George Wimpey Plc Business Information, Profile, and History

Company Perspectives:

George Wimpey has unparalleled experience in building homes and is at the forefront of the industry in build quality and customer service and satisfaction. There is total commitment to creating and delivering consistent real value for our customers and shareholders alike and to ensuring that George Wimpey offers the opportunity for a long term secure and rewarding investment.

History of George Wimpey Plc

George Wimpey plc ranks among the world's oldest and largest private construction concerns, with operations in the United Kingdom and the United States. Over the course of its history, the company has built over 850,000 homes, more than any other company in the world. In 2002, George Wimpey expected to complete 13,000 housing projects in the United Kingdom, where its operations included inner-city as well as suburban developments. U.S. operations rank among that nation's top 30 homebuilders, spanning five Sunbelt states under the Morrison Homes brand. In an industry marked by stiff competition and rapid consolidation, Wimpey has held its own, completing an internal consolidation of its UK homebuilding operations as well as major acquisitions in its two key markets. In the early twenty-first century, the company built accommodations ranging from modest one-bedroom apartments to mammoth five-bedroom showplaces.

Late 19th Century Origins

The firm was established by Walter Tomes and George Wimpey as a stone-working partnership in 1880. The young entrepreneurs initially took contracts for structural and decorative residential masonry, but by the late 1890s they had expanded into paving, specializing in laying the foundations for the horse-drawn streetcars of that era. Tomes sold out in 1893, leaving Wimpey with a sole proprietorship. Winning local public works contracts boosted the contractor's reputation in the 1890s. The company built the local town hall in 1896 and was contracted to lay the foundations for London's first "electric tramway" in the latter years of the decade. After the turn of the century, Wimpey won a prestigious contract to build the 140-acre White City complex. This series of pavilions and gardens built for the Franco-British Exhibition of 1908 featured an 80,000-seat stadium that also served as the site of that year's Olympic Games.

Four years of progressive illness culminated in George Wimpey's death in 1913 at the age of 58. Owing partly to the distractions and labor shortages of World War I, the founder's family put the business up for sale in 1919. With £500 for goodwill, £2,500 stock-in-trade, and an extra £100 to help the Wimpey heirs meet their last payroll, Godfrey Way Mitchell bought the firm and registered it as a private enterprise. In recognition of the fine reputation built during the company's first four decades, Mitchell retained the Wimpey name.

With £3,000 in working capital borrowed from his father, the 27-year-old Mitchell took his company back to its roots: paving. Mitchell built up a fleet of eleven steam rollers and took contracts for public and private paving jobs. In spite of severe economic recession in Britain in the early 1920s, Wimpey's annual revenues topped £137,000 by 1925. The company subcontracted for several housing developers during this period. Mitchell astutely observed that Wimpey stood to make higher profits (albeit at an increased risk) if it bought the land and built and sold homes itself instead of just contracting for the projects. The company's first residential development, Greenford Park Estate, was completed in 1928.

It seemed an inauspicious time to expand operations into such a capital-intensive venture: unemployment ran high in the 1920s, and in 1931 Britain followed the United States into the most serious economic depression in modern history. Although unemployment in the United Kingdom neared three million by 1933, Wimpey and its housing venture boomed. The company concentrated its early efforts on construction of inexpensive, accessible homes. Those in the Greenford Park development, for example, sold for £550. Buyers needed less than five percent (£25) down and received a £50 government subsidy as further incentive. Wimpey's emphasis on the low end of the residential market, with its high and relatively stable demand, would characterize its housing business for decades to come. The construction bonanza was credited with fueling one-third of Britain's re-employment from 1932 to 1935. In the decade before World War II, Wimpey built an average of 1,200 houses annually. The company continued to build roads throughout southern England during this period.

When Mitchell took Wimpey public in 1934, he set up a unique ownership scheme wherein the charitable Tudor Trust (later renamed Grove Charity Management) held about half of the firm's shares. By that time, the company's annual revenues neared £2 million, over 13 times its turnover of a decade before. In 1936, Wimpey won its first major civil engineering contract, an £800,000 government agreement to build the Team Valley Trading Estate in northeast England. The comprehensive job called for diverting a river as well as building railways, a viaduct, and other accouterments of an industrial park. By this time, the company was able to provide a full range of contracting services, from planning to marketing.

Wartime Contracts Boost Sales, Reputation

After Germany's 1938 invasion of Austria, the British government began issuing defense contracts in cautious preparation for a conflict that British diplomats tried in vain to avert. Wimpey's war-related government contracts started that year with immense underground concrete tanks used to store aviation fuel reserves. A second £4 million contract called for the construction of a Royal Ordnance Factory near Glasgow, but even this extensive project paled in comparison to Wimpey's later contributions to the war effort. In 1938, Wimpey began bidding on contracts to build airfields or "aerodromes," as they are known in the United Kingdom. By the war's end, Wimpey had built nearly 100 of the facilities for the burgeoning Royal Air Force (RAF), which proved key to Britain's defense. Wimpey received so many government contracts during this time that some in the media speculated that the company was receiving preferential treatment and that Winston Churchill had a financial stake in it. In response, Mitchell himself requested a government investigation, which cleared the company of all charges and noted that Wimpey's efficiency won it the contracts. The company also built fortifications along Britain's eastern coastline in case of a German invasion. Although the RAF averted a ground invasion of Great Britain, intensive bombing forced Wimpey from its headquarters to a suburban, bomb-proof outpost on land owned by Mitchell. The Hammersmith complex was bombed shortly thereafter, and the company stayed in its "temporary" headquarters until a new office building was completed in 1949. In 1948, Mitchell was knighted "in recognition of his public services."

Global Expansion and Diversification: The Postwar Era

Mitchell laid the foundation for postwar growth by establishing local offices throughout Great Britain in the years immediately following the war. These satellites helped absorb the deluge of veteran workers and prompted diversification into coal mining, among other activities.

Demand for housing was especially high in the postwar era; nearly one-third of Britain's housing had been damaged in the bombing and practically no new homes had been built since 1939. A shortage of bricks drove Mitchell to seek out an economical, reliable, and efficient alternative method of construction. Wimpey architects and engineers based their "No-Fines" technique on a Norwegian idea. The concept employed concrete containing no fine aggregate (sand or stone), hence the name. Poured concrete walls formed the main structure upon which conventional interior and exterior finishes were then applied. Government housing contracts propelled the construction of tens of thousands of residences annually in the early 1950s, and after the government lifted restrictions on private home-building in 1954, Wimpey re-entered that market as well. The proliferation of automobiles brought many road building contracts. Other major projects in the immediate postwar era included a factory for Pirelli General Cable Works, the Queen Elizabeth II grandstand at Ascot, London Bridge House, and Heathrow Airport.

Wimpey became one of Britain's first contractors to expand overseas in 1946, when the company added offices in Cairo, Baghdad, and Singapore. Early international projects concentrated on roads and airfields, but the rapid expansion of the global automotive industry in the postwar era drove burgeoning demand for oil and petroleum products. Wimpey "mutually developed" with the oil industry, both at home and abroad. The company built oil fields, refineries, pipelines, and support systems in Kuwait, Borneo, Iraq, Syria, and New Guinea. Many of these early projects required the contractor to build its own roads out to the chosen sites. In Borneo, Wimpey built an entire town, complete with over 2,200 residences, a shopping center, swimming pools, hotels, and a power station. At first the company shipped laborers from the United Kingdom to its often-remote sites, but it gradually started training indigenous labor, subcontracting locally, and using local materials.

Wimpey naturally moved "downstream" in the petroleum industry, building numerous plants for the world's largest petrochemical firms. Contracts with chemical giant Union Carbide Corporation alone called for the construction of 15 plants in Sweden, Belgium, India, and Australia. Other major clients included Imperial Chemical Industries plc (ICI), Shell Oil Company, Conoco Inc., and, of course, British Petroleum Company PLC.

Oil industry projects often offered the foothold that Wimpey leveraged into other overseas contracts. For example, the company's expertise in petroleum took it to Jamaica in the mid-1950s, but construction of sugar processing plants, hotels, highways, schools, and offices soon established it as one of the biggest contractors in the Caribbean. Political upheaval forced the closure of Wimpey's Cairo and Baghdad offices in the late 1950s, but by that time the company had launched operations in Canada and Australia that would prove vital contributors to overseas revenues. Wimpey's open-cast coal mine, launched in Australia in 1950, produced more than 1.5 million tons of coal in its first year alone. Over the years, operations "down under" expanded to three offices with the capacity to provide infrastructure, private and public housing, and general contracting.

Expansion into Canada was precipitated by a survey that indicated a "desperate need for construction and housing development expertise." Accordingly, Wimpey established an office in Toronto in 1955. The rapid pace of postwar suburbanization supported the company's expansion from residential construction into roads and highways as well as support systems like water mains and sewers. By 1970, Wimpey was building nearly 2,000 homes each year in the province of Ontario alone. Its high concentration of work in this region ranked Canada as the largest contributor to Wimpey's overseas revenues, at more than 30 percent.

Mitchell remained Wimpey's executive chairman until 1973. Geoffrey Foster's 1994 examination of Wimpey for Management Today noted the deep and lasting effects of Mitchell's tenure, characterizing him as a visionary, "patriarchal" leader whose influence was felt through the 1980s. Dick Gane, formerly chair of Canadian operations, led Wimpey from 1973 to 1976, when Reginald B. Smith advanced to the executive chair. A "life-long Wimpey man" and former chief estimator, Smith essentially carried on Mitchell's ideals as the company slogged through the difficult 1970s.

Boom and Bust: 1970s and 1980s

Wimpey's internationalization gave it something of a "split personality" during this decade. When the Organization of Petroleum Exporting Countries (OPEC) more than tripled oil prices after 1973's Yom Kippur War between Egypt and Israel, construction in the Middle East boomed, while most of the rest of the industrialized world went bust. Wimpey's activities there centered on Amman, the capital of Jordan, where the contractor built government offices, roads, and a stadium. Wimpey's overseas expansion earned it a Queen's Award for Export Achievement in 1977.

Although high oil prices meant a bonanza in the Middle East, they sparked astounding rates of inflation in the rest of the developed world. In the United Kingdom, wage freezes, strikes and 50 percent inflation characterized the middle years of the decade. When both the government and commercial interests lowered their capital expansion budgets, the company added remodeling of homes and historic buildings to take up the slack. In spite of the dramatic reduction in home-building, Wimpey was able to remain Britain's biggest private house-builder, building over 106,000 homes throughout the decade. The company also looked to joint ventures in continental Europe for new housing business.

A 1979 restructuring made Smith president and nominally reorganized the company's numerous departments into four primary divisions: U.K. Construction, International and Engineering, Specialist Holdings, and Group Services. Wimpey had grown exponentially in the postwar era: By 1980, the company had 40,000 employees, and its annual revenues exceeded £1 billion. However, some critics noted that the company's management techniques had not developed to accommodate the company's expansion. Sir Clifford Chetwood, who took the Wimpey reins in the early 1980s, worked to create divisional autonomy and responsibility by transforming over a dozen British subsidiaries into three divisions: homes, construction or contracting, and minerals.

In 1984, Wimpey expanded into the United States with the acquisition of San Francisco-based Morrison Homes. Morrison had been established in Seattle in 1905 by C.G. Morrison and moved to northern California in 1946. By the mid-1980s, the company had shifted focus from apartment buildings and shopping centers to single-family homes and subdivisions.

Wimpey's UK housing and public works markets remained depressed through the 1980s, but the middle years of the decade saw another "boom" that helped mask any organizational shortcomings. The global recession of the late 1980s and early 1990s saw Wimpey slide from a pre-tax profit of nearly £145 million at a 1988 peak to £43 million (after exceptional items) in 1990. The company registered consecutive annual losses of £16 million in 1991 and £112 million in 1992. From 1989 to 1992, Chetwood had divested some nonessential businesses, cut employment rolls in the United Kingdom by 30 percent, and reduced debt by 40 percent. The chief executive relinquished his office to a hand-picked successor, Joe Dwyer, at the end of 1992.

New Leadership, New Ideas: The 1990s

Dwyer intensified Chetwood's reorganization, coordinating all activities around business areas. Perhaps more importantly, Dwyer purged the top executive offices, bringing in a completely new, significantly younger, board of directors, some from outside Wimpey's ranks. These new managers brought new techniques to the somewhat dated company. For example, Richard Andrew, Wimpey's recently appointed director of the homes division, instituted market research to help guide that department's activities.

Dwyer also worked to change Wimpey's ownership structure. In 1993, he convinced the trustees of Grove Charity Management to reduce its stake in the contractor from over one-third to about five percent. Within a few months, Wimpey raised capital vital to fuel its continued growth with its first rights issue since going public in 1934. As Geoffrey Foster's 1994 article in Management Today observed, "after three horrendous years, Wimpey found itself towards the close of 1993 with a strong balance sheet and a range of options such as it had not had in 50 years." The firm recorded a £25.5 million profit before taxes that year on revenues of £1.59 billion and had reduced its debt another 80 percent, from £136.1 million in 1992 to £27.9 million.

This strengthened financial position enabled the company to acquire McLean Homes from Tarmac in 1996, at which time Wimpey divested its other construction and quarry businesses to devoted itself exclusively to house construction.

In the early years of the twenty-first century, Wimpey embraced new design concepts and experimented with modular construction. Modular homebuilding held out the possibility of vast improvements in efficiency; a home could be built in one-fourth the time of a conventionally-built house. However, it remained an experimental building method for Wimpey. As one company official told Building Design magazine, "If it improves the quality, decreases cost, and gains better customer satisfaction then it's a no-brainer that people will want to use it. The jury's out in terms of being able to say 'yes' to all of these questions." The company also invested £400,000 in its website, creating 300 "microsites," each devoted to a specific development.

In 2001, the company invested £29 million in the merger and reorganization of its two UK divisions, Wimpey Homes and McLean Homes, as George Wimpey. Later that same year, Wimpey acquired Alfred McAlpine plc for £461 million ($659 million). Although some analysts questioned the wisdom of the acquisition--Wimpey paid a high premium to book value and took on additional debt to do so--the new business increased Wimpey's penetration of southeast England, an area that was expected to grow rapidly in the years to come. The acquisition also moved Wimpey into a slightly higher-margin segment of the homebuilding business.

Up to this time, the UK homebuilding industry had been very fragmented, with Wimpey the dominant player. Three key rivals--Taylor Woodrow plc, Persimmon plc, and Wilson Connolly Holdings plc--emerged from the merger frenzy. In fact, Persimmon's acquisition of Beazer Group plc in March 2001 vaulted it past Wimpey to the top of the UK homebuilding heap.

Wimpey was able to maintain growth in both revenues and profits throughout the late 1990s and early 2000s, with sales increasing from £1.2 billion in 1997 to nearly £1.9 billion in 2001. Pre-tax profits more than doubled during that period, from £63 million to £152 million. The company's interim results for the first half of 2002 showed revenues up 44 percent over 2001, positioning Wimpey to break the £2 billion mark. Profit before tax more than doubled during the first half, from £38.9 million to £86.3 million.

Principal Subsidiaries: George Wimpey UK Ltd.; Morrison Homes, Inc.

Principal Competitors: Taylor Woodrow plc; Persimmon plc; Wilson Connolly Holdings plc.

Chronology

• Key Dates:
• 1880: The firm is established by Walter Tomes and George Wimpey as a stone-working partnership.
• 1893: Tome sells his share of the partnership to Wimpey.
• 1908: The company is contracted to build a series of pavilions and gardens for the Franco-British Exhibition.
• 1913: George Wimpey dies.
• 1919: Godfrey Way Mitchell buys the company from the Wimpey family.
• 1928: The company completes its first residential development.
• 1934: The company goes public, with annual revenues near £2 million.
• 1938: Wimpey begins landing extensive government contracts in connection with the British war effort.
• 1946: The company expands its operations overseas, soon establishing itself as a major contractor in the Middle and Far East, Australia, and Canada.
• 1954: Wimpey re-enters the private-home market.
• 1979: After a reorganization, the presidency of Wimpey is assumed by Reginald B. Smith, who is succeeded shortly thereafter by Sir Clifford Chetwood.
• 1984: Wimpey expands into the United States with the acquisition of Morrison Homes, Inc.
• 1992: Joe Dwyer assumes the leadership position at Wimpey.
• 2001: The company charts £1.9 billion in sales.
• 2002: The company projects completion of 13,000 housing projects in the United Kingdom.