Analysts Presentation
North American Operations
30 October 2002
Agenda
Introduction Iain Napier
Overview of North America John Peshkin
California Mike Forsum
Arizona Garth Wieger
Canada John Peshkin
Florida John Peshkin
Texas John Peshkin
Summary Iain Napier
North American Housing
An Important Segment of
Taylor Woodrow’s Portfolio
Benefits of Being in North America
Housing market (world’s largest) remains strong
Opportunities for substantial growth (1.8m starts p.a.)
History of home price inflation circa 5-7% p.a.
Affordable market benefits from low interest rates
Limited investment alternatives sustain luxury market
Some constraint on supply in selected areas
(but less than UK)
Fragmented market now beginning to consolidate
Recent Achievements
Underlying operating profit up 17% to £35.1m
California returns to profit
Expansion into Phoenix, Arizona
£32m of Canadian commercial properties sold
Equinox pre-sold 400+ units in first 90 days
PGA Honda Classic at Mirasol
Entitlements obtained for 5,000 homes at Steiner Ranch
Cost reductions from central purchasing
Strong Order Book (30.06.02: £331m)
Strong pipeline for 2003 onwards
We have a strong presence in some
of the best North American markets
23 projects
£69m CE*
16 projects
£124m CE*
5 projects
2 projects
£28m CE*
12 projects
£88m CE*
* Housing Capital Employed at H1 2002
Each of These Markets are Different
Toronto San Diego
Market size - 50,000 units Market size – 9,000 units
Home price inflation Home price inflation
– 8% SF; 10% high-rise – Robust 21%
– ASP £114,000 – ASP £233,000
Demand for high-rise Demand for single family
driven by: driven by:
– No rentals being constructed – Job growth 2.7%
– Affordable product type – Highly skilled workforce keeps
– City living option preferable to employment rate high
suburbs – Population growth
– 100,000 people moving into – Diversified technology sector
Toronto this year – Supply constrained creating
– Low interest rates high demand and price
– Sales up 40% appreciation
– Strong tourism industry
North American Housing is a Local Business
Performance driven by strong local management with
clear strategy
Incremental rewards from core corporate systems
Flex product mix to meet market trends
– Maximize returns while minimizing risk
– Sustainable profit growth
Operating Margin 1999 - 2002
%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
1999 2000 2001 2002*
California 9.3% 9.2% -4.7% 4.1%
Canada 13.3% 14.6% 14.1% 16.8%
Florida 14.0% 14.5% 24.2% 26.8%
Texas 18.0% 9.2% 23.9% 29.7%
Total 11.4% 11.1% 9.2% 15.9%
* 2002 Numbers are annualised H1 2002 numbers
ROCE 1999 - 2002
%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
-20.0%
1999 2000 2001 2002*
California 12.0% 19.5% -10.9% 5.1%
Canada 14.6% 15.7% 24.6% 33.5%
Florida 22.8% 24.8% 55.0% 45.2%
Texas 25.3% 6.5% 24.7% 13.2%
Total 15.6% 18.6% 18.9% 22.7%
* 2002 Numbers are annualised H1 2002 numbers
Changing the Mix to Optimise Returns
Number of units sold Canada Region Mix 1998 vs 2001
600
545
500
456
420
400
326 1998
300
2001
197
200
100
36
0
Hi Rise Lots Lo Rise
Returns Vary by Type of Development
Illustrative cumulative cashflows from project types
Cumulative Cashflow
1 2 3 4 5 6 7 8 9
Years
High-Rise Low-Rise Master Developer Low-Rise Merchant Builder
Bringing it Together with Control Systems
Allocation of capital
Centralized purchasing
Project delivery centrally reviewed
Company-wide financial reports and accounting processes
Customer satisfaction measured
IT consolidation
Human Resources
Corporate Communications
Achieved 20-30% Growth p.a. through 2000
Operating Profit
£m
80
70
9.5
60
4.7
50 7.9
40 5.6
30 60.6
53.3
46.5
20
36.4
10
0
1998 1999 2000 2001
Housing Property
Recent Full Year Housing Performance
£m
50 Operating Profit
41.8
40
30 25.5 FY`00
19.6
17.9
20
13.9
FY`01
10 5.6
1.6
0
-10
(12.0)
-20
California Canada Florida Texas
• Florida and Texas benefited in ‘01 from
£6.2m of plot sales (£5.2m & £1m respectively)
Recent Half Year Housing Performance
£m
25 Operating Profit
22.0
20 18.5
HY'01
15
11.6 HY'02
10
7.3
5 2.9 3.1
3.9
1.9
0
California Canada Florida Texas
• Florida and Texas benefited in H1 ‘01 from
£6.2m of plot sales (£5.2m & £1m respectively)
Recent Housing ROCE
Return on
Capital Employed %
20 18.9
18.6
18
15.6
16
14 13.5
12
10
8
6
4
2
0
1998 1999 2000 2001
Delivering on Strategy
Strategy 2002 Achievement
Return to historic levels of profit 17% underlying growth in H1 ‘02
growth California back in profit
New projects for 2003
Expand into new markets Acquisition of Journey
Exit commercial properties Disposal substantially complete:
£32m proceeds
Implement core corporate Substantially complete
systems
Explore new profit streams Implement central
purchasing program
California
Mike Forsum, President
California
San Francisco Bay Area
Pacific Ocean
Ventura County
Active Los Angeles San Bernardino
County
Under Development Orange County
Under Contract San Diego
Overview - California
Building Market TW
Permits CAGR% H1 ’02
2002 e ‘98-’02 Completions
111 homes
Market 150,000 8.0% 4 lots
Average selling
price £250,000 9.0% £675,000
Hotspots (e.g. Orange County, Riverside,
areas, product, etc) Sacramento
New Management
Highly experienced senior management team in place
Reorganized to best maximize core skill sets
– Now structured to grow the business
50% reduction in team size
Strategic Initiatives - California
Reposition the company
– Focus on markets that best take advantage of our capital, people
and brand
– Reduce prices by 25% in 2003
– Accelerate sell out of under-performing ultra-luxury projects
– Develop new project mix - 90% mid market homes; 10% luxury
– Expand land bank
– Transcend brand to more attainable price points
Do more with less
– Savings through improved product development process
– Reduce construction cycle times by up to 30%
– Reduce warranty costs by improving customer service
Casitas at Santaluz
San Diego
•80 units
•£451,000 ASP
•Phase VI of VII
•Move-up, move-down
Villas at Shady Canyon
Irvine
•21 units
•£1.2 million ASP
•Final Phase
•Move-up, move-down,
mature families
Astoria
Cupertino
•56 units
•£424,000 ASP
•Phase I of VI
•Young families
Arizona
Garth Wieger, President
Arizona
Phoenix
Active
Under Development
Under Contract
Overview - Phoenix, Arizona
Building Market TW
Permits CAGR% H1 ’02
2002 e ‘98-’02 Completions
Market 36,000 3.1% N/A
Average selling
price £120,000 5.8% N/A
Hotspots (e.g. Southeast Valley
areas, product, etc)
Background to Journey Homes Management
History and record
– Experience with top-tier builders with highest market share
– Repeated success in growing companies
Strategic Initiatives - Arizona
Integration with TW almost complete
Capitalize on TW’s financial strength and local
management’s relationships with land owners to grow the
business
Expand into Southeast Valley
Increase home closings from 700 in 2003
Acquire sites for TW branded mid-priced homes
Maintain discipline and focus on maximizing efficiency
Tierra Rosa
Phoenix
•245 units
•£101,000 ASP
•Sold 148
•1st & 2nd time buyers
Buenavida
El Mirage
•660 units
•£75,000 ASP
•Year 2 of 3
•1st time buyers
Canada
John Peshkin, CEO
Ontario, Canada
Ottawa
Toronto
Kitchener Burlington
London
Active
Under Development
Under Contract
Overview – Ontario, Canada
Building Market TW
Permits CAGR% H1 ’02
2002 e Completions
‘98-’02
656 homes
Market 83,500 11.6% 183 lots
Average selling
price £100,000 6.0% £95,000
Hotspots (e.g. High-rise condos in Greater
areas, product, etc) Toronto area; Brampton/Barrie
Strategic Initiatives - Canada
Centrally located design centre
Secure final entitlements on controlled property
Complete disposition of commercial properties
Reduce average price points
Continue growth of high-rise business
Bridle Trail
Unionville
•1,600 units
•£177,000 ASP
•Final Phase
•30-40% Asian, affluent
Stonebridge
Ottawa
•2,300 units
•£121,000 ASP
•Year 2 of 10
•1st time, move-up, empty nester
Millcroft
Burlington
•2,000 units
•£144,000 ASP
•Phase XI of XIII
•Move-up, empty nester
Chartwell Garden
Markham
•600 units
•£144,000 ASP
•Final Phase
•Asian, move-up
Toronto
•690 units (JV 50%)
•£74,000 ASP
•2 buildings 65% sold
•70% Asian, investors
Florida
John Peshkin, CEO
Florida
Jacksonville
Orlando
Tampa
Gulf of Mexico
Sarasota
Palm Beach
Ft. Myers/Naples
Active
Under development
Under contract
Overview - Florida
Building Market TW
Permits CAGR% H1 ’02
2002 e Completions
‘98-’02
118 homes
Market 167,000 7.2% 270 lots
Average selling
price £147,000 5.25% £445,000
Hotspots (e.g. Coastal areas, Orlando; high-rise,
areas, product, etc) affordable price ranges
Strategic Initiatives - Florida
Expand high-rise business
Construct more homes within TW owned communities
Lower average prices through product value engineering
Achieve short-term growth with mid market low rise
Maintain strong land bank of over 4 years
– Acquisition teams now located in regions
Mirasol
Palm Beach Gardens
•2,105 units
•£404,000 ASP
•Year 2 of 7
•2nd home, family,
retiree, empty nester
Vasari
Naples
•726 units
•£245,000 ASP
•Year 2 of 7
•2nd home, retiree,
empty nester
•158 units The Oaks Preserve
•£405,000 ASP Sarasota
•Tower 3 of 6
•2nd home, retiree,
empty nester
Texas
John Peshkin, CEO
Texas
Austin
Houston
Active
Gulf of Mexico
Under Contract
Overview - Texas
Building Market TW
Permits CAGR% H1 ’02
2002 e Completions
‘98-’02
17 homes
Markets 150,000 6.74% 16 lots
Average selling
price £125,000 5.54% £280,000
Hotspots (e.g. Houston, Dallas, San Antonio;
areas, product, etc) affordable prices
Strategic Initiatives - Texas
Expand business within existing markets
– Replacement land for Avalon (Houston) under contract
– Identify other homebuilding opportunities in Houston capitalizing on
well-respected brand
– Exploit acquisition opportunities in Austin as a result of market
weakness
Pursue volume strategy at Steiner Ranch until market
improves
– Closely control capital expenditures
Dallas and San Antonio identified for future expansion
Avalon
Houston
•794 units/307 TW
•£266,000 ASP
•Year 6 of 8
•Move-up, move-down,
family, empty nester
Steiner Ranch
Austin
•3,267 units (JV 50%)
•£245,000 ASP
•Year 3 of 10
•1st time, move-up,
retiree, empty nester
Strategic Initiatives – North America
Focus on existing markets
Add value through core corporate systems
Growth through acquisition of other homebuilders
Maintain disciplined approach to land acquisition
Maintain “best in class” management team and well-
respected brand
Be not the largest, but the best within our chosen markets
Summary
Proven track record - been there 25+ years
Well managed business, with good range of skills
Actions taken to return to historic growth rates, but with
more predictable profit streams
Additional growth options for Taylor Woodrow, both
organically and by value adding acquisitions
Favourable outlook in North America
Attractive markets