HMI Conference 2004The challenges facing the Board

Peter Johnson

CEO George Wimpey Plc

Tuesday 7 September 2004

The role of the Board

Maintaining standards of Corporate Governance

Approving plans, budgets and major projects

Ensuring management:

is of an adequate calibre

is addressing current business priorities

has an effective strategy to create shareholder value

is listening to its shareholders

Current business priorities

Implementing Barker

Managing a changing market

Current business issues:Implementing “Barker”

Promoting the message

Promoting free market vs increased regulation

Communicating with Government on delivery

Fulfilling our part of the bargain

Preparing for growth

Customer service

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Current industry ave recommendation rate

Barker target 2007 recommendation rate

George Wimpey recommendation rate

2003 2004

GW weekly sales rates: 2002 vs. 2004

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GW weekly sales rates: 2002 - 2004

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GW weekly sales rates: 1997 - 2004

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North Division Midland Division South Division2003 2004

A comparison with the past

1990

Industry stocks were highPlanning was a lesser issue

Many companies were highly gearedLand purchase was poorly disciplined

Many companies had to

manage for cash

Interest rates were highUnemployment was high and risingMortgage service costs were highThere were many distress sellers

The effect on house prices was

largely out of our hands

2004

Industry stocks are lowLand with planning is scarceCompanies are well-financed

Land purchase is well-disciplined

Companies can manage for

their shareholders

Interest rates are lowUnemployment is low and stableMortgage service costs are low

Number of distress sellers will be low

The effect on our house prices

is mainly in our own hands

Strategies for shareholder value: The Berkeley example

Exit volume housebuilding: major players have scale benefits

Focus on urban regeneration: area of competitive advantage

Cautious in land market: demand bidding prices too high

Use balance sheet capacity to improve shareholder returns

Return surplus funds which cannot be used at adequate returns within

business to shareholders

Strategic priorities

Generate positive free cash flow

focus on areas of competitive advantage

avoid areas of competitive weakness

don’t overpay for land

Deploy surplus cash in the interests of shareholders

don’t over-invest in mature markets

don’t grow volumes for the sake of it

use the balance sheet in the shareholders’ interests

give shareholders immediate as well as future cash returns

George Wimpey Strategy

Secure margins through land disciplines and cost controlSustain benefits arising from absolute and relative scaleStructure in place for growth if land available on right terms

In UK, prioritise margin and cash over rapid volume growth

Maintain rapid growth rate of Morrison within existing markets

Deliver significant volume and profit growth from Morrison

Continue to reduce gearing levels to ~40%Sustain policy to increase dividends ahead of earnings growth

Reduce gearing and increase dividend payout

Conclusions

A key time for the industry: Boards face important challenges

Long term, Barker is key: we must deliver our side of the programme,

and help Government deliver theirs

Short term, the market is changing: we must adapt our volume targets

to reflect a tighter market

Our strategies must reflect the real world: we can only achieve

profitable growth if we have competitive advantages

Now is the time to demonstrate we justify higher share prices!