Wimpey merger cost £14m

by John Leitch



The integration of Wimpey Homes and McLean Homes, a priority for the group's chief executive Peter Johnson, was completed during the first half of 2001 at a cost of £14m.

Wimpey's pre-tax profit (six months to 30 June) was £39m (£48m). Without the exceptional charge it would have been £53m. Turnover was slightly ahead at £710m (£690m).

McLean Homes was bought from Tarmac in 1996 as part of a £600m asset swap with Tarmac. McLean had achieved - and continues to achieve - better margins than Wimpey's own housing business. Until Johnson's arrival, Wimpey leaders had ducked out of full integration, with the result that the two divisions were bidding against each other, on occasions, for the same piece of building land.

In February this year, Johnson said he anticipated potential savings of £20m when integration was complete. Announcing Wimpey's latest interim results last week, he said 80% of this saving would be achieved by the end of the full year: so with £6m already accrued in the first-half, there would be a further £10m benefit to surface during the coming six-month period.

Since April, the merged UK business has operated within 21 regional businesses. The main changes are that: nine regional offices were closed; a new office for central London has been opened; and administrative and management numbers have fallen by 435.

Johnson said further opportunities to improve returns have been identified. "Detailed benchmarking of our costs has taken a close look at dozens of individual items such as bricks, groundwork and roofing tiles," he said.

"We have identified opportunities for reducing build costs. We have gone back to suppliers for savings, enabling us to fix costs further ahead. Some suppliers have entered supply chain arrangements.

"House design has also changed, especially some Wimpey Homes' models. As a result we will be able to build faster and take costs out. For instance, we have reduced roof pitch on some products, redesigned chimneys and taken out some house designs that call for scaffolding to go up and be taken down too many times."

The number of Wimpey outlets has fallen: the average number in the first half of the year was 271, 11% lower than in the same period in 2000. As a result, legal completions were down at 4,400 (5,000).

During the period the proportion of detached housing remained at 60%, the same as last year, despite the need to provide extra smaller units as a result of PPG3. The average private development selling price was up 8% at £118,000.

Both brands (Wimpey and McLean) are still being sold, and despite the "successful integration" of the businesses, no decision has yet been made as to whether or not to switch to a single name.

"We will decide if we are going to merge the names in a few months," said Johnson. "We've still got to make up our mind on this one."

He added that Wimpey was keen to build a presence in the higher end of the housing market.