Annual Report and Accounts 2010

Group summary

The Group made significant progress during the year, both operationally and in strengthening of the balance sheet. We have:

• returned to profit before tax and exceptional items;
• reduced the level of year end net debt by £96 million despite exceptional one-off payments of £187 million; and
• completed a total refinancing which delivers a simplified debt structure with extended maturity of 3.5 years, and provides the Group with the operational flexibility that it requires.

We have reduced the level of the Group's pension deficit and have recognised £300 million of deferred tax assets in the UK at the year end due to the return to profitability of our UK Housing business and the more stable market outlook. As a result, the Group's net asset value per share has risen from 46.9 pence at the end of 2009 to 56.9 pence at 31 December 2010.

Group results

The Group generated revenue of £2,603.3 million in 2010 (2009: £2,595.6 million) from total completions of 14,238 homes (2009: 15,166). We remain focused on prioritising margin ahead of volume growth and, although home completions fell in both the UK and North America, this was offset by growth in average selling prices.

Gross profit of £363.9 million (2009: £230.2 million) includes a positive contribution of £122.4 million (2009: £59.6 million), relating to realisation of written down inventory above its originally estimated net realisable value, where the combination of selling prices and cost, or mix improvements have exceeded our original market assumptions. These amounts are stated before the allocation of overhead excluded from the Group's net realisable value exercise.

Group operating profit* was £194.1 million (2009: £43.3 million), representing a Group operating margin* of 7.5% (2009: 1.7%). Financial performance has been strong across all of our main markets, with profit growth achieved in the UK, US and Canada. £79.3 million of the Group's operating profit* was delivered in the first half of the year and £114.8 million was recorded in the second half.

The operating profit* for the year includes £12.0 million relating to a one-off pension curtailment credit arising from the closure of the UK George Wimpey Staff Pension Scheme to future accrual in August 2010. In addition, there is a £0.6 million pension curtailment credit arising in respect of the US pension scheme.

UK Housing

We completed a total of 9,962 homes in the UK in 2010 (2009: 10,186) at an average selling price of £171k (2009: £160k) as we continued to prioritise margin ahead of volume. We delivered a significant growth in operating profit* to £123.0 million (2009: £14.3 million) and in operating margin* to 7.1% (2009: 0.8%). The 2010 result includes a one-off pension curtailment credit of £12.0 million arising from the closure of the George Wimpey Staff Pension Scheme to future accrual in August 2010.

North America Housing

In North America, we completed a total of 4,140 homes (2009: 4,755), of which 2,570 were in the US (2009: 3,347) and 1,570 were in Canada (2009: 1,408). Average selling prices rose in both markets, with an average selling price of £178k in the US (2009: £161k) and £236k in Canada (2009: £195k). Revenue totalled £835.6 million (2009: £824.3 million).

Operating profit for North America as a whole was £93.8 million (2009: £48.1 million) of which £18.4 million was delivered in the US (2009 loss: £6.8 million) and £75.4 million was achieved in Canada (2009: £54.9 million). The operating margin for North America overall was 11.2% (2009: 5.8%). The 2010 result includes a one-off pension curtailment credit of £0.6 million arising in respect of the US pension scheme.

Spain and Gibraltar Housing

We completed 136 homes in Spain and Gibraltar in 2010 (2009: 225), including the final home completions from our Gibraltar business. The average selling price of these completions was £214k (2009: £260k). Revenue was £31.1 million (2009: £61.0 million) and we recorded an operating loss* of £3.6 million (2009 loss: £1.4 million).