George Wimpey Plc Business Information, Profile, and History
London W6 7EN
History of George Wimpey Plc
George Wimpey PLC ranks among Great Britain's largest construction concerns. After emerging in 1993 from two consecutive years of losses, Wimpey concentrated its future efforts in three primary areas: residential housing in the United Kingdom and the United States, ongoing internationalization of its construction business, and capital investment in its minerals interests. Although the company has operations in 16 countries around the world, nearly 90 percent of its annual revenues came from the United Kingdom, United States, and Canada in 1993. The company's history was dominated by Sir Godfrey Way Mitchell, who led Wimpey from 1919 until 1973.
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.
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, 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."
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 the 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.
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 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.
The 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, reduced 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.
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 Foster's 1994 article 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. Management hoped that this positive financial position would place it in the vanguard of the global economic growth that was predicted for the latter years of the twentieth century.
Principal Subsidiaries: Wimpey Homes Holdings Ltd.; Wimpey France S.A.; George Wimpey Australia Pty Ltd.; Wimpey Leisure S.A. (Spain); George Wimpey Inc. (United States); George Wimpey Canada Ltd.; Wimpey Construction Ltd.; Grove Projects Ltd.; Wimpey Asphalt Ltd.; Wimpey Hobbs Ltd. (80%); Wimpey Minerals Inc. (United States); Wimpey Disposal Ltd.; Wimpey Property Holdings Ltd.; Wimpey Property Holdings B.V. (Netherlands); Wimpol Ltd.; Wimpey Environmental Ltd.; Wimpey Group Services Ltd.; Wimpey Fleming (Quarries) Ltd. (Ireland) (50%).
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