Learning Center
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

18 December 2002


									18 December 2002

George Wimpey Plc

Pre-close Trading Statement

George Wimpey Plc is releasing the following trading update prior to its close period
before Preliminary results for the year to 31 December 2002, which will be
announced on Wednesday 5 March 2003.

George Wimpey UK

George Wimpey has continued to experience healthy market conditions across its
UK businesses. Visitor levels have remained strong and selling rates continue to be
ahead of the same period in 2001, despite limited availability in many locations.
Sales prices have continued to increase but, as anticipated, at slower rates than
earlier in the year. The average selling price for the year is expected to be
approximately £148,000, a rise of some 21% over 2001. This rise includes underlying
price inflation over the year, adjusted for product size and the mix of locations,
estimated at close to 10%.

Private development completions for the year, at just over 12,000, will be in line with
expectations. Cost increases have been contained, benefiting from the programmes
introduced with the restructuring and acquisition of McAlpine Homes during 2001.
This, together with price increases, has led to a larger than expected improvement in
margins, even after the effect of fair value adjustments to the acquired assets.

Compared to the end of 2001, when forward sales from the recently acquired
McAlpine Homes businesses were included, the forward order book at the year end
is expected to be some 9% lower by volume but more than 9% higher by value.

George Wimpey’s sales are well spread, with limited exposure to individual markets.
Only about 20% of completions in 2002 will be in south east England, with less than
10% of outlets located within the M25. Over 96% of completions will be below

Laing Homes

Trading in Laing Homes since its acquisition on 1 November 2002 has continued to
be healthy and in line with expectations. As anticipated, almost a third of the year’s
completions will be achieved in the two months of George Wimpey ownership.
Whilst Laing Homes operates in the premium market, mostly in southern England, it
has limited exposure to the Central London and luxury homes markets. Over 60% of
these completions will be under £300,000 and only 10% over £500,000.

The forward order book remains very strong, and at the year-end is expected to be
approximately 15% higher by volume and almost 30% higher by value than at the
end of 2001.

Laing Homes’ staff have been informed of the future structure and plans for the
business. Cost savings of £10 million from the end of 2003 are in line with
projections at the time of the acquisition. However, the one-off cost of achieving
them will be somewhat less than the £7 million originally forecast.

Morrison Homes

Most of Morrison Homes’ markets in the US have remained healthy throughout the
year, with markets in Florida and Northern California remaining particularly strong.
Regional job losses have led to weaker markets throughout the year in Atlanta and
parts of Texas. Completions, at just over 3,000, will be in line with expectations.

The forward order book at the year-end is expected to be some 31% higher by
volume and more than 45% higher by value than that at the end of 2001.

With a further increase of over 5% in average selling prices to approximately
$250,000 and continued containment of costs, Morrison’s margins will show an
improvement on 2001.


The improved terms on which land is being acquired in the UK, reported at the half
year, were sustained throughout the second half. The owned and controlled short-
term landbank has been maintained at over 3 years’ supply at current build rates for
both George Wimpey UK and Laing Homes.

The minimum financial returns on land purchases have also been increased in the
US, where the land bank has increased in order to sustain expected higher volumes
in 2003.

Gearing, interest and tax

Despite deferred consideration payments of £263 million relating to the purchase of
McAlpine Homes and £80 million for the acquisition of Laing Homes, gearing at the
year end is expected to be comfortably below 50%. Cash generation has improved
due to planned reductions to work in progress, the additional completions at the year
end from Laing Homes, and careful management of land acquisition. Interest cover,
even after imputed interest of over £10 million on the deferred payments for the
acquisitions of McAlpine Homes and Laing Homes, is expected to be over 8 times.

As announced in November $365 million of debt was raised through a US Private
Placement for an average term of over 10 years at an average cost of 6.2% per

Following the adoption of FRS19, the tax rate for the year will be around 33%.


As noted last year there will be a deficit in the Group’s pension fund as calculated by
the requirements of FRS 17. Unless stock markets recover the losses experienced
since early 2002, this will be higher than reported last year. However, the Group will
continue to account for pensions under SSAP 24. The results for the year will reflect
the £9 million increase in the charge required following the actuarial valuation in April
2002 and forecast in March. As reported at the half year, action has been taken to
control future costs both by reducing the cost of benefits to existing members and
closing the defined benefit scheme to new members.

Commentators continue to express concern about the short-term prospects for the
UK housing market based on high and increasing house price inflation statistics. By
contrast, the new homes market is reporting much lower inflation of around 10%,
which has been moderating as the year has progressed. Buyer interest in George
Wimpey’s markets remains strong in almost all locations.

The UK housing market continues to be supported by an underlying shortage of
supply and good affordability resulting from low interest rates and healthy levels of
consumer confidence. George Wimpey’s broad market spread, and negligible
exposure to the market for luxury apartments and houses, limits its exposure to any
areas of specific market weakness.

Management will continue to concentrate on improving margins, by reducing costs
and buying land on better terms. Volumes and land use will be optimised in light of
changes in the market to sustain progress on margins.

In the US, Morrison Homes operates in markets in the south and west with above
average rates of population growth and long-term employment growth. In most of
these markets, visitor levels and affordability remain strong by historic standards and
plans are in place to continue to deliver both volume and margin growth.

All three businesses, George Wimpey UK, Laing Homes and Morrison Homes, will
enter 2003 with strong order books at better margins than twelve months before.


Group results for 2002 are expected to show substantial progress over 2001 and to
be around the top end of current market expectations.

At this early stage, the Group remains confident that further progress will be achieved
in 2003.


Andrew Carr-Locke                             020 7963 6354
Finance Director

Elizabeth Morley                              020 7554 1400
Gavin Anderson & Co

To top