Transforming Wimpey: a year of change

Peter Johnson

Chief Executive - GEORGE WIMPEY PLC

HSBC HOUSING CONFERENCE

19 October 2001

Transforming Wimpey:a year of change

• George Wimpey a year ago• a new strategy to create value• step 1:

The merger of Wimpey and McLean

• achievements and lessons learnt• step 2:

The acquisition of McAlpine Homes

• progress to date• next steps

George Wimpey a year ago

• low margins in the UK

• low rating - discount to book value

• undemanding targets

• no business strategy

• excessive bureaucracy

• Wimpey, McLean and SLM competing

• demotivated management

• deteriorating land position

A new strategy to create value

• establish focus on shareholder value

• restructure Group to reduce costs and increase accountability

• restructure UK activities to achieve industry standard margins

• exploit value potential of Morrison Homes

• restructure senior management and Board

A new strategy to create value

Restructure UK activities

• improve land purchase to buy land in the right location at the right time at the right price

• reduce build costs

• increase revenue per plot

• reduce overheads

Step 1: The merger of Wimpey and McLean

What we did• listened to major shareholders

• involved the organisation at all stages

• acted quickly and ruthlessly

• communicated fully and openly

• set demanding targets internally

• made realistic promises externally

• maintained a fast pace

Step 1: The merger of Wimpey and McLean

What we achieved• a single UK business

one, decentralised, business model clear lines of authority and accountability speedy, delegated decision-making single set of values and behaviours

• a new company forward looking moved away from Hammersmith aspiring to be a successful housebuilder

Step 1: The merger of Wimpey and McLean

What we achieved

Total overhead cost saving: £20 m

• reduced number of regions from 29 to 21• reduced staffing in Wimpey regions

• closed Wimpey head office

• total headcount reduced by 435

• slimmed corporate office

• delivered ahead of plan

Step 1: The merger of Wimpey and McLean

What we achieved

Projected build cost savings: £15 m

• comprehensive benchmarking introduced• opportunities identified in product design,

product specification, and procurement• processes introduced to share experiences• benefits already being achieved

Step 1: The merger of Wimpey and McLean

What we achieved

Improved land purchase

• reduced regional pressure to buy land

• rapid response time improved opportunities

• strategic land integrated into the business

• hurdle rates raised

Step 1: The merger of Wimpey and McLean

What we achieved

Increased revenue per plot

• sales of options benchmarked• project team reviewed best practice and

achievements of Morrison Homes• new marketing suites introduced• superior McLean approach being adopted• options sales up 13% year to date

Step 1: The merger of Wimpey and McLean

What we achieved

Changed the culture

• delegated authority

• clear leadership and strategy

• companywide benchmarking an opportunity not threat

• open and honest communication

• a single set of values and behaviours

Step 1: The merger of Wimpey and McLean

What we learnt• what we got right

involvement and ownership communication and honesty maintaining trust through being fair setting demanding targets and a rapid pace maintaining the focus on the future

• what we got wrong underestimating the challenge of transition

Step 2: The acquisition of McAlpine Homes

The objectives

Refocus land bank to raise selling prices

• increase proportion of business in the south

• increase focus towards primary locations

• increase number of sites with larger houses

• acquire land bank for 2002/3 volume needs

Step 2: The acquisition of McAlpine Homes

The objectives

Why McAlpine meets our objectives

• average price £145k vs Wimpey £118k

• > half sales in south vs one third of Wimpey

• greater focus on primary locations

• greater proportion of larger houses

LondonBristol

Birmingham

Manchester

Leeds

Liverpool

Newcastle

Combined geographiccoverage(excluding Scotland)

LondonBristol

Birmingham

Manchester

Leeds

Liverpool

Newcastle

LONDON

Chelmsford

Basingstoke

Southampton

Slough

Guildford

Colchester

Ipswich

St Albans

Cambridge

MiltonKeynes

Maidstone

Rochester

Norwich

South East

George Wimpey

Sites

Improved South East presence

McAlpine

LondonBristol

Birmingham

Manchester

Leeds

Liverpool

Newcastle

LONDON

Chelmsford

Basingstoke

Southampton

Slough

Guildford

Colchester

Ipswich

St Albans

Cambridge

MiltonKeynes

Maidstone

Rochester

Norwich

South East

George Wimpey

Sites

George Wimpey

5 Bed Det. Sites

McAlpine

LONDON

Chelmsford

Basingstoke

Southampton

Slough

Guildford

Colchester

Ipswich

St Albans

Cambridge

MiltonKeynes

Maidstone

Rochester

Norwich

McAlpineLONDON

Chelmsford

Basingstoke

Southampton

Slough

Guildford

Colchester

Ipswich

St Albans

Cambridge

MiltonKeynes

Maidstone

Rochester

Norwich

Improved South East Product Mix

McAlpineGeorge Wimpey

Sites

MANCHESTERLiverpool

Chester

Southport Blackburn

Improved North West Presence

McAlpine

George Wimpey

5 Bed Det. Sites

Step 2: The acquisition of McAlpine Homes

What we did

Structuring the deal for our shareholders

• a modest premium to historic net assets• a small discount to current market values• deferred payments to meet bridging finance• detailed due diligence to minimise valuation

and integration risks

Step 2:The acquisition of McAlpine Homes

Where we areDrawing on the lessons we learnt

• involvement and ownership >40 Wimpey managers in due diligence team full involvement in integration planning

• communication and honesty regular communication since announcement McAlpine managers fully informed of our plans email address for queries

Step 2:The acquisition of McAlpine Homes

Where we areDrawing on the lessons we learnt

• maintaining trust and fairness honest and open from the start series of pre-acquisition meetings promised to honour obligations

• setting demanding targets and a rapid pace set target of 450 job reductions: 25% of staff began integration before completion! new structure to be in place by new year

Step 2:The acquisition of McAlpine Homes

Where we areDrawing on the lessons we learnt

• maintaining the focus on the future involved management team in business plan focus on “new” company

• underestimating the challenge of transition loyalty bonuses to retain staff until new year focus on recruitment of key skills

Progress to date

• new Group management team in place

• new UK management team in place

• McAlpine acquisition completed

• offices relocated from Hammersmith

• bulk of £20 m savings achieved this year

• £15 m build cost savings fully identified

• £18 m McAlpine savings identified

Next steps

• Inner City business to be brought together

• branding to be resolved

• McAlpine work in progress to be reduced

• McAlpine build cost savings to be quantified

• McLean option performance to be transferred to Wimpey and McAlpine

• making the most of our US experience