Preliminary Results for the Year Ended 31 December 2000

21 February 2001

Preliminary Results for the year ended 31 December 2000

Headlines

Profit before tax up 30% to £146 million
UK operating margin up from 8.4% to 11.4%
UK restructuring programme on plan
Forecast annual savings increased by £5 million to £20 million
Earnings per share up 22% to 30p
Dividend per share up 14% to 7.5p

Financial Highlights20001999

Turnover£1702m£1527m

Operating Profit£170m£119m

Profit before Tax£146m£113m

Earnings per share30p24.5p

Dividends per share7.5p6.6p

John Robinson, Chairman, commented

“These results show the substantial improvement in performance I promised last year. I am particularly pleased that the Group operating margin has reached our target 10% level well ahead of plan.”

Chief Executive, Peter Johnson, said

“These results provide a sound foundation for our restructuring programme, which is on track to deliver increased annual savings of £20 million in 2002.”

Enquiries:

George Wimpey PLC

Peter Johnson, Group Chief Executive )today 020 7457 2345

Richard Saville, Group Finance Director) thereafter 020 8748 2000

Gavin Anderson & Company

Elizabeth Morley020 7457 2345

Consolidated results for 2000

The Board is pleased to announce results for 2000 that show a strong improvement in performance across all parts of the Group, and already meet the Group operating margin target of 10% set for 2003.

Profit before tax was up 30% to £146.1 million on sales up 11% to £1,702 million. Operating profit was up 43% to £170.2 million. Operating margin improved from 7.8% in 1999 to 10.0% in 2000. The effect of the depreciation of sterling in translating the US dollar results increased sales by £23 million and pre-tax profits by £1.4 million. Return on capital employed increased from 17% to 20.5% and return on equity from 15.1% to 17.7%. Earnings per share were up 22% to 30 pence. The tax charge was 24%, compared with 22% the previous year.

Dividend

The final dividend was increased by 13% to 4.85 pence per share, resulting in the total dividend for the year up 14% to 7.5 pence per share. The dividend is covered 4 times.

Balance Sheet and Financing

The Group retains a strong balance sheet, despite an active programme of investment in land. Gearing measured as net debt to shareholders’ funds only increased by 2% points to 33%. Interest cover remained a very healthy 7.1 times.

Net borrowings at December 2000 were £220 million, an increase of £41 million, compared to a year earlier, of which £6 million was due to currency translation. Land spend was £485 million, an increase of £74 million over 1999, land holdings rose by £179 million during the year. At the same time, a tight control was maintained on working capital, which was at similar levels to a year earlier.

UK Restructuring Programme

This restructuring programme is proceeding according to plan.

In December, it was announced that Keith Cushen, previously Managing Director of McLean Homes, had been appointed Managing Director of the combined UK housing business, incorporating Wimpey Homes, McLean Homes, George Wimpey Strategic Land Management and other centralised functions, such as procurement and IT.

A new, single UK management team was in place by the beginning of January. The number of senior management positions within the UK business was significantly reduced. Internal working teams were set up before Christmas to review the role of centralised functions and the existing regional structure, comparing the structure and staffing of the Wimpey and McLean Homes’ businesses and identifying best practice from across the Group.

The conclusions of this programme are now being implemented within the business. The total number of regions will be reduced from 29 to 21. The number of regions in Scotland will be reduced from 4 to 2, in the north of England from 8 to 6 and in the Midlands from 5 to 4. Responsibility for the existing sites currently administered by those regional offices to be closed will be transferred to neighbouring regions. The regional office in South Wales will close, though both existing sites and ongoing activities will be managed by a slimmed-down satellite operation supported by the south-west region. Existing regional offices in the south midlands and southern England will be merged to create larger regions of an economic scale, reducing the number of regional offices by 3. A new regional office will be established to serve the specialist market of central London, building on the success of established sites in Docklands and on Thames-side.

As previously reported, all existing selling outlets will be maintained, and can be more efficiently supported by the new regional office network.

A detailed review of staffing levels and structures across the business has been carried out and best practices identified. As a result, a number of work practices will be simplified. This will enable the average overhead level per region to be reduced, generating further cost savings, and streamlining the business.

The land acquisition and planning support activities currently undertaken by George Wimpey Strategic Land Management will be fully integrated into the new regions.

In the past, a number of important operational functions, particularly in Wimpey Homes, were the responsibility of centrally-managed departments. These functions included design and procurement. A detailed review of these functions has shown that, contrary to original assumptions, this structure had resulted, on balance, in higher costs than where such responsibility for such functions remained within the regional businesses. Central procurement and design will therefore be closed and responsibility for these functions returned to local management. In both cases, advantage will be taken of specialist knowledge and experience within the business, as well as the use of modern technology to gain the full potential for benefits of scale. No such benefits have been assumed in the estimated cost savings.

Further opportunities for reducing costs and improving management effectiveness are under review. However progress to date confirms that annual cost savings will amount to £20 million, compared with the £15 million estimated in December. Some benefit is already being seen, and the full benefit will be seen in 2002 and onwards. The estimated costs of this programme remain in the region of £15 million.

UK Housing (Wimpey Homes and McLean Homes)

After a strong first half, the UK market weakened during the summer and demand remained below the previous year through the autumn. Despite this, both Wimpey Homes and McLean Homes continued to perform strongly throughout the year.

Combined Wimpey and McLean completions of private housing were 7% down at 10,823, compared with 11,606 the previous year. First half completions were down 4% to 4,758, with second half completions down 8% to 6,065. Completions of partnership housing were down by 19% to 614, of which 375 were completed in the second half of the year, a reduction of 22% on the previous year.

The product mix continued to improve. Detached houses accounted for 59% of completions, compared with 55% the previous year. For Wimpey Homes, the proportion of standard house types continued to fall, with the majority of houses sold across the Group being either bespoke developments or house types developed to suit regional traditions and tastes. Growth continued in upmarket urban apartments. As a result, average selling prices for private housing rose 16% to £112,500.

Through careful acquisition, the owned and controlled landbank continued to strengthen. At the end of the year, the owned and controlled short-term landbank amounted to some 33,450 plots, 3.1 years supply at the 2000 rate of build, compared with 33,100 plots, 2.8 years supply at the 1999 rate of build. In addition, the strategic landbank grew to 10,700 acres, compared with 10,150 acres at the end of the previous year. There was only minimal use of sites from the strategic landbank during 2000. This strategic landbank will make a worthwhile and growing contribution to the cost efficiency of the business from 2002 onwards.

Despite the problems the industry faces in securing adequate sources of skilled labour, costs were well controlled and both Wimpey Homes and McLean Homes continued to receive a high number of awards for product quality and customer service. These achievements result from a consistent approach to standards and levels of site management and supervision as well as the significance attached to partnership relations with important subcontractors and materials suppliers.

Wimpey Homes and McLean Homes continued to innovate in both the construction and marketing of their product. The first homes from the joint project with Britspace and the Guinness Trust to build houses completely from factory-manufactured modules were erected in Chelmsford earlier this month. A growing emphasis was placed on helping purchasers add their own personal touches to their house, which adds considerably to the value of each property.

They underlying operating profit rose 40% to £142.5 million, compared with £101.9 million the previous year. The underlying operating margin rose from 8.8% to 11.4%.

Second half operating profit rose 26% to £89.1 million, following a rise of 72% to £53.4 million in the very strong first half. Operating margin in the second half was 12.3% compared with 10.2% in the second half of 1999.

US Housing (Morrison Homes)

Despite a 5.1% fall in national permits for Single Family Dwellings to 1,183,500 from its record 1999 level, the overall market remained at high levels. Total housing permits amounted to 1,574,000 units,the third highest level since 1979. The markets in which Morrison operates in California, Arizona, Texas, Georgia and Florida continued particularly strong, despite worries about the US economy. These five states are amongst the six states with the highest levels of projected employment growth for the years from 2000 to 2005.

Morrison builds detached houses, mainly in the price range $150,000 to $300,000. Sizes typically range from 1,800 square feet to 3,000 square feet. These are built largely to order, though a proportion are built for sale. Morrison assists customers in adding an unusually large range of features as well as modifications to their standard house designs. This, together with their high reputation for customer service, has helped them expand into in a variety of new, upmarket locations, including a number of Masterplan communities.

Completions were 2.5% up at 2,638, compared with 2,574 for the previous year. First half completions were down 5% to 947, with second half completions up 7% to 1,691.

The product mix continued to improve with average selling prices for the year increasing by 15% to $227,000. In the first half of 1999 the average selling price was $188,000.

Morrison maintains a mixed landbank, with its activities dependent on land acquired for development, from developers and on rolling options, which can be exercised depending upon the rate of house sale. The total owned and controlled landbank continued to strengthen. At the end of the year, it amounted to some 9,970 plots, compared with 8,500 plots at the end of 1999. The average number of outlets grew from 65 in 1999 to 80 in 2000.

Morrison continued to receive a high number of awards for product quality and customer service from independent award schemes. As in the UK, considerable importance is attached to maintaining stable relations through partnering arrangements with key subcontractors. This has also helped maintain availability of subcontractors within strong labour markets. Costs were well controlled, helped by substantial reductions in the price of prime building materials such as lumber and plasterboard during the second half.

Morrison Homes continues to innovate in both the construction and marketing of its homes, for example, a hand-held computer-based process is being trialled to improve scheduling efficiency and reduce build cycle times. A new Decor Centre was opened in Orlando, Florida to assist purchasers in the selection of furnishings and other features to improve and personalise their home. Following its success, further centres will be opened in other markets in the coming year.

Operating profit rose 29% to $53.0 million, compared with $41.2 million in 1999. The operating margin rose 0.5% to 8.6%. In sterling terms, operating profit rose to £34.9 million, compared with £25.5 million the previous year.

Second half operating profit rose 37% to $40.8 million, following a rise of 5% to $12.2 million in the first half. Operating margin in the second half was 10.4% compared with 9.3% in the second half of the previous year.

Board Changes

Peter Curry will be retiring from the Board at the forthcoming Annual General Meeting, whereupon Michael Blackburn will take over as Senior Non-Executive Director. A further announcement on the appointment of additional Non-Executive Directors will be made in the near future.

Outlook

The value of sales agreed, but not legally completed, at the end of 2000 was some 8% higher in the UK than at the end of 1999, and more than 35% higher in the USA. Sales activity in both markets has remained healthy in the first few weeks of the New Year.

The UK market is expected to remain stable, with only modest price inflation in 2001, though the likelihood of a General Election inevitably creates a degree of uncertainty. Despite the weakening in the US economy, Morrison’s primary markets are also expected to remain steady.

Whilst progress since the announcement in December has been somewhat better than anticipated, the first half remains unlikely to match last year’s very strong performance. The benefit to profits now expected from the restructuring programme in the UK should lead to some progress for the year as a whole.

Ends