Performance
2002 was an excellent year for Housing with all leading performance indicators showing improvement on the prior year. Turnover grew by 19% to £281m on completions 13% ahead at 2,298 units, operating profit increased by 38% to £28m, and operating margins moved to 10%. Our average selling price, excluding joint ventures, increased by 16% to £130,000 with further growth expected in 2003 as the quality of both our site locations and products continues to improve. We are now firmly seeing the benefits from the significant investment made in prior years. Our joint venture businesses grew substantially with 307 completions in 2002 (2001: 113).

Market Overview
Very favourable market conditions were experienced in each of the three geographical areas where we operate - the Midlands, North of England and Central Scotland, as well as in all sectors of the market including affordable accommodation, family housing, premium City Centre apartments and detached villas.

All were stimulated by a powerful combination of factors leading to increasing demand for home ownership - a strong desire to own in preference to rent; an active investment market; high consumer confidence with low unemployment levels and historically low and stable interest rates. Structural changes also made a major contribution to the market, with lifestyle trends increasing the number of new households and the demand for housing. On the supply side, it is well documented that new house completions are only two thirds of their late 1980s peak and are not keeping pace with the growth in household formations. The result was strong demand and rising prices.

Operations
We continue to operate a policy of autonomous regions but, importantly, with a reference point at division for common branding, design, build and cost base information. Continuous improvement is also embraced, with each region being responsible for developing best practice for specific processes across the business.

A significant amount of work has been undertaken to improve plotting and housing efficiency. This process is on-going with the need to continuously address changing markets and planning requirements. The implementation of PPG3 and the move to denser 'clustered' developments presents considerable challenges in design and layout. In addition we are seeing an increasing proportion of 'one-off' apartment schemes within our portfolio, each with its own specific designs.

Significant shortages of skilled labour are continuing to impact on the business, and in particular are resulting in extended build times and increased production costs.

We have devoted considerable resources to growing the Miller brand and improving our sales offering to customers both on site and remotely. Our highly innovative and customer-oriented web site has done much to enhance brand awareness, and has recently won 2 Awards in the Construction Marketing Awards and 1st place in the Cream Awards.

We were also delighted to be runner-up in the Building Magazine Major Housebuilder of the Year Award. Customer Care continues to be a prime focus for the business. We utilise external research to undertake surveys of all of our customers which is invaluable in setting exacting benchmarks and for monitoring performance. During 2002 we also undertook some unique research inviting a sample of our customers to complete a daily diary sheet about their housebuying experience from reservation through to post occupation. This has provided a valuable insight into the emotions experienced by customers which in turn has identified areas where we can improve the customer experience. We are committed to providing the best possible customer service.

Joint Ventures
Joint ventures are a growing feature of our business in two areas. Through Miller Residential Development Services we provide guaranteed funding, as well as residential development expertise, to site owners and smaller developers who wish to maximise their returns while at the same time controlling their risk. This business has grown spectacularly since its launch in 2001 and completed more than 300 units in 2002.

We are also increasingly using joint ventures to share risk in certain large city centre apartment schemes. This strategy has proved very successful, with an excellent example being the £50m development at Lancefield Quay in Glasgow where we are in joint venture with Cala. A significant percentage of the apartments have been sold off plan.

Landbank
The land market remains extremely competitive with prices increasing at rates faster than end selling prices in many areas. Whilst good land at sensible prices is therefore difficult to obtain, we are in the enviable position of possessing a strong landbank, owning and most importantly having planning permission for all of the land we require to deliver our 2003 sales targets. Prospects for 2004 and beyond are equally positive. Our landbank currently comprises 8,000 plots with a further 15,700 under option.

Prospects
The market in our area of operations has remained strong in the first 12 weeks of this year, and to date we have achieved more than 700 sales, with the rate of sale running some 24% ahead of that experienced in 2002. With this as our base, and providing demand remains steady over the critical spring and summer months, we are confident in our ability to deliver enhanced performance for the current year.