Interim Results for the Half Year Ended 30 June 2004

28 July 2004 George Wimpey Plc Interim Results for the half year ended 30 June 2004 Highlights  Group profit before tax up 29% to £158.5 million  Group operating profits up 23% to £181.6 million  George Wimpey + 22% to £138.7 million  Laing Homes + 43% to £17.1 million  Morrison Homes + 33% to $60.1 million  Laing Homes making encouraging progress  Return on average capital employed 24.0% for last 12 months  Free cash flow, before acquisitions and dividends, over the last 12 months totalled £156.0 million  Half year gearing reduced to 59%  Interim dividend up 37% to 5.2p  Strong forward order books: over 80% of projected 2004 sales reserved or completed in UK and over 90% of projected 2004 sales reserved or completed in USJohn Robinson, Chairman said “These are another set of excellent results for George Wimpey. We believe the market has settled at sustainable levels with only modest levels of price inflation going forward. Based on current market conditions, we would expect results for the year as a whole to be around the top end of market expectations.“Peter Johnson, Chief Executive said “Over the past three years, George Wimpey’s strategic priorities have been to improve operating margins and create the potential for significant growth in Morrison Homes. This stage of our strategy is now largely complete. We will now concentrate on sustaining the improvements we have achieved in our UK margins through selective land acquisition and prioritising margin over rapid volume growth. At the same time, we will continue the rapid growth of Morrison Homes, reduce our gearing and increase dividends ahead of earnings growth.”Enquiries George Wimpey Plc Peter Johnson, Group Chief Executive } today 020 7554 1400 Andrew Carr- Locke, Group Finance Director } thereafter 020 7802 9888Gavin Anderson & Company Elizabeth Morley / Tom Siveyer 020 7554 1400Visit www.georgewimpeyplc.co.uk for  consensus analysts’ forecasts  a webcast of the Company’s presentation to analysts available during the afternoon of 28 July  a full copy of presentation and appendices available from 10.45 am  high resolution photographs for media use1 Chairman’s Statement Group Results First half results for George Wimpey once again show a strong uplift on the previous year. The market for new homes in the UK started the year well, with the interest rate rises in recent months steadying the market to more sustainable levels. In the US the housing market has remained particularly strong. Against this background Group turnover rose by 15% to £1,219.9 million (2003: £1,059.0 million) as a result of increases in volumes across all three of our businesses as well as higher prices in George Wimpey and Morrison Homes. As all businesses continue to focus on control of costs and margin improvement, Group operating profits rose 23% to £181.6 million. This follows last year’s first half increase of 40% to £148 million. Profit before tax also rose strongly by 29% to £158.5 million (2003: £122.7 million) after last year’s 42% increase. Morrison Homes continued to perform particularly strongly even after the effect of the weak dollar, which reduced profit before tax by £3.3 million. The exchange rate used for the period was £/$1.81. The Group tax rate for the period remained unchanged at 31%, the rate anticipated for the year as a whole. Return on equity after interest and tax for the 12 months to 30 June 2004 was 24.8%, return on capital for same period was 24.0%. Over the past 12 months total assets employed in the business have risen by £200.5 million to £2,052.5 million (2003: £1,852.0 million). This reflects the continued investment in the landbank in both the UK and US and the final payment of £95 million at the end of 2003 relating to the Laing Homes acquisition. Total owned and controlled plots in the UK were increased to over 50,000 (2003: 46,688 plots) to counter the lengthening planning approval process. Owned and controlled plots in the US rose to 20,062 (2003: 15,325 plots) providing a sound basis for accelerated growth in the second half of 2004 and beyond.Improved performance has enabled the business to become cash generative before acquisitions and dividends. Free cash flow, before acquisitions and dividends, over the last 12 months totalled £156.0 million. With shareholders’ funds growing strongly and debt levels falling by £58 million at 30 June 2004 to £754.3 million (2003: £812.3 million), gearing has been reduced to 59% from 79% at 30 June 2003. Dividend For the first half of the year earnings per share rose by 27% to 28.6 pence (2003: 22.5 pence). Reflecting the Board’s continued confidence in the financial performance of the Company I am pleased to announce a further increase in the interim dividend of 37% to 5.2 pence per share from 3.8 pence per share in June 2003. This continues our policy of enhancing the dividend growth rate ahead of earnings with the aim of reducing the level of dividend cover over time. Strategy Over the past three years, George Wimpey’s strategic priorities have been to improve operating margins and create the potential for significant growth in Morrison Homes. 2 Whilst there remains further scope for margin improvement in Laing Homes, this stage of our strategy is now largely complete. At the same time, the UK market has returned to normal levels, and house price inflation is expected to remain low for some time. Despite this, the land market remains very competitive as the planning system continues to restrict supply. Conversely, demographic trends and a growing economy are expected to underpin a strong housing market in the United States in the coming years. We have an excellent position in that market in terms of location, brand and management. Investing behind that strength will increase the value of our business. Against this background, we will now concentrate on sustaining the improvements we have achieved in our UK margins through selective land acquisition and prioritising margin over rapid volume growth. At the same time, we will continue the rapid growth of Morrison Homes, reduce our gearing and increase dividends ahead of earnings growth.Outlook We believe the UK housing market has settled at normal and sustainable levels and expect only modest price inflation going forward. Our order books are strong in both quantity and quality and we expect to see increases for the year as a whole in both George Wimpey and Laing Homes sales revenues and operating margins. As a result of planning delays, our volumes for the full year are likely to be similar to last year. Our cost controls within the UK business remain strong and we are prepared for these more normal market conditions. The prospects for the US markets served by Morrison continue to benefit from strong underlying demographic trends, continuing low interest rates and improving job growth. Morrison’s land position enables it to take full advantage of these conditions to achieve significant volume growth this year and next. With very strong order books, and despite the weaker dollar, Morrison is expected to show substantial profit growth for the full year.Based on current market conditions, we expect results for the year as a whole to be around the top end of market expectations. John Robinson ChairmanUK HousingMarket Conditions In general, market conditions across the UK remained healthy for the first half of 2004. Continuing undersupply, as a result of problems within the planning system, and good levels of affordability have continued to support the market. Recent interest rate rises, along with intense media coverage, are achieving their objective of steadying the market at low and sustainable levels of house price inflation. Against this background, the market in the North and Scotland has continued to be stronger and experienced the highest levels of price inflation. Only limited price rises have been experienced in the Southeast for some time. The market for higher priced properties has remained slow with little price movement. Both George Wimpey and Laing Homes experienced good overall selling rates during the period, slightly ahead of the same period in 2003. Cancellation rates have remained at normal levels. The use of part exchange remains at low levels with a total value of part exchange properties currently held of £12.9 million, representing 60 properties (2003: £38 million representing 188 properties).3 Laing Homes has shown encouraging progress over the first half of 2003, with total completions up 67% on the same period in 2003. This significant increase in volume along with tighter control of costs has improved the financial performance of the business. Total annual cost savings of £12 million following acquisition have already been secured by actions completed in the first half of 2004 and land is now being acquired on better terms. Laing Homes is a much stronger business as a result of the actions taken, providing an excellent platform for future volume growth. Sales and Prices George Wimpey H1 2004 H1 2003 % +/- Turnover £809.3 m £691.1 m + 17% Total completions 4560 4370 + 4% Private 4220 4125 + 2% Affordable 340 245 Private average selling price £184,000 £163,000 + 13%Laing Homes H1 2004 H1 2003 % +/- Turnover £142.9 m £113.6 m + 26% Total completions 533 319 + 67% Private 423 310 + 36% Affordable 110 9 Private average selling price £308,000 £331,000 - 7%At Laing Homes action has been taken to reduce the exposure of the business to higher priced products, over £500,000, where we believe market risks to be greater. Average selling prices are starting to reduce as a result of this change in mix.The 13% rise in George Wimpey average selling prices is a result of strong demand in the North and Midlands being partially offset by prices in the South moving forward more modestly. Going forward we expect the rate of price increases to be modest.Total first half completions for the whole of the UK business rose 9% on the first half of 2003 to 5,093 from 4,689. The average number of sales outlets open during the first half fell by 7% to 294. The average number of Laing Homes sales outlets open has remained broadly in line with last year but at George Wimpey, as a result of high selling rates in the early part of the year, many developments sold out quicker than planned. In addition, the opening of new sales outlets continues to be affected by delays in the planning system. Selling rates in the second half of the year are expected to be below the abnormally high rates experienced in the same period in 2003. It is anticipated, therefore, that total private development volumes for the full year will be similar to 2003. Profits and Margins George Wimpey H1 2004 H1 2003 % +/- Operating profit £138.7 m £114.0 m + 22% Operating margin 17.1% 16.5%Laing Homes H1 2004 H1 2003 % +/- Operating profit £17.1 m £12.0 m + 43% Operating margin 12.0% 10.6%George Wimpey’s scale continues to be a major benefit in the control of costs, as well as in the acquisition of those larger sites where competition is more limited. Whilst the price 4 of some materials rose modestly, the pace of inflation on labour costs fell, so that the combined effect of inflation on material and subcontractor costs was below 5%, similar to last year. As a result, operating margins improved further, despite the impact of increased regulatory costs. At Laing Homes, operating profits and margins show significant improvement over the same period last year as the benefits of restructuring and an increased cost focus come through. Operating margins will continue to show improvement as the scale of existing Laing Homes businesses reaches an efficient size and as land acquired on improved terms comes through to sales. Return on average capital employed for the combined UK business was 24.4% for the last 12 months. Customer Service Improving the quality of services offered to our customers continues to be a major focus for both George Wimpey and Laing Homes. Customer satisfaction measured as ‘would you recommend’ has now reached 89.4% for George Wimpey and 84.5% for Laing Homes. These are well above the 75% level recommended for the industry by Kate Barker in her report ‘Review of Housing Supply’ and significantly above the industry average of 46% given in The Housing Forum’s National Customer Satisfaction Survey for 2003.The introduction of centralised options centres to the UK business has helped to increase total turnover from the sale of options in the UK by 12% to £23.8 million (2003: £21.2 million). The average value of options sold per customer across the UK business in the period was over £5,000. George Wimpey now has three established centralised options centres in Edinburgh, Bromsgrove and Cannock with a fourth due to open in Swindon in August. We have plans to open two more centres in the South in the near future. Land The total UK owned and controlled landbank rose during the period to 50,901 plots. This represents a 5% increase since December 2003 and a 9% increase on the same time last year. During the period we have continued to be selective in our land buying and maintained our land purchase disciplines. We continue to acquire land on terms consistent with our current operating margins in George Wimpey and on terms better than current operating margins in Laing Homes.The strategic landbank now stands at 18,125 acres, which includes around 13,000 plots allocated in local plans. UK Outlook The UK housing market appears to have returned to more normal and sustainable levels in recent weeks. With over 80% of the year’s anticipated sales reserved, exchanged or completed at margins ahead of last year George Wimpey and Laing Homes are well positioned to deliver another year of good performance. US HousingThe general economy in the US continues to strengthen and the housing market has remained particularly strong throughout the first half of the year. The market continues to be supported by strong demographic trends and good affordability. Many of Morrison Homes’ markets also benefit from the above average population and job growth being experienced in the Southern and Western regions of the US.5 Sales and Prices Morrison Homes H1 2004 H1 2003 % +/- Turnover £ £267.7 m £254.3 m + 5% Turnover $ $484.4 m $409.4 m + 18% Total completions 1714 1521 + 13 % Average selling price $ $278,000 $266,000 + 5 %Morrison Homes has once again achieved significant growth in the first half, building on a strong first half performance in 2003. The average number of sales outlets open during the period was similar to last year. However a large number of outlets have closed early as a result of the particularly strong selling rates. Visitor levels per outlet have been almost 30% higher than in the first half of 2003. The weekly selling rate per outlet was up 48% on the first half of 2003 reflecting both the strong market conditions and the success of the Morrison product range.Morrison has introduced a successful new range of slightly smaller homes and higher density townhomes into markets in Florida and Texas. This planned change to product mix has somewhat offset price increases with average selling prices rising 5%. Profits and Margins Morrison Homes H1 2004 H1 2003 % +/- Operating profit £ £33.2 m £28.1 m +18% Operating profit $ $60.1 m $45.3 m + 33% Operating margin 12.4% 11.1%Operating profits in local currency showed a significant 33% growth, following the strength of a 64% increase in operating profits in the first half of 2003. The continued focus on costs has helped to improve operating margins from the first half of 2003. We are monitoring very carefully the reported shortages in some materials but we do not anticipate that the current situation will cause any disruption to our production programmes. Morrison Homes achieved an average return on capital employed of 24.0% for the last 12 months.Customer Service Customer satisfaction measured as ‘would you recommend’ was 82% and the proportion of customers referred by previous Morrison homebuyers reached 20.1%, reflecting the strong customer service culture within Morrison, which is in turn reflected in the strength of the brand.With a new Signature Selection Center opened recently in Denver, centralised options centres are now open in all of our markets. Total options revenue increased by 11% to $45.3 million (2003: $40.8 million) with each Morrison customer spending an average of $26,400 on optional extras to customise their home (2003: $26,800). Landbank During the period Morrison continued to develop a very strong land position. The short term owned and controlled landbank increased to 20,062 plots, an 18% increase on the end of 2003 (16,967 plots) and a 31% increase on the end of June 2003 (15,325 plots). This excellent position continues to strengthen Morrison’s ability to deliver substantial further growth during the second half of 2004 and beyond. 6 US Outlook The US economy continues to strengthen and the housing market, whilst slowing from the exceptional pace of recent months, is expected to remain strong. Morrison Homes has an extremely strong landbank, well designed products and industry leading standards of customer service and so is well positioned to take advantage of these excellent conditions. With over 90% of this years expected sales reserved, exchanged or completed at margins ahead of those achieved last year Morrison is set to deliver a further record performance in the second half of 2004 and create a strong foundation for 2005. 7 Group Profit and Loss Account For the six months ended 30 June 2004 (unaudited)2004 2003 2003 Half year to Half year to Year to 30 June 30 June 31 December £m £m £mTurnover 1,219.9 1,059.0 2,878.5Cost of sales (956.7) (836.0) (2,284.8)Gross profit 263.2 223.0 593.7Administrative expenses (81.6) (75.0) (163.9)Profit on ordinary activities before interest 181.6 148.0 429.8Interest – net payable (23.1) (25.3) (51.6)Profit on ordinary activities before taxation 158.5 122.7 378.2Tax on profit on ordinary activities (note 3) (49.1) (37.6) (117.3)Profit attributable to ordinary shareholders 109.4 85.1 260.9Dividends (20.1) (14.5) (46.7)Retained profit for the period 89.3 70.6 214.2Earnings per ordinary share-basic 28.60p 22.45p 68.54pEarnings per ordinary share-diluted 27.85p 21.95p 67.06pDividends per ordinary share (note 4) 5.20p 3.80p 12.25p8 Group Balance Sheet At 30 June 2004 (unaudited)June 2004 June 2003 December 2003 restated restated (note 5) (note 5) £m £m £mFixed assets 28.5 26.7 26.4Current assets Stock (note 6) 2,515.4 2,371.8 2,365.8Debtors 137.9 135.2 118.8Cash at bank and in hand 13.7 7.4 23.62,667.0 2,514.4 2,508.2Creditors: amounts falling due within one year (589.7) (649.4) (735.6)Net current assets 2,077.3 1,865.0 1,772.6Total assets less current liabilities 2,105.8 1,891.7 1,799.0Creditors: amounts falling due after more than one year (801.0) (837.9) (603.0)Provisions for liabilities and charges (26.7) (28.6) (27.6)Total equity shareholders’ funds 1,278.1 1,025.2 1,168.4Represented by:Capital and reserves Called-up share capital 97.3 95.2 96.0 Share premium account 109.7 107.4 109.2 Profit and loss account 1,071.1 822.6 963.21,278.1 1,025.2 1,168.4Shareholders’ funds per ordinary share 328p 269p 304pGearing 59% 79% 45%9 Abridged Group Cash Flow Statement For the six months ended 30 June 2004 (unaudited)2004 2003 2003 Half year to Half year to Year to 30 June 30 June 31 December restated restated (note 5) (note 5) £m £m £mOperating profit 181.6 148.0 429.8Depreciation 3.2 3.3 7.3Change in provisions (0.8) 0.4 (0.8)Working capital before land expenditure 144.9 96.1 648.0Cash inflow from operating activities 328.9 247.8 1,084.3 before land expenditure Land expenditure (net of land creditors) (462.0) (482.0) (853.5)Cash (outflow)/inflow from operating (133.1) (234.2) 230.8 activities Net interest paid (22.6) (19.1) (43.2)Taxation (55.3) (53.8) (118.1)Capital expenditure (6.2) (2.9) (8.5)Sale of fixed assets 1.0 1.0 2.2Acquisitions and disposals - (120.0) (214.7)Equity dividends paid (16.0) (14.8) (25.4)Cash outflow before financing (232.2) (443.8) (176.9)Issue of ordinary share capital (net of expenses) 1.8 1.1 3.4Purchase of own shares (note 5) - (0.8) (8.5)Exchange adjustments 5.3 6.8 28.4Movement in net debt in the period (225.1) (436.7) (153.6)Opening net borrowings (529.2) (375.6) (375.6)Closing net borrowings (754.3) (812.3) (529.2)10 Notes to the Interim Accounts (unaudited)1 Basis of preparation of the interim accounts The interim accounts have been prepared on a basis which is consistent with the accounting policies adopted for the year ended 31 December 2003, as modified in order to comply with UITF 38 ‘Accounting for ESOP trusts’ (note 5).These interim accounts were approved by the Directors on 28 July 2004. They are unaudited but have been reviewed by the auditors whose review report is set out below.A copy of the Interim Report of the Company is placed on the website of George Wimpey Plc. Executive management is responsible for the maintenance and integrity of the Company’s website. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.2 Analysis by class of business Operating Turnover Profit/(Loss) Assets employed 2004 2003 2004 2003 June 2004 June 2003 Half year Half year to Half year Half year restated to 30 June 30 June to 30 June to 30 June (note 5) £m £m £m £m £m £mGeorge Wimpey UK 809.3 691.1 138.7 114.0 1,384.5 1,332.5 Laing Homes 142.9 113.6 17.1 12.0 335.5 237.4 Total UK 952.2 804.7 155.8 126.0 1,720.0 1,569.9 USA Housing 267.7 254.3 33.2 28.1 339.1 299.1 Corporate - - (7.4) (6.1) (6.6) (17.0) 1,219.9 1,059.0 181.6 148.0 2,052.5 1,852.0Dividends (20.1) (14.5) Net debt (754.3) (812.3)Total equity shareholders’ funds 1,278.1 1,025.23 Tax on profit on ordinary activities Taxation has been calculated at 31% of profit on ordinary activities before taxation (2003: 31%). This is the estimated effective tax rate for the year to 31 December 2004.4 Interim dividend The Directors have declared an interim dividend of 5.20p per share (2003 : 3.80p) totalling £20.1m (2003 : £14.5m) which will be paid on 22 October 2004 to ordinary shareholders on the register at the close of business on 24 September 2004.11 5 Reconciliation of movements in shareholders’ funds For the six months ended 30 June 2004 (unaudited)2004 2003 Half year to Half year to 30 June 30 June restated £m £mProfit attributable to ordinary shareholders 109.4 85.1 Dividends (20.1) (14.5)89.3 70.6Currency translation differences on foreign currency net investments - 0.2 Shares allotted 1.8 1.1 Scrip dividend 16.2 7.4 Contribution to QUEST - (0.3) Consideration paid for purchase of own shares - (0.8) Credit in respect of employee share schemes 2.4 2.4Net increase in shareholders’ funds 109.7 80.61 January – shareholders’ funds as previously stated 1,170.0 943.0 Prior year adjustment (1.6) 1.61 January shareholders’ funds as restated 1,168.4 944.630 June – shareholders’ funds 1,278.1 1,025.2Following adoption of UITF 38 ‘Accounting for ESOP trusts’, investments in the Company’s own shares of £10.3m at 30 June 2004 (31 December 2003 £10.3m and 30 June 2003 £2.6m) are shown as a deduction from shareholders’ funds. The shares are held in order to provide shares to certain employees under the long term incentive plan. The amount expensed in the period is credited to reserves. At 31 December 2003, the total amount expensed in respect of the long term incentive plan was £8.7m, providing a net reduction in shareholders’ funds of £1.6m. At 1 January 2003, the net adjustment in respect of UITF 38 was to increase shareholders’ funds by £1.6m. The cash flow has been restated to show purchase of own shares as a financing activity, rather than capital expenditure.6 Stock June June December 2004 2003 2003 £m £m £mLand held for development 1,771.4 1,641.7 1,728.6 Construction work in progress 699.6 658.6 577.8 Part exchange properties 12.9 38.1 28.4 Other stock 31.5 33.4 31.0 2,515.4 2,371.8 2,365.8These accounts do not constitute statutory accounts. Comparative figures for the year to 31 December 2003 have been extracted from the statutory accounts of George Wimpey Plc on which the auditors gave an unqualified report and which have been filed with the Registrar of Companies.12 Independent Review Report to George Wimpey PlcIntroductionWe have been instructed by the company to review the financial information which comprises the profit and loss account, the balance sheet, the cash flow statement and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.Directors' responsibilitiesThe interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.Review conclusionOn the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2004.PricewaterhouseCoopers LLP Chartered Accountants London 28 July 200413

Interim Results for the Half Year Ended 30 June 2004

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