morrison homes analyst/investor presentation

Morrison HomesAnalyst/Investor

Presentation


Presentation

The Howard Hotel – London

14 April 2005

Morrison HomesGrowth StrategyMorrison HomesGrowth Strategy

Steve Parker

President Morrison Homes

Morrison Growth Strategy 1Morrison Growth Strategy 1

Growth markets large population growth employment growth inward migration

Susan Jacobson-KulakDivision President, Phoenix


Growth through satellite operations reduces overhead costs manages land and market risk develops management

Successful track record Jacksonville, Sarasota, Central Valley

Bob WalterSenior Vice President, West


Growth through product development lower price points Townhomes low-rise condominiums

Mike StoreyDivision President, Tampa


Addressing underperforming businesses sale of Atlanta assets in hand Texas market showing improvement Texas improvement plan well under way a long way to go – but potential for longer term growth

John NapolitanExecutive Vice President

US economy and housing market US economy and housing market

Bruce Van Stee

Chief Financial Officer

US economyUS economy 1st Quarter Forecast 2004 2005 2005

GDP Growth 4.4% 4.0% >3.5%

Job Growth 2.2M .5M 2.0M

Fed Funds Rate 2.25% 2.75% 3.75%

30 Year Fixed Mortgage Rate 5.75% 6.0% 6.5%

CPI (excl. food/energy) 2.2% 2.4% -

Consumer Confidence 102.7 102.4 -

US market

Morrison position within the US marketMorrison position within the US market

(in thousands) 2004 2004 Job Growth Rank Single Family

Permits Rank

Florida 281 1 185 1California 217 2 147 3Texas 121 3 148 2Arizona 88 4 81 5Colorado 47 9 39 12

754 600

National Results 2,200 1,600Morrison Markets 34.3% 37.5%

US market

US housing market – near termUS housing market – near term

Strong first quarter demand Inventory levels well controlled Staged sales releases occurring in Phoenix, Orlando and

Tampa as demand exceeds supply Some moderating of price increases in markets where high

price appreciation has occurred – Southern California, Las Vegas and parts of Northern California (Bay Area)

Mortgage rate increases will be offset by solid economic and job growth

Forecast for 2005 permit activity indicate a slight drop (3% to 4%) from 2004 record levels (1.6M)

US market

US housing market – longer termUS housing market – longer term

Long term industry fundamentals still very strong New household formations projected at 1.2M annually

through 2020 Homebuilding still highly fragmented business, market share

of large public builders around 23% Well capitalized builders have advantage as land market

becomes more difficult

US market

Morrison HomesGrowth Strategy 1

Growth Markets


Growth Markets

Susan Jacobson-Kulak

Division President, Phoenix

Phoenix – the marketPhoenix – the market

Population 3,500,000 2004 Single Family Permits 60,825% change from 2003 27.46%Position in US 1

Job growth: 2003 + 20,6002004 +

40,8002005 (projected) +

46,600

Morrison closings: 2004 542

Growth markets

Phoenix - key business strengthsPhoenix - key business strengths

Strong leadership and management team Sound Morrison business practices and disciplines Product offering - right price points and products Effective and stable field staffing – both construction and

sales Good geographic coverage

/land position

Growth markets

Phoenix geographic marketPhoenix geographic market

Growth markets

281

336 326

510

585

0

100

200

300

400

500

600

2000 2001 2002 2003 2004

Phoenix – sales (units)Phoenix – sales (units)

Growth markets

20.3

12.8

6.88.7

6.6

17.4%

12.9%10.8%

12.3%11.1%

0

5

10

15

20

25

2000 2001 2002 2003 2004

0%

5%

10%

15%

20%

PBIT Margin

millions

Phoenix PBIT & operating marginPhoenix PBIT & operating margin

Growth markets

705857

957848

1714

0

500

1000

1500

2000

2000 2001 2002 2003 2004

Phoenix landbank (units)Phoenix landbank (units)

Growth markets

Phoenix - potential for organic growthPhoenix - potential for organic growth

Strong market to continue Landbank in place to grow to 800 units in 2006 Potential to increase growth to >1000 units by 2007 Longer term potential for development

of satellite operation in Tucson

Growth markets


Growth through satellite operations



Bob Walter

Senior Vice President, West

What is a satellite operation?What is a satellite operation?

Profit center that is an extension of an existing Division An organic growth strategy that leverages:

existing Division management and employee base proven systems and procedures architecture sub-contractors land sellers

Within 2 hour drive of the Division


138 112

23

134

70

164

72

237

151

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004

Sacramento Central Valley

17%

34%31%

39%

0%

$ million

Sacramento and Central Valley revenueSacramento and Central Valley revenue


23 23

4

30

14

44

16

62

42

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2004


16%

31%

0%

27%

41%

$ million

Sacramento and Central Valley PBITSacramento and Central Valley PBIT


Central Valley satelliteCentral Valley satellite

The Sacramento Division started the satellite operation and within 3 years turned it over to the new Central Valley Division Management Team.

The satellite initiative allowed us to enter the Central Valley market and grow the business organically by leveraging: Sacramento Management Team’s experience and capability proven systems and procedures architecture land seller relationships sub-contractor relationships


Central Valley transitions to full Division responsibility over 3 yearsCentral Valley transitions to full Division responsibility over 3 years

Operations

Sales

Construction

Finance

Purchasing

Warranty

SacramentoIncluding

Central Valley

Operations

Sales

Construction

Finance

Purchasing

Warranty

Sacramento

Central ValleySupported by Sacramento

Operations

Sales

Construction

Finance

Purchasing

Warranty

Operations

Sales

Construction

Finance

Purchasing

Warranty

Operations

Sales

Construction

Finance

Purchasing

Warranty


2000/2001 2002/2003 2004


Key findingsKey findings

We can use this strategy to continue to grow into new markets

This satellite strategy also provides a development opportunity for our future Division leaders


5,3812004

4,4792003

3,6422002

Single Family PermitsFRESNO

4,8902004

4,2292003

3,7762002

Single Family PermitsRENO


What’s next?What’s next?


Growth through product development



Mike Storey

Division President, Tampa

To meet market demand To stay a step ahead of the competition To maintain product in largest price segments

Orlando low $200’s Tampa high $100’s

Opportunity to move into prime inner-city and infill locations Higher density products offsets higher land costs More controllable business

Why Townhomes?Why Townhomes?


Resulting benefitsResulting benefits

Greystone 130 sales in 13 months, 10 per month all sales through lottery price increase with every building release

over $40,000 since opening average sale price now over $250,000 current sales at 40% gross margin over 150 closings projected for 2005



Alexandria Place 40 sales in 7 months, 6 per month sales through lottery system price increase with every building release

over $30,000 since opening average sale price now over $170,000 current sales at 32% gross margin over 70 closings projected for 2005



Townhomes exceed expectations in all financial and performance measurements

True market demand exceeds actual absorptions and has

been managed through controlled monthly releases,and sales holds, as necessary

Improved health and safety conformance Improved production and construction staging efficiency


Going forwardGoing forward

Townhomes Orlando Division

12 future Townhome communities planned Tampa Division

5 future Townhome communities planned several others under negotiation

future growth into other Morrison Divisions


Going forwardGoing forward

Condominiums condominium communities rapidly gaining market share

in response to demand Orlando and Tampa Divisions evaluating potential for low-

rise condominiums to maintain and expand presence in target price points to address higher inner-city land prices avoids legal liability associated with high rise


Why are Morrison Townhomes so successful?Why are Morrison Townhomes so successful?


30 foot wide (1,405-2,215 sq. ft.) Two-car garage Designed for the upscale homebuyer Architecturally rich details including varied roof lines, dormers and

appealing window configurations

Greystone Orlando, Florida


Greystone Orlando, FloridaGreystone Orlando, Florida


High quality amenities add to the value of inner market location


Alexandria Place Tampa, Florida 20 foot wide (1,527-1,790 sq. ft.) One-car garage Designed for first time buyers Smaller designs do not sacrifice architectural appeal


Why Morrison Townhomes?Why Morrison Townhomes?

Buyers do not sacrifice design quality of a single family home Buyers gain

value a desirable location and a carefree lifestyle



Addressing underperforming businesses





Austin – the marketAustin – the market

Population 1,400,000

2004 Single Family Permits 12,600% change from 2003 +12%Position in US 24

Job growth: 2003 -6,1002004 4,5002005 (projected) 17,000



Austin - key improvement areasAustin - key improvement areas

Leadership and management Expansion to lower price points Re-position from ‘semi-custom’ builder Sales staffing and sales execution Install business processes

for high production


Austin DivisionAustin Division

YTD 2005 ResultsChange from 2004

Sales +83%

Closings +43%

Sales Proceeding +102%


Houston – the marketHouston – the market

Population 4,600,0002004 Single Family Permits 42,500% change from 2003 +17%Position in US 5

Job growth: 2003 -16,3002004 17,3002005(projected) 43,000



Houston - key improvement areasHouston - key improvement areas

Leadership and management Expansion to lower price points Expand geographic coverage from northwest segment Update and rationalize product offerings Sales staffing and sales execution Re-build a number of key business processes


Houston DivisionHouston Division

YTD 2005 Results Change from 2004

Sales Flat

Closings +80%

Sales Proceeding Flat


Dallas / Ft. Worth – the marketDallas / Ft. Worth – the market

Population 6,000,000

2004 Single Family Permits 44,000% change from 2003 +10%Position in US 4

Job growth: 2003 -28,5002004 12,4002005(projected) 57,000



Dallas - key improvement areasDallas - key improvement areas

Leadership and management Install proven Morrison business practices and disciplines Expansion to lower price points Update and rationalize product offerings Sales staffing and sales execution Drive frontline margin

improvement


Dallas DivisionDallas Division

YTD 2005 ResultsChange from 2004

Sales +73%

Closings +76%

Sales Proceeding +120%


Texas markets - summaryTexas markets - summary

Employment now positive in all 3 markets Almost 100,000 permits in 2004 Significant potential for Morrison profit growth

leverage from current under performance longer term unit volume growth


Texas markets - summaryTexas markets - summary

Significant changes have been made in the past 9 months we are seeing first signs of progress

Austin will reach performing status this year further potential for volume and margin growth

Houston and, especially Dallas will take more time must take time to get fundamentals right

Potential for substantial growth in all 3 markets Meanwhile, maintain cautious approach to land purchases


Morrison HomesGrowth Strategy

Summary

Steve ParkerPresident Morrison Homes

Morrison HomesGrowth Strategy

Summary

Steve ParkerPresident Morrison Homes

Morrison Growth Strategy - summaryMorrison Growth Strategy - summary

Growth plan in place Underperforming businesses being addressed Strong landbank 5 year growth

operating profits 37% pa 2005 has started very strongly

Morrison growth strategy

LandbankLandbankLand in place to support strong growth


2004 2003 2002 2001 2000

18,892Lots owned / under option 15,304 11,796 10,160 8,330

2,687Lots controlled 1,663 1,643 2,075 1,640

21,579Total landbank 16,967 13,439 12,235 9,970

282Land spend $m 203 173 132 119

Morrison Growth Strategy - summaryMorrison Growth Strategy - summary

Growth plan in place Underperforming businesses being addressed Strong landbank 5 year growth

operating profits 37% pa 2005 has started very strongly



Presentation


Presentation

The Howard Hotel – London

14 April 2005

morrison homes analyst/investor presentation

Documents

us1job growth

tampamorrison growth

westmorrison growth

land market

morrison markets

handtexas market

morrison closings

price increases