Strategy
This investment sets us on the next phase of our strategic plan. We are looking to accelerate organic growth within our existing Housing regions, targeting to sell 3,500 houses per annum by 2007. Together with controlled expansion of both commercial property and construction, we anticipate turnover approaching £1bn by that date.
The Group now has considerable depth with 80 housing developments, 70 commercial property projects and 50 construction projects. Our aim is to deliver long term sustainable growth in profits and dividends, thereby producing a total return for our shareholders which is ahead of our peer group.
Housing
Housing was the main driver behind the Group’s increase in profits. Turnover was in line with 2003 as we consolidated to focus on margin growth. This strategy has proved very successful with operating margins increasing to 15%, bringing us into line with several of our peer group.
Our average selling price increased by 14% to £175,000. In response to the Government’s emphasis on creating more sustainable communities, we will, in the future, have a higher percentage of our output as affordable housing.
The regional businesses have geared up for the next phase of organic growth and we are targeting a turnover of £600m per annum by 2007. The landbank is in place to deliver these targets. We have 10,450 units owned or controlled which have a developable value of £1.9bn, nearly five times current year turnover.
Our teams continually strive to improve the quality of our product and enhance the buying experience for customers. We employ an independent external organisation to assess our performance and set a small number of identifiable performance measures, a key one of which has resulted in 85% of customers being prepared to ‘recommend Miller Homes to their best friend’. This is ahead of the survey results for The Housing Forum and the targets set by the Barker Review.
Property
The business achieved a step change during the year in terms of the number, size and value of projects. We have a diverse portfolio of 70 projects, with a combined development area of 18m ft2 and an out-turn value of £3.7bn.
Investment trading is a key component of our strategy and will remain a growth activity for the foreseeable future. We invested £222m in a number of individual properties and portfolios during the year. These provide a range of opportunities to add value and will be traded out over a three year cycle.
Our joint venture business has increased the scale of projects under development. Centros Miller will shortly complete the sale of 370,000 ft2 of retail in Maidstone to Land Securities and follow this with an 800,000 ft2 scheme in Portsmouth anchored by John Lewis. In the public sector, we are working on projects with numerous councils across the UK as well as with national organisations such as British Waterways and English Partnerships in the delivery of major schemes.
Overseas is another area of growth. We completed our first project in Eastern Europe – a 145,000 ft2 outlet store in Budapest anchored by Nike and Adidas. This adds to the three non-food retail projects totalling 478,000 ft2 in Portugal, which are at different stages of development.
Construction
We are a market leader in the sector; our partnering, value engineering and project management skills differentiate us from the competition. This is evidenced by 100% of our business being procured on a negotiated basis and our client base including a growing number of repeat customers. These include Sainsbury’s and Morrisons, with whom we have £90m of secured orders. We were also very successful in generating a significant cash inflow which benefits the whole Group.
Working with the public sector, we currently have framework agreements with Barnsley, Derbyshire, Warwickshire and Middlesbrough Councils and are nearing completion of two city academy projects valued at £38m at Peckham and Northampton. We are fully committed to the Government’s PPP strategy and have reached financial close on £300m of LIFT (Local Improvement Finance Trust) projects at Barking and Havering and at Leeds.
Corporate Social Responsibility
As a major employer we take our responsibility towards the sustainability of our communities, the regeneration of inner cities and protecting the environment very seriously.
This is an important area and we have devoted an entire section of the annual report to fully explain our philosophy and how this is implemented.
Health and Safety
This is a major priority for all of our businesses. Rigorous annual targets are set for each business which are subject to internal audit and Group Board review. During the year we have doubled our Health and Safety staff, reinforcing our commitment to this area.
Awards
The Group has received a number of prestigious awards which are featured throughout the report. All businesses were winners and my thanks go to all of the Miller teams for their extra effort, which has been duly rewarded and recognised.
Outlook
Looking forward, we are confident in the growth prospects for each of our three businesses. In Housing, while the past few months have witnessed the return of normal market conditions, we have already secured £245m of forward sales. Our Property business is well positioned to provide a larger proportion of Group profits following a record £299m investment in new projects during 2004, and Construction has an excellent order book of £320m with strong prospects for the year ahead, underpinned by a blue-chip client base with well formulated capital investment plans.
Keith M Miller CBE
Group Chief Executive
