of return 31/12/2003 rate of return 31/12/2002 At 31/12/2004 £m At 31/12/2003 £m At 31/12/2002 £m Equities 7.5% 182 7.8% 165 7.5% 170 Government Bonds 4.5% 283 4.8% 266 4.5% 182 Non-government Bonds 5.4% 118 5.5% 106 5.6% 100 Insurance Policies 5.4% 5 5.5% 5 5.6% 5 Cash 4.0% 2 4.0% 3 4.0% 27 Total market value of assets 590 545 484
Actual value of defined benefit liabilities (775) (730) (648) NOTESACCOUNTS TO THE Deficit in the Scheme (185) (185) (164) Related deferred tax asset 55 55 49 Net pension liability (130) (130) (115)
If the above amounts had been recognised in the accounts, the Group’s net assets and profit and loss account reserve at 31 December 2004 would have been as follows:
2004 2003 £m £m Restated Net assets Net assets 1,439.1 1,168.4 Less: SSAP 24 net pension asset (18.8) (10.8) Add: FRS 17 net pension liability (130.0) (130.0) Net assets including FRS 17 net pension liability 1,290.3 1,027.6 Profit and loss account reserve Profit and loss account reserve 1,229.4 963.2 Less: SSAP 24 net pension asset (18.8) (10.8) Add: FRS 17 net pension liability (130.0) (130.0) Profit and loss account reserve including FRS 17 net pension liability 1,080.6 822.4
2004 2003 £m £m Analysis of the amount that would have been charged to operating profit: Service cost (including past service cost of nil) (10.8) (9.6) Analysis of net return on pension Scheme assets that would have been charged to other financial income: Expected return on pension Scheme assets 31.6 27.7 Interest on pension Scheme liabilities (39.6) (35.8) (8.0) (8.1) Analysis of the amount that would have been recognised in statement of total recognised gains and losses: Actual return less expected return on assets 21.8 16.2 Experience gains and losses on liabilities – (3.7) Changes in assumptions (26.0) (33.1) Actuarial loss (4.2) (20.6) Movement in deficit during the year: Deficit in Scheme at 31 December 2003 (185.0) (164.0) www.georgewimpeyplc.co.uk Movement in year: Service cost (10.8) (9.6) Pension contributions 22.5 17.3 Net return on pension Scheme assets (8.0) (8.1) Actuarial loss (4.2) (20.6) Deficit in Scheme at 31 December 2004 (185.5) (185.0) 56 NOTES TO THE ACCOUNTS CONTINUED
8 PENSION ARRANGEMENTS (CONTINUED)
2004 2003 2002 History of experience gains and losses Difference between expected and actual returns on Scheme assets (£m) 21.8 16.2 (65.1) Percentage of Scheme assets 4% 3% (13%) Experience gains and losses on Scheme liabilities (£m) – (3.7) 33.4 Percentage of Scheme liabilities – 1% (5%) Total amount recognised in statement of recognised gains and losses (£m) (4.2) (20.6) (94.4) Percentage of Scheme liabilities 1% 3% 15%
9 DIRECTORS’ REMUNERATION NOTESACCOUNTS TO THE Details of Directors’ emoluments are contained within the Remuneration Report on pages 41 to 46 commencing with the paragraph entitled Pensions.
10 TANGIBLE ASSETS Group
Property Property Plant and Freehold Leasehold Equipment Total £m £m £m £m Cost 1 January 2004 3.4 0.4 45.9 49.7 Exchange adjustments – – (0.8) (0.8) Capital expenditure – 0.3 13.0 13.3 Disposals (0.3) – (5.6) (5.9) 31 December 2004 3.1 0.7 52.5 56.3 Accumulated depreciation 1 January 2004 1.6 0.1 26.8 28.5 Exchange adjustments – – (0.3) (0.3) Disposals (0.1) – (3.8) (3.9) Charge for the year 0.1 0.1 7.6 7.8 31 December 2004 1.6 0.2 30.3 32.1 Net book value 31 December 2004 1.5 0.5 22.2 24.2 1 January 2004 1.8 0.3 19.1 21.2
Leasehold properties had terms of below 50 years at the balance sheet date.
11 INVESTMENTS Group Parent
Investments in Investments in own shares subsidiary undertakings 1 January 2004 as previously stated Cost 10.3 1,490.0 Provisions (8.7) (94.6) Net book value 1.6 1,395.4 GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT Prior year adjustment (1.6) – 1 January 2004 – restated – 1,395.4 Movements Additions at cost – 192.4 Exchange adjustment – (10.1) Release of provisions against investment cost –94.6 31 December 2004 Cost – 1,672.3 Provisions –– Net book value – 1,672.3
In the opinion of the Directors the value of the Company’s investments in its subsidiary undertakings is not less than the amount at which it is stated in the balance sheet.The Company’s principal subsidiary undertakings are shown in note 33. Additions at cost of £192.4 million is the sterling equivalent at the time of the transaction of a US$350 million investment funded by matching US$ borrowings. 57
12 INVESTMENTS IN JOINT VENTURES The Group has two principal joint ventures: GN Tower Limited (GNT) – The Group has a 50% shareholding in the Ordinary Share Capital of GW City Ventures Limited (GWCV), the remaining shareholding is ultimately held by Barclays PLC. GNT is a wholly owned subsidiary of GWCV and is undertaking the development of 257 residential and 18,000 sq ft of commercial/retail properties in the city centre of Manchester.The Group has made shareholder loans to GNT of £1.5 million and sold the land and associated development works to the joint venture for a cash sum of £17.5 million.The profit on sale of the land to GNT recognised in the profit and loss account totalled £1.8 million. Management fees charged to the joint venture in the year totalled £0.3 million. At 31 December 2004 the joint venture was financed by interest bearing unsecured shareholder loans amounting to £3.0 million, mezzanine interest bearing loans from the Group of £1.8 million repayable by September 2008 and non recourse interest bearing loans from Barclays Bank PLC repayable by June 2008 amounting to £11.8 million. Other than the shareholder and mezzanine loans referred to above there were no amounts outstanding to or from the joint venture at the year end. North Central Management Limited (NCM) – The Group has a 50% shareholding in the Ordinary Share Capital of North Central Management (Holdings)
Limited (NCMH), the remaining shares are ultimately held by Taylor Woodrow plc. NCM is a wholly owned subsidiary of NCMH and is undertaking the NOTESACCOUNTS TO THE development of the Vizion7 development in Islington, London which includes 467 residential properties, 50 affordable houses and 60,000 sq ft of commercial/retail space. During the year the Group has advanced shareholder loans to NCM of £4.1 million. At 31 December 2004 NCM was financed by unsecured shareholder loans amounting to £8.2 million and non recourse interest bearing loans from Royal Bank of Scotland repayable by June 2008 of £19.0 million. Other than the shareholder loans referred to above there were no amounts outstanding to or from the joint venture at the year end.
13 STOCK Group
2004 2003 £m £m Land held for development 1,940.5 1,728.6 Construction work in progress 654.4 577.8 Part exchange properties 25.6 28.4 Other stock 34.9 31.0 2,655.4 2,365.8
14 DEBTORS Group Parent
2004 2003 2004 2003 £m £m £m £m Receivable within one year: – trade debtors 23.5 35.7 – – – amounts owed by subsidiary undertakings – – 1,881.5 1,690.3 – corporate taxation – – 6.8 5.0 – other debtors 75.7 52.3 0.3 0.5 – prepayments and accrued income 14.1 10.2 1.0 1.0 – deferred tax asset (note 24) 3.3 ––– 116.6 98.2 1,889.6 1,696.8 Receivable after more than one year: – trade debtors 3.7 1.6 – – – amounts owed by subsidiary undertakings – – 118.2 286.9 – deferred tax asset (note 24) 5.7 11.0 – – – other debtors 7.5 8.0 – – 16.9 20.6 118.2 286.9 133.5 118.8 2,007.8 1,983.7
15 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Group Parent
2004 2003 2004 2003
£m £m £m £m www.georgewimpeyplc.co.uk Finance debt (note 17) 19.4 17.4 5.0 5.6 Trade creditors 137.4 124.5 – – Land creditors 205.5 234.5 – – Amounts owed to subsidiary undertakings – – 2,094.0 1,856.4 Accruals and deferred income 201.1 212.7 8.3 8.7 Corporate taxation 105.5 58.6 – – Other taxation and social security creditors 5.9 7.0 – – Other creditors 53.3 48.7 0.5 0.8 Proposed dividend (note 5) 42.3 32.2 42.3 32.2 770.4 735.6 2,150.1 1,903.7 58 NOTES TO THE ACCOUNTS CONTINUED
16 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Group Parent
2004 2003 2004 2003 £m £m £m £m Finance debt (note 17) 521.0 535.4 521.0 535.4 Trade creditors – 1.2 – – Land creditors 76.0 55.5 – – Amounts owed to subsidiary undertakings – – 358.8 322.3 Other creditors 11.3 10.9 – – 608.3 603.0 879.8 857.7
17 FINANCE DEBT Group Parent
NOTESACCOUNTS TO THE 2004 2003 2004 2003 £m £m £m £m Secured finance debt Other loans 1.2 1.6 – – Unsecured finance debt US$ private placement ($54.2 million 2003 $63.8 million) 28.2 35.5 28.2 35.5 US$ private placement ($320 million and £30 million) 195.9 207.9 195.9 207.9 US$ private placement ($150 million) 78.1 85.3 78.1 85.3 Bank loans and overdrafts 237.0 222.5 223.8 212.3 539.2 551.2 526.0 541.0 Total finance debt 540.4 552.8 526.0 541.0 Maturity of borrowings Under one year 19.4 17.4 5.0 5.6 Over one year and up to two years 5.0 5.4 5.0 5.4 Over two years and up to five years 224.4 160.3 224.4 160.3 Over five years 291.6 369.7 291.6 369.7 540.4 552.8 526.0 541.0 Repayable over five years Repayable in full on maturity after five years 74.9 57.0 74.9 57.0 Repayable by instalments after five years 216.7 312.7 216.7 312.7 291.6 369.7 291.6 369.7 Committed undrawn facilities Over two years and up to five years 540.0 525.0 540.0 525.0 Over five years 180.1 188.0 180.1 188.0 720.1 713.0 720.1 713.0
Security – The loan of £1.2 million (2003: £1.6 million) is secured on current assets. Terms of loans – The US$54.2 million (£28.2 million) private placement is divided into 2 separate tranches, US$19.2 million is repayable in 2 equal annual instalments commencing between 0 and 1 years and US$35 million is repayable in full on maturity between 4 and 5 years.The US$ private placement of US$320 million plus £30 million (£195.9 million) was arranged during 2002. US$110 million is repayable between 4 and 5 years, US$70 million plus £30 million is repayable between 7 and 8 years, US$110 million is repayable between 9 and 10 years and US$30 million is repayable between 12 and 13 years.The US$150 million private placement was arranged in 2003. $54 million is repayable between 5 and 6 years, US$28 million between GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT 8 and 9 years, US$38 million between 10 and 11 years and US$30 million between 13 and 14 years. £1.2 million of other loans are repayable within one year.The unsecured bank loans and overdrafts are all repayable in full on maturity. £13.2 million (2003: £10.1 million) within 1 year, £148.9 million (2003: £155.0 million) over 2 years and up to 5 years, and £74.9 million (2003: £57.4 million) over 5 years. The Group maintains central committed bank borrowing facilities (both drawn and undrawn) which total £945 million at December 2004 (2003: £925 million) and on which borrowings may be repaid and subsequently redrawn. £255 million of these facilities fall due for renewal in excess of 5 years, £690 million falls due between 2 and 5 years. Gearing – Gearing is calculated by expressing finance debt less cash at bank and in hand as a percentage of shareholders’ funds. 59
18 FINANCE DEBT INTEREST RATE AND CURRENCY PROFILE The financial and treasury policy is described in the Financial Review on pages 26 to 28. After taking into account the various interest rate and cross currency interest swaps entered into by the Group, the currency and interest rate exposures of the finance debt of the Group were: 2004 2003 Fixed Floating Fixed Floating Rate Rate Total Rate Rate Total £m £m £m £m £m £m Sterling 180.0 43.0 223.0 220.0 43.0 263.0 US $ 249.6 67.8 317.4 274.2 15.6 289.8 429.6 110.8 540.4 494.2 58.6 552.8
2004 2003 NOTESACCOUNTS TO THE Weighted Weighted Average Weighted Weighted Average Average Years to Maturity Average Years to Maturity Fixed Rate of Fixed Rate Fixed Rate of Fixed Rate US $ Fixed Rate Borrowings 4.88% 4.9 4.91% 5.7 £ Fixed Rate Borrowings 5.82% 7.1 5.98% 6.7
Interest rates – US$35 million of the US$54.2 million private placement has effectively been swapped into floating US$ interest rates based on a margin over 6 months US$ LIBOR.The remaining US$19.2 million is at a fixed coupon averaging 8.6%.The US$320 million private placement is at a fixed averaged interest rate of 6.13%. US$100 million of this private placement has been swapped into rates which are fixed for approximately 2 years at a rate of 4.83% with the remaining period floating. US$10 million has been swapped into floating rates based on a margin over 6 months US$ LIBOR.The £30 million tranche of the private placement is at a fixed rate of 6.8%.The US$150 million private placement is swapped into floating rates with US$70 million fixed for one month at an average rate of 2.0% and US$80 million fixed for 1 year at an average rate of 2.74%. Bank borrowings under 1 year (£13.2 million) are borrowings on short term facilities in the different currencies in which the Group has activities.These are at floating rates of interest based on margins over Base Rate or the equivalent short term measure in the currencies concerned. Bank borrowings in excess of 1 year (£223.8 million) are at floating rates of interest based on a margin over LIBOR in the currencies concerned. £150 million of floating rate bank borrowings have been fixed at a rate of 5.17% before margin. The average interest rate in 2004, calculated by dividing the net interest payable in the year on net borrowings by the average daily net borrowings, was 5.5% (2003: 5.4%).
19 FINANCIAL ASSET INTEREST RATE AND CURRENCY PROFILE Group
2004 2003 £m £m Cash deposits Sterling 0.2 0.1 US $ 19.1 23.0 Other 0.2 0.5 19.5 23.6
The cash deposits are at floating rates of interest, based on current short term money market rates. www.georgewimpeyplc.co.uk 60 NOTES TO THE ACCOUNTS CONTINUED
20 OTHER FINANCIAL ASSETS/LIABILITIES 2004 2003
Fixed Non-Interest Fixed Non-Interest Rate Bearing Total Rate Bearing Total Other financial assets £m £m £m £m £m £m Sterling – 5.9 5.9 – 6.2 6.2 US $ – 5.1 5.1 – 3.0 3.0 Other 0.2 – 0.2 0.4 – 0.4 0.2 11.0 11.2 0.4 9.2 9.6
The weighted average interest rate on fixed rate other financial assets is 7.0% (2003: 7.0%). The maturity of fixed rate other financial assets is between 1 and 5 years (2003: between 1 and 5 years), and the maturity of non-interest bearing financial assets is on average 3 years (2003: 3 years). NOTESACCOUNTS TO THE Other financial liabilities 2004 2003 £m £m Sterling (87.0) (67.6) US $ (0.3) – (87.3) (67.6)
£87.3 million (2003: £67.6 million) falls due between 1 and 8 years (2003: between 1 and 9 years). All other financial liabilities are non-interest bearing. In addition to the above, the Group had rental guarantee provisions of £4.2 million (2003: £6.5 million) in respect of leasehold property meeting the definition of financial liabilities.These financial liabilities are considered to be floating rate financial liabilities as in establishing the provisions the cash flows have been discounted. All short term debtors and creditors have been excluded from the disclosures shown in notes 20, 21 and 23, as allowed under Financial Reporting Standard 13.
21 INTEREST RATE AND CURRENCY HEDGES As explained in the Financial Review on pages 26 to 28, the Group’s policy is to hedge part of the interest rate risk and transactional currency exposure. Gains and losses on interest rate and currency hedges are not recognised until the exposure that is being hedged is itself recorded. Unrecognised and deferred gains and losses on interest and currency instruments used for hedging, and the movements therein, are as follows: Unrecognised Deferred Gains Losses Net Gains Losses Net £m £m £m £m £m £m Gains/Losses on hedges at 31 December 2003 5.4 (2.4) 3.0 – (1.5) (1.5) Gains/Losses arising in previous years included in 2004 income (3.7) 1.1 (2.6) – – – Gains/Losses arising before 31 December 2003 not included in 2004 income 1.7 (1.3) 0.4 – (1.5) (1.5) Gains/Losses arising in 2004 not included in 2004 income 4.1 (1.6) 2.5 – 1.5 1.5 Gains/Losses on hedges at 31 December 2004 5.8 (2.9) 2.9––– of which: Gains/Losses to be recognised in 2005 2.7(0.4)2.3––– Gains/Losses to be recognised in 2006 or later 3.1(2.5)0.6––– GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT 22 CURRENCY EXPOSURE AND ANALYSIS OF NET ASSETS The Group’s principal subsidiaries have little transactional currency exposure as they neither export goods nor import any material amount of products nor have any significant level of intra-group trading or provision of services. Consequently, none of the principal subsidiaries has any material net foreign currency monetary assets/liabilities by reference to their local currencies and hence the amount of foreign exchange differences included in the Group profit and loss account for 2003 and 2004 was not material. The table below provides a currency analysis of the net assets of the Group: 2004 2003 Restated Net Operating Net Net Net Operating Net Net Assets Borrowings Assets Assets Borrowings Assets £m £m £m £m £m £m Sterling 1,639.5 (222.8) 1,416.7 1,419.8 (262.9) 1,156.9 US $ 320.5 (298.3) 22.2 277.7 (266.8) 10.9 Other – 0.2 0.2 0.1 0.5 0.6 Total Net Assets 1,960.0 (520.9) 1,439.1 1,697.6 (529.2) 1,168.4 61
23 FAIR VALUES The fair value is defined as the amount at which a financial instrument could be exchanged in an arm’s length transaction between informed and willing parties, excluding accrued interest, and is calculated by reference to market rates discounted to current value.Where market values are not available, fair values have been calculated by discounting cash flows at prevailing interest and exchange rates. All debt and financial instruments used to manage the interest rate and currency of borrowings with a maturity of less than three months after the balance sheet date are assumed to have a fair value equal to the book value.The book values are the amounts recorded in the balance sheet. Financial liability provisions relate to rental guarantees as set out in note 25. Under the Group’s accounting policy, foreign currency assets and liabilities that are hedged using currency swaps are translated at the forward rate inherent in the contracts. Consequently, the book value of the relevant asset or liability effectively includes the fair value of the hedging instrument. For the purpose of the table below, the book value of the relevant asset or liability is shown gross of the effect of the hedging instrument. 2004 2003 Book Value Fair Value Book Value Fair Value £m £m £m £m Primary financial instruments held or issued to finance NOTESACCOUNTS TO THE the Group’s operations: Short term borrowings (19.4) (19.4) (17.4) (17.4) Long term borrowings (521.0) (540.1) (535.4) (547.7) Cash deposits 19.5 19.5 23.6 23.6 Other financial assets 11.2 9.2 9.6 8.5 Other financial liabilities (87.3) (74.1) (67.6) (56.9) Financial liability provisions (4.2) (4.2) (6.5) (6.5) Derivative financial instruments held to manage the interest rate and currency profile: Interest rate swaps – 2.9 – 3.0 Currency swaps ––(1.5) (1.5)
24 DEFERRED TAXATION Group
2004 2003 £m £m Accelerated capital allowances 1.7 3.1 Other timing differences 7.3 7.9 Asset at 31 December 9.0 11.0 Asset at 1 January 11.0 15.5 Exchange adjustments (0.7) – Deferred tax charge in the profit and loss account (note 4) (1.3) (4.5) Asset at 31 December (note 14) 9.0 11.0
The deferred tax asset has not been discounted.
25 PROVISIONS FOR LIABILITIES AND CHARGES 2004
Remedial Rental Work Guarantees Total £m £m £m Group 1 January 21.1 6.5 27.6 Movements Exchange adjustments (0.3) – (0.3) Interest discounted 0.4 0.3 0.7 Provided 11.6 0.5 12.1 Released (2.6) (1.6) (4.2) Utilised (7.9) (1.5) (9.4)
1.2 (2.3) (1.1) www.georgewimpeyplc.co.uk 31 December 22.3 4.2 26.5
Remedial work – The provision covers various obligations across the Group, including aftercare at Springfield Environmental Limited which has a legal responsibility of a long term nature for the management of old, completed sites, provisions for losses on construction contracts for which responsibility was retained by the Group following the asset swap with Tarmac PLC in 1996, and housing maintenance provisions which should be utilised over the next two years. Parent company provisions of £3.1 million (2003: £3.2 million) relate to remedial work. Rental guarantees – The provision covers shortfalls anticipated under leasehold commitments. An estimate has been made of the level of income and expenditure anticipated for each property, and the timing of the utilisation of the provision chiefly covers the next two years. Net outgoings have been discounted on a pre-tax basis using the short term cost of borrowing. 62 NOTES TO THE ACCOUNTS CONTINUED
26 SHARE CAPITAL Number of Shares (‘000s) £m
Ordinary shares of 25 pence each 2004 2003 2004 2003 Authorised 500,000 500,000 125.0 125.0 Allotted, called-up and fully paid 1 January 384,053 377,245 96.0 94.3 Allotted under employee share schemes and scrip dividend 7,466 6,808 1.9 1.7 31 December 391,519 384,053 97.9 96.0
Details of employee share schemes and of outstanding share options are shown in the section entitled Employee Share Schemes on page 36.
27 RESERVES 2004 NOTESACCOUNTS TO THE Share Profit Premium and Loss £m £m Group Reserves at 1 January – as previously stated 109.2 964.8 Prior year adjustment – (1.6) Reserves at 1 January – restated 109.2 963.2 Movements Retained profit for the year – 248.6 Exchange adjustments – (1.7) Scrip dividend (1.1) 18.6 Credit in respect of employee share schemes – 0.7 Shares allotted under employee share schemes 3.7 – Reserves at 31 December 111.8 1,229.4
The cumulative amount of goodwill written off since 1 January 1986, net of goodwill relating to subsidiary undertakings disposed of, is £45.7 million (2003: £45.7 million). A scrip dividend alternative was offered to shareholders this year.The £18.6 million (2003: £11.3 million) scrip dividend paid has been credited back to reserves. Included in exchange adjustments are exchange gains of £20.8 million (2003: £28.4 million) arising on foreign currency net borrowings designated as hedges of net investments overseas. Following the adoption of UITF38 ‘Accounting for ESOP Trusts’,investments in the Company’s shares of £9.5 million (31 December 2003 £10.3 million) have been transferred to the profit and loss account reserve.The shares are held in order to provide shares to certain employees under the Long Term Incentive Plan.The amounts charged to the profit and loss account in respect of the shares awarded under Long Term Incentive Plan are credited to reserves and the provision offset against the cost of shares. At 31 December 2004 the provision for the cost of shares awarded under the Long Term Incentive Plan was £8.6 million (2003: £8.7 million). Share Profit Premium and Loss £m £m Parent Reserves at 1 January 109.2 409.4 Movements Retained profit for the year – 8.5 Exchange adjustments – 1.1 Scrip dividend (1.1) 18.6
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT Shares allotted under employee share schemes 3.7 – Reserves at 31 December 111.8 437.6
In accordance with the provisions of Section 230 of the Companies Act 1985, a separate profit and loss account for the parent company is not presented. The Company’s profit attributable to ordinary shareholders is £71.0 million (2003: loss of £15.4 million). 63
28 RECONCILIATION OF OPERATING PROFIT TO CASH INFLOW FROM OPERATING ACTIVITIES Group
2004 2003 £m £m Group operating profit 500.7 429.8 Depreciation 7.8 7.3 Amortisation of goodwill 0.4 0.5 Land held for development realised from land and house sales 702.1 665.3 Increase in stock (excluding land held for development) (88.5) (90.7) (Increase)/decrease in debtors (16.8) 4.7 Increase in creditors 7.1 68.2 Decrease in provisions for liabilities and charges (1.5) (0.8) Net cash inflow from operating activities before land expenditure 1,111.3 1,084.3
Expenditure on land held for development (926.7) (892.6) NOTESACCOUNTS TO THE (Decrease)/increase in land creditors (8.4) 39.1 Cash inflow from operating activities 176.2 230.8
29 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT Group
2004 2003 £m £m Restated Returns on investments and servicing of finance Interest received 3.7 2.3 Interest paid (52.9) (45.5) Net cash outflow for returns on investments and servicing of finance (49.2) (43.2) Capital expenditure and financial investments Purchase of tangible assets (13.4) (8.5) Sale of tangible assets 1.8 2.2 Loans to joint ventures (7.4) – Net cash outflow for capital expenditure and financial investment (19.0) (6.3) Acquisitions and disposals Purchase of Laing Homes – (214.7) Net cash outflow for acquisitions and disposals – (214.7) Financing Shares allotted under employee share schemes 4.5 3.4 Purchase of own shares – (8.5) Debt due within a year 2.1 (0.8) Debt due beyond a year 7.0 154.8 Net cash inflow from financing 13.6 148.9
In accordance with UITF38 ‘Accounting for ESOP Trusts’ purchase of own shares has been reclassified out of capital expenditure and financial investments into financing. www.georgewimpeyplc.co.uk 64 NOTES TO THE ACCOUNTS CONTINUED
30 ANALYSIS OF NET DEBT Group
1 January Cash Exchange 31 December 2004 Flow Movement 2004 £m £m £m £m Net cash Cash at bank and in hand 23.6 (2.6) (1.5) 19.5 Less deposits treated as liquid resources (23.0) 2.4 1.5 (19.1) 0.6 (0.2) – 0.4 Bank overdrafts (11.3) (0.8) 0.4 (11.7) (10.7) (1.0) 0.4 (11.3) Liquid resources Deposits included in cash treated as liquid resources 23.0 (2.4) (1.5) 19.1 NOTESACCOUNTS TO THE
Debt due within one year (6.1) (2.1) 0.5 (7.7) Debt due after one year (535.4) (7.0) 21.4 (521.0) Total (529.2) (12.5) 20.8 (520.9)
The Group defines liquid resources as short term deposits maturing or capable of being realised within one year.
31 CONTINGENT LIABILITIES The Parent company has given guarantees in respect of the bank borrowings of subsidiary undertakings.The amount guaranteed at the year end was £6.9 million (2003: £10.1 million).The Group has given guarantees, in the ordinary course of business, to the lenders to each of the joint ventures in note 12. The guarantees are for 50% of cost and interest overruns arising from construction.
32 COMMITMENTS Group
2004 2003 £m £m Operating leases Annual commitments under operating leases expiring: – within one year 0.5 1.5 – within two to five years 2.4 3.6 – after five years 4.7 2.7 7.6 7.8 Of which: – land and buildings 7.3 7.5 – other 0.3 0.3
33 SUBSIDIARY UNDERTAKINGS
Principal Subsidiary Undertakings Country of Operation/Registration Activities George Wimpey UK Ltd UK/England Homes Laing Homes Ltd UK/England Homes Morrison Homes Inc USA Homes Wimpey Overseas Holdings Ltd UK/England Corporate
GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT NOTES: 1.The subsidiary undertakings listed are those held at 31 December 2004 which significantly affect the amount of the profit or the assets of the Group. 2. In all cases the Group’s interest is in the equity share capital. 3. All subsidiary undertakings listed above are wholly owned and held directly by the parent company at 31 December 2004, except for Morrison Homes Inc. which is a wholly owned subsidiary of Wimpey Overseas Holdings Ltd.
34 DISCLOSURE OF RELATED PARTY TRANSACTIONS 1. George Wimpey Plc funds the Wimpey Staff Personal Accident Scheme (The Scheme) which provides discretionary personal accident benefits to the members of the Wimpey Staff Pension Scheme.There is an interest free loan from The Scheme to the Group which is repayable at one month’s notice. The balance owed by the Group to The Scheme was £0.5 million throughout the year.
2. During the year the Group established a joint venture with a wholly owned subsidiary of Barclays PLC. Barclays PLC is a substantial shareholder in George Wimpey Plc as disclosed in the Directors’ Report.The details of transactions and amounts outstanding with the joint venture company are included in note 12. FIVE YEAR REVIEW 65
2004 2003 2002 2001 2000 £m £m £m £m £m Restated Restated Profit and Loss Account Turnover 3,005.7 2,878.5 2,600.1 1,895.9 1,702.0 Group operating profit before exceptional operating items and joint ventures 500.7 429.8 329.7 213.1 170.2 Share of operating loss of joint ventures (0.3) –––– Exceptional operating items – – (5.9) (28.9) – Profit on ordinary activities before interest 500.4 429.8 323.8 184.2 170.2 Interest – net payable (49.7) (51.6) (37.9) (32.2) (24.1) FIVE YEAR REVIEW FIVE YEAR Profit on ordinary activities before taxation 450.7 378.2 285.9 152.0 146.1 Tax on profit on ordinary activities (139.7) (117.3) (94.3) (48.3) (47.8) Profit for the financial year 311.0 260.9 191.6 103.7 98.3 Dividends (62.4) (46.7) (34.3) (30.8) (27.7) Retained profit 248.6 214.2 157.3 72.9 70.6
Balance Sheet Fixed assets 35.9 26.4 28.1 25.2 17.4 Stock 2,655.4 2,365.8 2,079.9 1,829.1 1,204.0 Other working capital (704.8) (667.0) (759.5) (671.4) (285.1) Provisions for liabilities and charges (26.5) (27.6) (28.3) (16.6) (9.3) Net operating assets 1,960.0 1,697.6 1,320.2 1,166.3 927.0
Shareholders’ funds – previously stated 1,439.1 1,170.0 943.0 783.3 706.8 Prior year adjustments – (1.6) 1.6 – – Shareholders’ funds – restated 1,439.1 1,168.4 944.6 783.3 706.8 Net debt 520.9 529.2 375.6 383.0 220.2 1,960.0 1,697.6 1,320.2 1,166.3 927.0
Statistics Return on average shareholders’ funds (after tax and before exceptional items) 23.9% 24.7% 22.7% 16.4% 14.7% Earnings per ordinary share – basic 80.8p 68.5p 51.1p 27.9p 26.6p Earnings per ordinary share – diluted 79.7p 67.1p 50.0p 27.7p 26.5p Earnings per ordinary share before exceptional items – basic 80.8p 68.5p 52.2p 32.8p 26.6p Earnings per ordinary share before exceptional items – diluted 79.7p 67.1p 51.1p 32.6p 26.5p Dividends per ordinary share 16.0p 12.25p 9.1p 8.25p 7.5p Shareholders’ funds per ordinary share 368p 304p 250p 210p 191p Ratios Dividend cover (times) 5.1 5.6 5.6 3.4 3.5 Interest cover before exceptional items and interest on deferred consideration (times) 10.1 9.8 11.9 8.0 7.1 Gearing 36% 45% 40% 49% 31%
Volumes www.georgewimpeyplc.co.uk UK completions 12,232 12,909 13,720 11,537 11,437 US completions 4,422 3,661 3,197 2,900 2,638 66 NOTICE OF MEETING
Notice is hereby given that the twenty seventh Annual General a to the allotment of equity securities in connection with a Meeting of George Wimpey Plc will be held on 14 April 2005 at rights issue, open offer or any other pre-emptive offer or 11.30 am at The Royal College of Physicians, 11 St Andrew’s Place, a scrip dividend alternative in each case in favour of ordinary Regent’s Park, London NW1 4LE, to transact the following business: shareholders (excluding any shareholder holding shares as treasury shares) where the equity securities respectively ORDINARY BUSINESS attributable to the interests of all ordinary shareholders are 1 To receive and consider the Report of the Directors and Accounts proportionate as nearly as may be to the respective number for the year ended 31 December 2004. of ordinary shares held or deemed to be held by them, and 2 That a final dividend of 10.8 pence per share in respect of the year subject to such exclusions or other arrangements as the Directors ended 31 December 2004 be and is hereby declared due and may deem necessary or expedient to deal with fractional payable on 13 May 2005 to shareholders on the register at close entitlements, legal or practical problems arising in any overseas of business on 4 March 2005, such final dividend to be payable only territory, the requirements of any regulatory body or stock in respect of such of the shares in respect of which the relevant exchange or any other matter whatsoever; and holder of the shares has not exercised any entitlement to receive
NOTICE OF MEETING b to the allotment (otherwise than pursuant to sub-paragraph new shares instead of a dividend in cash pursuant to the scrip a above) of equity securities up to an aggregate nominal dividend scheme. value of £4,897,435; To re-elect the following Directors who retire by rotation: and shall expire five years after the date of passing of this resolution, 3 Peter Johnson save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be 4 Andrew Carr-Locke allotted after such expiry and the Directors may allot equity 5 Christine Cross securities in pursuance of such an offer or agreement as if the power conferred hereby had not expired. and to re-appoint: 10 That the Company be and it is hereby generally and unconditionally 6 Peter Redfern following his first appointment to the Board authorised to make market purchases (within the meaning of 7 To re-appoint PricewaterhouseCoopers LLP as auditors of the section 163 (3) of the Companies Act 1985) of not more than Company, to hold office until the conclusion of the next general 39,179,481 ordinary shares of 25 pence each in its share capital at a meeting at which accounts are laid before the Company, and to price not less than 25 pence per share and not more than 5% above authorise the Directors to fix their remuneration. the average of the middle market quotations for the ordinary shares in the Company taken from the London Stock Exchange Daily To consider and, if thought fit, to pass the following resolutions Official List for the five business days immediately preceding the which are to be proposed, in the case of resolutions 8, and 11, day on which such shares are contracted to be purchased (in each as ordinary resolutions and, in the case of resolutions 9 and 10, case exclusive of any expenses) provided that the authority hereby as special resolutions of the Company: conferred shall expire at the conclusion of the next Annual General 8 That the Directors be and they are hereby generally and Meeting of the Company to be held after the date hereof (except unconditionally authorised in substitution for all previous authorities that the Company may make a contract to purchase its own shares conferred upon them to exercise all powers of the Company to allot under the authority hereby conferred prior to the expiry of such relevant securities (within the meaning of section 80 (2) of the authority, which will or may be executed wholly or partly after the Companies Act 1985) up to an aggregate nominal value of expiry of such authority and may make a purchase of its own shares £32,649,568, provided that this authority shall expire five years after in pursuance of any such contract). the date of passing of this resolution save that the Company may SPECIAL BUSINESS before such expiry make an offer or agreement which would or 11 That the Remuneration Report contained within the Annual might require relevant securities to be allotted after such expiry Report and Accounts for the year ended 31 December 2004 is and the Directors may allot relevant securities in pursuance of hereby approved. such an offer or agreement as if the authority conferred hereby had not expired. 9 That the Directors be and they are hereby empowered pursuant to section 95 of the Companies Act 1985 to allot equity securities (within the meaning of section 94(2) of the Act) for cash pursuant to the authority conferred by the resolution numbered 8 above and/or where such allotment constitutes an allotment of equity securities by virtue of section 94(3A) of the Companies Act 1985, GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT as if sub-section (1) of section 89 of the Companies Act 1985 did not apply to any such allotment, provided that this power shall be limited: 67
EXPLANATION OF RESOLUTIONS Resolution 10:To Empower the Company to Make Market Purchases Resolution 1:To Receive the Directors’ Report and Accounts of its Shares The Directors are required to present to the meeting the Directors’ and This resolution is intended to renew the authority of the Directors to Auditors’Reports and the Accounts for the year ended 31 December 2004. make market purchases of shares within a 10% limit, and in accordance with Article 53 of the Company’s Articles of Association.The Board has Resolution 2:To Approve a Dividend no present intention of exercising this authority. Moreover, purchases The proposed 2004 final dividend of 10.8 pence per share will be paid will only be made if they would result in an expected increase in on 13 May 2005 to shareholders who are on the register on earnings per share, taking into account other available investment 4 March 2005.The final dividend will be paid in cash to all shareholders opportunities, and will be in the best interests of shareholders other than those who exercise their right to receive shares instead of generally. Any shares purchased in accordance with this authority their cash dividend pursuant to the scrip dividend scheme. will subsequently be cancelled or they may be held in treasury Resolution 3:To Re-elect Peter Johnson pursuant to the Companies (Acquisition of Own Shares) (Treasury Article 103 of the Company’s Articles of Association states that one Shares) Regulations 2003.These regulations allow the Company to third of the Directors must retire annually, those doing so being the hold its own shares in treasury following a buy back as an alternative longest serving since last being re-elected. Peter Johnson offers himself to cancelling them. Holding bought back shares in treasury provides NOTICE OF MEETING for re-election. the Company with the ability to sell or transfer them quickly and effectively and also provides flexibility in using such shares for Resolution 4:To Re-elect Andrew Carr-Locke employees’ schemes. If any such shares are used, the Company will, Andrew Carr-Locke offers himself for re-election in accordance with so long as required under the guidelines of the Association of British Article 103 of the Company’s Articles of Association. Insurers Investment Committee, count them towards the limits in the Resolution 5:To Re-elect Christine Cross schemes as if they were newly issued shares. Christine Cross offers herself for re-election in accordance with Article All rights attaching to the shares, including voting rights and the right 103 of the Company’s Articles of Association. to receive dividends, are suspended whilst they are held in treasury. Resolution 6:To Re-appoint Peter Redfern Options were outstanding as at 1 February 2005 to subscribe for a total Article 108 allows the Board to appoint a person to the Board number of 8,798,764 ordinary shares, or 2.25% of the Company’s issued during the year, subject to them being re-appointed at the share capital. subsequent Annual General Meeting. Peter Redfern was appointed on 12 October 2004 and offers himself for re-appointment. If the authority to purchase shares is ever used in full (and the purchased shares cancelled), the proportion of issued share capital Directors’ biographical details are shown on page 35 of the represented by this figure would be 2.5%. Annual Report.These include dates of appointment, ages, career histories, current directorships and other significant appointments. Resolution 11:To Approve the Remuneration Report of the Company The Board recommends the re-election and the re-appointment In accordance with the Directors’ Remuneration Report Regulations of the above Directors. 2002 the Board is required to present the Remuneration Report to shareholders for approval at the Meeting.The Remuneration Report is Resolution 7:To Re-appoint PricewaterhouseCoopers as Auditors set out on pages 41 to 46 of the Annual Report and Accounts for This resolution proposes that PricewaterhouseCoopers LLP the year ended 31 December 2004.The Board considers that be re-appointed as auditors, and permits the Directors to fix appropriate executive remuneration plays a vital part in helping to their remuneration. achieve the Company’s overall objectives.The vote will have advisory Resolutions 8/9:To Allot Shares and Disapply Pre-emption Rights status in respect of the remuneration policy and overall remuneration Under section 80 of the Companies Act 1985, the Directors cannot packages and is not specific to individual levels of remuneration. generally allot shares in the Company unless they are authorised to By Order of the Board do so by the Company in general meeting. Resolution 8 will authorise the Directors to issue new shares up to the lower of one third of the amount of the nominal value of the issued share capital of the Company as at the date of this Notice – i.e. up to a value of £32,649,568 or the amount of the nominal value of the authorised but unissued share capital of the Company.The authority will expire five years after James J Jordan the date of passing of this resolution.The Directors have no present Group Company Secretary intention of issuing shares, except as needed to satisfy the exercise George Wimpey Plc of options under the Company’s Employee Share Scheme and the Manning House allotment of shares pursuant to such elections made by shareholders 22 Carlisle Place of the Company. London SW1P 1JA 22 February 2005 Under Resolution 9, the Directors will remain subject to constraints on the issue of shares for cash.They will be able to issue such shares for cash only: • in connection with a rights issue, open offer or other pre-emptive offer or a scrip dividend alternative, or www.georgewimpeyplc.co.uk • up to 5% of the nominal value of the Company’s issued share capital as at the date of the Notice, i.e. £4,897,435. 68 NOTICE OF MEETING CONTINUED
ACTION TO BE TAKEN NOTES: Whether or not you intend to attend the Annual General Meeting, i. A member entitled to attend and vote at this Meeting may appoint a proxy you are requested to complete the enclosed Form of Proxy and return to attend and vote instead of him or her.The proxy need not be a member it to the Company’s Registrars, Lloyds TSB Registrars,The Causeway, of the Company. Worthing, West Sussex BN99 6DA as soon as possible and in any event ii. Instruments appointing proxies must be received by the Company’s Registrars so as to be received no later than 48 hours before the time appointed not less than 48 hours before the time fixed for the Meeting. for the Annual General Meeting, that is no later than 11:30 am on iii. Contracts of Service with Directors and the Register of Directors’ Interests will 12 April 2005.The completion and submission of a Form of Proxy will be available for inspection at the registered office of the Company during usual not prevent you from attending and voting in person if you so wish. business hours between the date of this Notice and the Annual General Meeting and at the venue of the Annual General Meeting for 15 minutes prior to the In conjunction with its Registrars, the Company has this year commencement of the meeting and until its conclusion. introduced a facility to allow each shareholder to register proxy iv. A copy of the full Annual Report and Accounts for the year ended 31 December votes electronically. Detailed information of how to do this is set out 2004, including the Remuneration Report referred to in Resolutions 1 and 11 on the Form of Proxy/Admission Card.You can register your proxy respectively, is also available on www.georgewimpeyplc.co.uk votes electronically by either logging on to our Registrars’ website, v. As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, NOTICE OF MEETING www.sharevote.co.uk and following the instructions, or, if your only those shareholders who are registered on the Company’s share register at 6:00 pm on 12 April 2005 shall be entitled to attend the Annual General Meeting shareholding is uncertificated, by registering your proxy votes and to vote in respect of the number of shares registered in their names at that using the service launched by CRESTCo, principally to streamline time. Changes to entries on the share register after 6:00 pm on 12 April 2005 the process for institutional investors. shall be disregarded in determining the rights of any person to attend or vote at the Meeting. RECOMMENDATION Your Directors are of the opinion that the resolutions to be proposed at the Annual General Meeting are in the best interests of shareholders as a whole and recommend you to vote in favour of them. Each Director will be doing so in respect of his or her own beneficial shareholdings. ATTENDANCE AND VOTING As a shareholder of George Wimpey Plc, you have the right to attend and vote at the Annual General Meeting. Please bring with you the accompanying Form of Proxy/Admission Card and retain it until the end of the Meeting. It will authenticate your right to attend, speak and vote, and will help us to register your attendance without delay. Registration will be available from 9:30 am. For the safety and comfort of those attending the Meeting, large bags, cameras, recording equipment and similar items will not be allowed into the building. The Meeting will commence at 11:30 am and light refreshments will be available from 11:00 am and also after the conclusion of the Meeting. You are advised to bring your Annual Report with you to the Meeting so that you can refer to it as necessary. If you do not wish, or are unable, to attend, you may appoint either the Chairman of the Meeting or someone else of your choice to act on your behalf and to vote in the event of a poll.That person is known as a ‘proxy’.You are advised to use the enclosed Form of Proxy to appoint a proxy or to vote electronically as outlined above and in more detail on the enclosed Form of Proxy. A proxy need not be a shareholder and may attend and vote on behalf of the shareholder who appointed him or her. At the Meeting, the proxy can act for the member he or she represents. This includes the right to join in or demand a poll, but it does not include the right to vote on a show of hands.The proxy is also valid GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT for any adjournment of the Meeting. Please tick the appropriate box alongside each resolution on the Form of Proxy to indicate whether you wish your votes to be cast ‘for’, or ‘against’,or whether you wish to withhold your vote from, that resolution. Unless you give specific instructions on how to vote on a particular resolution, your proxy will be able, at his or her discretion, either to vote ‘for’ or ‘against’ that resolution or to withhold from voting. Before posting the form to the Registrar, please check that you have signed it. In the case of joint holders, either of you may sign it. The Forms of Proxy must be received in the offices of the Company’s Registrars no later than 11:30 am on 12 April 2005. Any Form of Proxy received after this time will be void. BUSINESS DIRECTORY 69 GEORGE WIMPEY PLC – UK AND US
GEORGE WIMPEY LAING HOMES 1 East Scotland Region 25 Midland Region 2 West Scotland Region 26 North Thames Region 3 North Region 27 South East Thames Region 4 North East Region 28 South West Thames Region 5 North Yorkshire Region 29 Thames Valley Region 6 South Yorkshire Region 7 Manchester Region 8 North West Region 9 North Midlands Region 1 10 Midlands Region 2 11 East Midlands Region 12 West Midlands Region 13 South Midlands Region BUSINESS DIRECTORY 3 14 East Anglia Region 15 South West Region 4 16 Cardiff sub-office 17 Bristol Region 18 North London Region 21 19 East London Region 5 7 20 City 6 21 City sub-office 8 22 West London Region
10 11 23 South London Region 9 24 Southern Region 12 25 14 13
18 26 19 15 20 16 29 17 22 28 27 23
24
MORRISON HOMES 1 Atlanta Division 2 Orlando Division 3 Jacksonville Division 4 Tampa Division 5 Sarasota Operation 6 Houston Division 7 Dallas Division 8 Austin Division 9 Denver Division 11 10 Phoenix Division 12 9 11 Sacramento Division 12 Central Valley Division
1
10
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8 2 6 4 www.georgewimpeyplc.co.uk 5 70 BUSINESS DIRECTORY CONTINUED GEORGE WIMPEY
MEADOW VIEW, STOCKTON-ON-TEES EAST FELLS, ARMADALE, WEST LOTHIAN SANDMARTINS, MANSFIELD Meadow View is a development of East Fells provides a variety of attractive Sandmartins is situated in Berry Hill three and four bedroom homes in the properties ranging from two bedroom Park in the prime area of Mansfield. popular location of Ingleby Barwick, just semi-detached to large four bedroom A pretty development comprising one
BUSINESS DIRECTORY a few minutes’ drive from Stockton and family homes in the heart of West to four bedroom homes. Sandmartins Middlesbrough town centres.With Lothian.The development is perfectly provides a great opportunity to enjoy excellent transport links, Meadow View placed for both Edinburgh and the benefits of town and country living. is an ideal location for commuters and Glasgow. Originally a small hamlet, those wanting to explore the Cleveland the area became established in 1790. hills and Northeast coastline.
LOCKSONS WHARF, LONDON FALCON WHARF, BATTERSEA, LONDON HOLLIES ORCHARD, OXTED, SURREY This handsome gated development Combining iconic architecture, stylish In one of Southeast England’s most offers a choice of one and two design, a waterside location and 360o prestigious locations is a select bedroom apartments, several with views, Falcon Wharf is at the heart of development comprising a range of generous balconies or roof terraces one of the fastest evolving Thameside two to five bedroom homes. Each of boasting city views or waterfront areas of London.The development the properties provides luxury living settings. Locksons Wharf overlooks the offers 124 apartments, each with its with the appeal of a beautiful location. Limehouse Cut that once linked the own winter garden, set over 17 floors Perfectly placed for commuting into capital to the trade routes of the world. of curvilinear glass, steel and timber London or escaping to the countryside. It is a great central location. designed by renowned architect James Burland. GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT
JUNCTION 67, HACKNEY, LONDON STANDERWICK ORCHARD, SOMERSET KNIGHTS GROVE, HAMPSHIRE An exceptional development of one, This unique development of two, three This development is in North Baddesley, two and three bedroom apartments and four bedroom country-style a large village in the Test Valley with a and a three bedroom detached cottages combines the best of modern strong sense of traditional community townhouse.The latter has a private facilities with traditional design. Each spirit.To match the existing architecture garden while most of the apartments home has been sympathetically the properties have been designed feature balconies.Tucked away in a designed and constructed using with a traditional English village in quiet street, only minutes from the City, materials that ensure they fit into the mind. Knights Grove offers a range of London Fields, Hackney Downs station picturesque West Country landscape, two bedroom apartments and three or the hustle and bustle of Mare Street. adjacent to the Black Down Hills, an to five bedroom homes with many area of outstanding natural beauty. period features. 71 LAING HOMES MORRISON HOMES
CLOISTERS GATE, BICKLEY BARTRAM SPRINGS, JACKSONVILLE TRADITIONS, SACRAMENTO This is a development of 18 three and Bartram Springs offers beautiful views Traditions is located in the premier four bedroom homes in detached mews of the lake and nature preserves, just master planned community of Lincoln and semi-detached styles, set within the minutes from St. Augustine.Three Crossing. Five floorplans cater to
grounds of The Cloisters, an old Victorian community pools, a water park, parks move-up buyers looking to expand BUSINESS DIRECTORY manor house.The exclusive, gated and playgrounds, a fitness centre and their home by offering four and development features traditional tennis facilities grace the grounds, with five bedrooms, optional and standard architecture with contemporary interiors nearby shopping, excellent schools and bonus rooms, lofts and retreats. In creating a luxurious feel. proximity to Jacksonville. addition, the community offers an array of exciting amenities.
VICTORIA BRIDGE, HEREFORD STEINER RANCH, AUSTIN KEENE’S POINTE, ORLANDO Victoria Bridge is set in the grounds of Steiner Ranch is located in the master Keene’s Pointe is a neo traditional style the Grade II listed former Hereford planned community often called the community located in Windermere, an General Hospital and consists of 89 ‘Land Between the Lakes’ (Lake Austin extraordinary residential setting on new townhouses and new and and Lake Travis).The rugged hills Lake Tibet Butler.With oversized lots refurbished apartments in the hospital provide wonderful panoramic views, and a long list of the most desirable grounds and refurbished Lodge while the most desired amenities and amenities, the gated, master planned building and the original Grade II listed easy access to work and play makes community makes the lake a focal hospital building.The development is Steiner Ranch a place to call home. point of community life, along with set within a highly desirable location an 18-hole Jack Nicklaus Signature on the banks of the River Wye with Masterpiece Golf Course. views over the river.
BROCKLEY PARK, STANMORE THE BACK NINE, DENVER WORTHAM FALLS, HOUSTON Brockley Park offers 96 detached four, The Back Nine at Reunion a master Wortham Falls is a family oriented five and six bedroom executive family planned community overlooks the community that places an emphasis on www.georgewimpeyplc.co.uk homes.The properties are set in the mountains and the Buffalo Run golf centralised convenience.Wortham Falls heart of one of Stanmore’s most course.This community also includes is a short drive to schools, colleges, desirable residential areas and are over 150 acres of parks, a recreation major shopping centres, restaurants adjacent to beautiful greenbelt centre, pool, playgrounds, and Tot lots, and recreation facilities, as well as countryside and six acres of open and it is only a short drive from benefiting from a community space.The homes are traditionally shopping centres and Denver greenbelt and oversized playground. styled to blend with and enhance the International Airport. local architecture, plus all homes have good sized gardens, with landscaped frontages as standard. 72 BUSINESS DIRECTORY (CONTINUED) GEORGE WIMPEY PLC – UK AND US
GEORGE WIMPEY PLC 9 North Midlands Region 21 City sub-office 1 Atlanta Division Manning House Managing Director: Philip Lloyd 1200 Century Way,Thorpe Park Division President: Greg Lorenzetti 22 Carlisle Place Fairfax House Leeds, LS15 8ZA 450 Franklin Road, Suite 160 London SW1P 1JA Pendeford Business Park Tel: +44 (0)113 2515121 Marietta, Georgia 30067 Tel: +44 (0)20 7802 9888 Wobaston Road, Wolverhampton, Tel: +1 (1)770 794 5800 www.georgewimpeyplc.co.uk West Midlands WV9 5HA 22 West London Region Tel: +44 (0)1902 623700 Managing Director: Philip Towl 2 Orlando Division GEORGE WIMPEY UK LTD Stratfield House, Station Road Division President: Leslie Peters Chief Executive: Peter Redfern 10 Midlands Region Hook, Hants RG27 9PQ 151 Southhall Lane, Suite 200 Divisional MD Scotland and North: Managing Director: John Gainham Tel: +44 (0)1256 760606 Maitland, Florida 32751 Neil Athorn Chase House, Park Plaza Tel: +1 (1)407 629 0077 Heath Hayes, Cannock 23 South London Region Divisional MD Midlands: Peter Truscott Managing Director: David Huggett 3 Jacksonville Division Divisional MD South: Mick O’Sullivan Staffordshire WS12 2DD Tel: +44 (0)1543 496700 Weald Court Division President: Douglas Guy Divisional MD Laing Homes: 103 Tonbridge Road 101 East Town Place, Suite 700 Dave Livingstone 11 East Midlands Region Hildenborough St Augustine, Florida 32092 Group HR Director: Anna Edgeworth Managing Director: Mike Diffin Tonbridge, Kent TN11 9HL Tel: +1 (1)904 940 0004 Finance Director: Steve Jenkins BUSINESS DIRECTORY Unit 2,The Osiers Business Park Tel: +44 (0)1732 836000 Legal Director: Jim Phillips Laversall Way 4 Tampa Division Director of Customer Services: Leicester LE19 1DX 24 Southern Region Division President: Mike Storey Graham Hughes Tel: +44 (0)116 281 6400 Managing Director: Ian Menham 100 Tampa Oaks Boulevard Templars House Suite 100,Temple Terrace Gate House 12 West Midlands Region Lulworth Close, Chandlers Ford Florida 33637 Turnpike Road, High Wycombe Managing Director: Geoff Boxall Eastleigh, Hampshire SO53 3TJ Tel: +1 (1)813 910 7044 Buckinghamshire HP12 3NR 39 Dominion Court, Station Road Tel: +44 (0)23 8025 5288 Tel: +44 (0)1494 558323 Solihull, West Midlands B91 3RT 5 Sarasota Operation www.georgewimpey.co.uk Tel: +44 (0)121 703 3300 LAING HOMES 399 Interstate Blvd www.lainghomes.co.uk 25 Midlands Region Sarasota, Florida 34240 13 South Midlands Region Managing Director: Paul Degg Tel: +1 (1)941 371 3008 GEORGE WIMPEY Managing Director: Peter Gurr 23 Waterloo Place 6 Houston Division 1 East Scotland Region Beech House, 551 Avebury Boulevard Warwick Street, Leamington Spa Managing Director: Andy Wyles Milton Keynes Division President: Steve Von Hofe Warwickshire CV32 5LA 9807 Whithorn Drive No 1 Masterton Park, Carnegie Buckinghamshire MK9 3DR Tel: +44 (0)1926 331200 Campus, Dunfermline Tel: +44 (0)1908 544800 Houston,Texas 77095 Fife KY12 7EP 26 North Thames Region Tel: +1 (1)281 855 8041 Tel: +44 (0)131 338 4000 14 East Anglia Region Managing Director: Lee Bishop Managing Director: Frances Hill 7 Dallas Division Premiere House, Elstree Way Division President: John Mann 2 West Scotland Region Tartan House, Etna Road Borehamwood Managing Director: Fergus McConnell Bury St Edmunds 6565 N MacArthur Blvd Hertfordshire WD6 1JH Suite 400, Irving,Texas 75039 Unit C Ground Floor, Cirrus Building Suffolk IP33 1JF Tel: +44 (0)20 8236 3800 Glasgow Airport Business Park Tel: +44 (0)1284 773800 Tel: +1 (1)214 647 5260 Marchburn Drive, Abbotsinch 27 South East Thames Region 8 Austin Division Paisley PA3 2SJ 15 South West Region Managing Director: Roy Willer Managing Director: Philip Towl Vice President Operations: Tel: +44 (0)141 849 5500 Weald House, 84-88 Main Road Mike Wittenburg Omicron, Windmill Hill Business Park, Sundridge, Nr Sevenoaks 3 North Region Swindon 805 Las Cimas Parkway Kent TN14 6ER Suite 350 Austin Managing Director: John Taylor Wiltshire SN5 6PA Tel: +44 (0)1732 470500 North House Tel: +44 (0)1793 898200 Texas 78746 Wessington Way, Sunderland 28 South West Thames Region Tel: +1 (1)512 328 8866 16 Cardiff sub-office SR5 3RL Managing Director: 9 Denver Division Tel: +44 (0)191 516 5400 Managing Director: Philip Towl Gerry McCormack Copse Walk, Cardiff Gate Business Park Division President: Craig Campbell Tyrell House, Challenge Court 1420 West Canal Court 4 North East Region Pontprennau, Cardiff Barnett Wood Lane, Leatherhead Managing Director:Tim Nixon CF23 8WH Suite 170 Surrey KT22 7LL Littleton, Colorado 80120 Bowesfield Lane Tel: +44 (0)29 2054 5000 Tel: +44 (0)1372 385800 Stockton-on-Tees Tel: +1 (1)303 798 3500 Cleveland TS18 3HG 17 Bristol Region 29 Thames Valley Region Managing Director: Mike Hoey 10 Phoenix Division Tel: +44 (0)1642 626200 Managing Director: Sarah Bailey Division President: 600 Park Avenue, Aztec West Ashridge House 5 North Yorkshire Region Almondsbury, Bristol BS32 4SD Susan Jacobson-Kulak Oaklands Business Park 4800 North Scottsdale Road Managing Director: Gary Russon Tel: +44 (0)1454 628400 Off Fishponds Road Sandpiper House Suite 2300 18 North London Region Wokingham, Berkshire RG41 2FD Scottsdale, Arizona 85251 Peel Avenue, Calder Park Tel: +44 (0)118 936 4000 Wakefield WF2 7UA Managing Director: Lorrie Fraquelli Tel: +1 (1)480 941 0818 Tel: +44 (0)1924 241500 McLean House, Bluecoats Avenue GEORGE GEORGE PLCWIMPEY ANNUAL 2004 REPORT Hertford MORRISON HOMES 11 Sacramento Division 6 South Yorkshire Region Hertfordshire SG14 1PB Chairman (from 1.1.05): Stu Cline Division President: Bob Walter Managing Director: Philomena Ware Tel: +44 (0)1992 516100 President (from 1.1.05): Steve Parker 1180 Iron Point Road, Suite 100 Hesley House, Upper Wortley Road Executive Vice President: John Napolitan Folsom, California 95630 Rotherham, Sth Yorkshire S61 2RE 19 East London Region Senior Vice President West Region: Tel: +1 (1)916 355 8900 Tel: +44 (0)1709 565700 Managing Director: Phillip Lyons Bob Walter Kings House Chief Financial Officer: Bruce Van Stee 12 Central Valley Division 7 Manchester Region 101-135 Kings Road Vice President Legal: Russ Hayes Division President: Phil Bodem Managing Director: Martin Donnachie Brentwood Vice President Sales and Marketing: 5226 Pirrone Court, Suite 100, Salida, 629 Eccles New Road Essex CM14 4EE Kathi James California 95368 Salford, Manchester M50 1BD Tel: +44 (0)1277 236800 Chief Information Officer: Bob Witte Tel: +1 (1)209 545 8111 Tel: +44 (0)161 743 4900 20 City 3655 Brookside Parkway 8 North West Region Managing Director: Graeme Dodds Suite 400 Managing Director: Philomena Ware Suite 5.04, Exchange Tower Alpharetta, Georgia 30022 Lichfield House, Gadbrook Park 1 Harbour Exchange Square Tel: +1 (1)770 360 8700 Northwich, Cheshire CW9 7RF Limeharbour, London E14 9GE www.morrisonhomes.com Tel: +44 (0)1606 815300 Tel: +44 (0)20 7987 0500 SHAREHOLDER INFORMATION 73
TABLE OF CONTENTS 34 BOARD OF DIRECTORS 50 GROUP CASH FLOW STATEMENT ANNUAL GENERAL MEETING PRIVATE SHAREHOLDERS 01 FINANCIAL HIGHLIGHTS 36 DIRECTORS’ REPORT 51 ACCOUNTING POLICIES 14 April 2005 11:30am at If you have a query about your holding of George Wimpey Plc shares 02 GROUP OVERVIEW 38 CORPORATE GOVERNANCE 52 NOTES TO THE ACCOUNTS THE ROYAL COLLEGE OF PHYSICIANS, or need to change your details, for example address or payment 04 CHAIRMAN’S STATEMENT 41 REMUNERATION REPORT 65 FIVE YEAR REVIEW 06 CHIEF EXECUTIVE’S REVIEW 47 AUDITORS’ REPORT 66 NOTICE OF MEETING 11 ST ANDREWS PLACE, REGENTS PARK, LONDON NW1 4LE of dividend requirements, please contact the Registrars at the 11 OPERATING AND FINANCIAL REVIEW 48 GROUP PROFIT AND LOSS ACCOUNT 69 BUSINESS DIRECTORY address shown. 31 CORPORATE SOCIAL RESPONSIBILITY 49 BALANCE SHEET 73 SHAREHOLDER INFORMATION RESULTS WEBSITE 2004 year end results – 22 February 2005 Further details of the Group’s activities and products can be seen on its 2005 half year results – 6 September 2005 website at www.georgewimpeyplc.co.uk. Services available include: DIVIDENDS • email alert service Final Dividend – subject to approval at the Annual General Meeting, a final recommended dividend of 10.8 pence will be payable on • download Company reports 13 May 2005 to ordinary shareholders whose names appear in the • access press releases register of members at the close of business on 4 March 2005. The ex-dividend date is 2 March 2005. • download investor presentations SHAREHOLDER INFORMATION George Wimpey Plc is a dedicated housebuilding company with Interim Dividend – dates to be announced in July 2005 • view investor presentation via webcasts Once these dates have been approved they will be displayed • interactive share price charting tool operations in the UK and US.We have unparalleled experience in on our website www.georgewimpeyplc.co.uk GROUP COMPANY SECRETARY AND REGISTERED OFFICE our industry and combine the financial strengths of an international The scrip dividend scheme introduced by the Company in 2002 James Jordan continues to be available to shareholders. For more information, please Manning House developer with the focus of small regional businesses. contact Lloyds TSB Registrars. 22 Carlisle Place London SHAREHOLDERS’ SERVICES SW1P 1JA We aim to achieve leadership in our sector and be the housebuilder The Company continues to encourage private shareholders. email: [email protected] Shareview dealing Tel: +44 (0) 20 7802 9888 of choice for our shareholders, our customers, our employees and On the Company’s behalf, Lloyds TSB Registrars operate a phone or internet based low cost share sales service in George Wimpey Plc REGISTERED NUMBER sub-contractors and the communities in which we operate. Our focus shares.The telephone service is available on 0870 850 0852 and the 1397926 internet based service at the website, www.shareview.co.uk/dealing. is to consistently create and deliver value for our shareholders and REGISTRARS Postal share dealing service Lloyds TSB Registrars customers alike. Cazenove & Co also offer a low cost postal share dealing service on The Causeway behalf of the Company. Worthing West Sussex For any further details on either service please contact the Group BN99 6DA Company Secretary at the Registered Office or by telephone on +44 (0) 20 7802 9888. Tel: 0870 600 3970 TURNOVER (£M) OPERATING PROFIT (£M) * PROFIT BEFORE TAX (£M) * Corporate Individual Savings Account (ISA) You can see more details of your shareholding on Lloyds TSB Registrars This service is available to George Wimpey shareholders. ISAs are a website on www.shareview.co.uk useful way of holding your shares as any gains made on the value of 1,702.01,895.9 2,600.1 2,878.5 3,005.7 INVESTOR RELATIONS CONTACT 170.2213.1 329.7 429.8 500.7 146.1180.9 291.8 378.2 450.7 the shares held in the George Wimpey Corporate ISA are free of Capital Terri Wright Gains Tax when sold. 2,750 500 500 email: [email protected] For further information, contact The Share Centre on Tel: +44 (0) 20 7802 9888 2,200 400 400 +44 (0) 1296 41 41 44 or by e-mail to [email protected]. Alternatively, you can visit their website at www.share.co.uk. 1,650 300 300 ShareGift Shareholders with a small number of shares, the value of which makes 1,100 200 200 it uneconomic to sell them, may wish to consider donating them to charity through ShareGift, a registered charity administered by The Orr 550 100 100 Mackintosh Foundation. A ShareGift donation form can be obtained 0 0 0 from Lloyds TSB Registrars. Further information about ShareGift is Published by Black Sun Plc available at www.sharegift.org or by writing to: ShareGift,The Orr Photography by Richard Olivier and Tom Salyer Mackintosh Foundation, 24 Grosvenor Gardens, London SW1W 0DH. Printed by Royle Corporate Print 00 01 02 03 04 00 01 02 03 04 00 01 02 03 04 £3bn+ £500m+ £450m+ www.georgewimpeyplc.co.uk
+15% CAGR over four years +31% CAGR over four years +32% CAGR over four years
* Before exceptional costs of £5.9 million in 2002 and £28.9 million in 2001 GEORGE WIMPEY PLC WIMPEY GEORGE 2004 ANNUAL REPORT AND ACCOUNTS AND REPORT ANNUAL 2004
SECURING OUR FUTURE GEORGE WIMPEY PLC ANNUAL REPORT AND ACCOUNTS
FIND OUT MORE… 2004 Further details of George Wimpey Plc are available on-line at www.georgewimpeyplc.co.uk
George Wimpey Plc Manning House 22 Carlisle Place London SW1P 1JA Tel +44 (0)20 7802 9888 www.georgewimpeyplc.co.uk