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9
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Morgan Sindall plc
77 Newman Street, London W1P 3LA Tel: 0171 307 9200 Fax: 0171 307 9201
Visit our website at www.morgansindall.co.uk
A N N U A L R E P O R T & A C C O U N T S 1 9 9 8
Morgan Sindall is a specialist construction group whose principal
activities are fit out, regional construction and property investment.
The fit out companies operate primarily in the South of England,
whilst the regional construction business comprises a network of
branded companies covering the whole of England. Together these
businesses form the basis of a balanced construction group.
Morgan Sindall has pace and continues to challenge the status quo
in this traditional industry. The full year results show significant
progress towards achieving the objective of long term enhancement
of shareholder value through organic growth, careful acquisition and
the active management of a property portfolio.
Contents
Financial Highlights
Chairman's Statement
Chief Executive's Review
Fit Out
Regional Construction
Property
Group Overview
The Board
Report of the Directors
Remuneration Report
Corporate Governance
Directors’ Responsibilities
Auditors’ Report
1
2
4
6
8
10
12
14
15
17
19
21
21
22
23
24
25
26
27
29
42
45
45
Group Profit and Loss Account
Combined Balance Sheets
Group Cash Flow Statement
Combined Statement of Movements
in Reserves and Shareholders' Funds
Other Primary Statements
Principal Accounting Policies
Notes to the Accounts
Notice of Annual General Meeting
Corporate Directory
Financial Calendar
Corporate Directory
Directors
Sir D P Hornby (Chairman)
J C Morgan (Chief Executive)
J M Bishop
J J C Lovell
A M Stoddart
B H Asher (Non-Executive)
G Gallacher (Non-Executive)
Secretary
W R Johnston
Registered Office
77 Newman Street, London W1P 3LA
Tel: 0171 307 9200
Fax: 0171 307 9201
Financial Calendar
Solicitors
Charles Russell, 8-10 New Fetter Lane, London EC4 1RS
Auditors
Deloitte & Touche,
Leda House, Station Road, Cambridge CB1 2RN
Merchant Bankers
Close Brothers Corporate Finance Limited,
12 Appold Street, London EC2A 2AW
Brokers
Peel, Hunt & Company Limited,
62 Threadneedle Street, London EC2R 8HP
Registrars
Connaught St Michaels Limited,
PO Box 30, CSM House, Victoria Street, Luton LU1 2PZ
Annual General Meeting:
13 April 1999
Shareholder communication
Contact with existing and prospective shareholders is
welcomed by the Company. If you have any questions or
enquiries about the Company or the activities of the
Group, please contact: Jack Lovell, Client Director, at the
registered office shown above.
Share prices (FT Cityline)
Current buying and selling prices of the Company’s
shares, together with recorded information on key dates,
can be obtained by dialling 0336 434027.
Ordinary shares
Final dividend:
Ex-dividend date:
22 March 1999
Record date:
26 March 1999
Payment date:
14 April 1999
Interim results announcement:
August 1999
Preference shares
Dividend payment dates:
15 April 1999
15 October 1999
Next conversion date:
30 June 1999
Designed by Jarvis White
45
Financial Highlights
1998
1997
INCREASE %
Turnover
£425m
£331m
+ 28
Profit on ordinary activities before taxation
£9.760m
£7.260m
+ 34
Profit on ordinary activities after taxation
£7.714m
£5.848m
+ 32
Earnings per ordinary share
22.15p
16.38p
+ 35
Dividends per ordinary share
6.50p
5.25p
+ 24
Net assets
£23.2m
£17.5m
+ 33
Net cash funds
£28.4m
£18.4m
+ 54
9.8
7.3
5.2
424.6
331.2
283.1
175.2
3.0
95
96
97
98
95
96
97
98
Turnover £m
Profit before tax £m
Chairman’s Statement
Making a difference - together
I am pleased to report another excellent year for
the Group with profit before tax up 34% to
£9.760m from both increased turnover and margin.
Earnings per share has risen 35% to 22.15p and
the Board is recommending a final ordinary
dividend of 4.45p making 6.50p for the year
(1997: 5.25p).
Our fit out business has performed well despite
increased competition and reflects the strength of
our brands Morgan Lovell and Overbury, both long
established and well recognised in their sector. The
managers of these two companies, both of whom
were promoted in recent years, have refocused
their companies on proven business strengths and
have achieved profit growth from margin rather
than volume.
The regional construction business has continued
to make progress with turnover up nearly 40%,
albeit this growth in turnover has not been reflected
yet in bottom line profit. However there is no doubt
that much of the hard work has been done and this
business will be the major driver to the Group's
earnings over the coming years.
Returns from investment of our asset base in
property and cash have again contributed
significantly, aided by a trading profit on property as
reported at the half year. We must ensure that the
balance sheet remains sufficiently strong to support
the level of turnover and as such we will have funds
to invest. Our approach will continue to be cautious
but our track record demonstrates that above
average returns may still be achieved by selective
acquisition and proactive management.
Trading conditions overall, in the markets in which
we operate, show little sign of the much publicised
slowdown in the economy. Although there are
marked reductions in work volumes in certain
sectors, this is being compensated by increased
spending in other areas. We closely monitor the
order inflow and have contingency plans ready
should the trading environment deteriorate. For the
present however, we are pleased to have entered
1999 with an order book giving us similar
percentage cover of our budgeted turnover to
previous years.
Profit has grown at an average of 48% per annum
compound over the last three years and I believe
this momentum is a powerful driving force. The
economy for 1999 and beyond remains difficult to
forecast but with a strong balance sheet and net
cash of £28.4m we are well prepared for both the
challenges and opportunities that will arise.
Sir Derek Hornby
Chairman
2
Earnings per share has
grown at an average of 40%
per annum compound over
the last three years
6.50p
5.25p
4.20p
2.70p
95
96
97
98
Dividend
22.15p
16.38p
13.13p
8.03p
95
96
97
98
Earnings per share
Chief Executive’s Review
Taking the business forward
1998 has seen Morgan Sindall make further
progress. Turnover and operating profits from our
construction activities are up 29% and 30%
respectively on the previous year. In broad terms
turnover growth arose from our regional
construction business and profit growth from fit
out. The spread of our client base is proving to be
a strength. With nine brands comprising distinct
profit centres it is always possible for one or two of
these to have disappointing results without
hindering the Group overall performance. Last year
fit out had a poor first six months, this year one of
the regional construction brands suffered growing
pains. Remedial action has been taken and 1999
will I believe see regional construction make a
significantly stronger contribution. With a good
return from our property, a strong cash position
and central overheads reduced, the Group
earnings per share has increased from 16.38p
to 22.15p.
We remain committed to our policy of branded
construction companies empowered to make their
own decisions within an agreed marketing strategy.
Each brand management team develop their own
company and are rewarded well for the success
they achieve. There are benefits to each brand from
being within the Group, sound financial backing,
ability to benchmark, cross-fertilisation of skills and
common clients. However, the real power of the
Group is the strength of our people motivated by
running their own company and the knowledge
that they can make a difference.
The only non-negotiable is the Morgan Sindall
culture. A commitment to the client, talented
people who challenge the status quo and
conservatism in financial matters are the ground
rules that I and my colleagues have for
years repeatedly stressed as we go round the
companies. This year several of them have started
small torch groups comprising a mixture of site and
office staff from different disciplines to debate how
the culture affects them and how it will make the
company stronger than the competition. With
commitment at every level I believe we can
continue to have an edge and keep ahead of our
competitors.
Future prospects
As we approach the end of this millennium it is not
surprising that we reflect on past experiences and
consider what the future may offer. Morgan Sindall
has established itself as a top twenty UK
construction group and the 1998 results show
another year of above average growth. Our balance
sheet is strong and I believe our real assets, the
management and staff, have never been better.
However, rather than satisfaction in what has been
achieved I feel excited by the opportunity and
challenge ahead of us. The economic future is
uncertain, the construction industry is quite
correctly being pressed to improve and many of the
major historic names in the industry are questioning
whether they wish to continue in construction.
Nevertheless the construction industry will continue
to be a major sector of the economy in the next
millennium and only those companies that are
structured to accept change will flourish. I believe
that Morgan Sindall has the passion to win and that
the next few years will be very exciting and
rewarding for us all.
4
Fit Out
Improved environment
enhances performance
Our fit out business had another record
year with all parts of the business
performing strongly. Both Morgan Lovell
and Overbury are recognised as brand
Morgan Lovell's clients are largely in
leaders in their niche speciality. It is this
the South East and the Midlands and
specialisation – or as they explain it "they
are serviced from offices in London,
only do what they know they do well" –
Wokingham and Heathrow. They are well
that enables them to perform to a level
known for providing property users and
that consistently brings clients back
professionals with informative seminars
to them.
and lectures on matters affecting the
workplace, whether from changing
Overbury offers fit out and light
technology, furniture design or
refurbishment in commercial premises,
working practices.
mainly offices, in London, the Home
Counties and the Thames Valley. Each
Current order levels are similar to last
year Overbury completes more than 200
year. Whilst in the London market some
office fit outs covering 2 million square
sectors are facing uncertainty, the fit out
feet of space. Experience is vital if client
business has an inherent element of
expectations are to be exceeded against
protection against recession. Where
the stringent demands of fast track fit out
clients are hesitant to take new space,
and is confirmed by the fact that 75%
downsizing or refurbishment, either to
of projects are won on factors other
improve current conditions or for
than price.
reletting of surplus space, still provides
opportunity for fit out work.
Whereas Overbury work for clients who
purchase in the traditional way through
a team of independent consultants,
Morgan Lovell, work direct for clients to
provide a complete fit out solution. As
the workplace specialist, Morgan Lovell
offers the client consultancy, design,
construction and support. This "one stop
shop" facility brings significant benefits
to organisations who may not have
in-house construction expertise and
reflects Morgan Lovell's "client for life"
philosophy.
6
The new Thomas Cook call
centre, Peterborough
Satisfying clients
for over 20 years
proves experience
is vital with fast
track fit out
Regional Construction
Understanding clients
Turnover for regional construction has
again significantly increased, this year
We have been noticing an increasing
by nearly 40% of which acquisitions
demand for response maintenance from
account for less than 10%. Whilst
housing associations and experimenting
obtaining market share and bringing the
with ways as to how to respond to this
newly acquired companies up to a critical
market need. It is our belief that mixing
mass was the first priority the profit
this work with traditional small works or
performance was disappointing. Several
general maintenance operations does not
factors combined to reduce margin all of
work effectively. We are now in the
which have been addressed although
process of developing a specialist unit
none have changed our view of the
with individual communication and
potential of this business. Indeed the
control techniques and the initial
performance of certain brands has been
response is encouraging. In 1998 these
very satisfying and clearly prove that a
start up costs impacted profits adversely,
realistic margin can be achieved if we
but we will pursue this activity to see
listen and respond to the needs
whether it is capable of expansion.
of our clients.
Our subsidiary Sotham Engineering
It is in the Morgan Sindall tradition to be
Services Limited was not a business of
open when mistakes are made so that
long term strategic value to the Group
lessons can be learnt. One of the brands
and after exploring the possible exit
had a bad year, where contracts were
routes we agreed to sell the company to
taken on without sufficient margin and
its management in December 1998 for a
whilst clients were not let down, losses
consideration that is likely to equate to
were incurred. Changes have been made
net assets. I believe it is as important to
and 1999 should see this brand restored
divest activities that are not core as it is
to profitability.
to expand in the areas of our expertise.
Our order book, and importantly our
Our regional construction network of
enquiry levels are satisfactory with regard
to our budgets for this year. Whilst our
companies is now substantially complete.
Of the seven brands two are well on
market share in the individual regions is
their way to establishing a significant
still small it is our ability to delight our
presence, two have achieved critical
clients rather than the rate of the growth
mass and three are still relatively new
in the economy that will provide the
and growing. There remains enormous
opportunity for our success. Turnover
potential.
growth of between 20% and 30% is an
achievable target for these brands for the
forseeable future.
8
Our construction companies
meet a range of client needs
including maintenance, new
build, refurbishment and
design and build.
Our regional construction
business is capable of
turnover growth of
20-30% annually
Property
Working investments
Our policy for investment of our
reserves in either cash or property on
a proactive but conservative basis
remains unchanged. As a result we took
Our building in Wigmore Street, London
advantage of a strong property market
purchased for £3.2m earlier this year
between late 1997 to mid 1998 to realise
comprises four office units which we will
properties worth £14.4m of which we
either refurbish or sell in their present
have only reinvested £3.25m. This net
condition and a site where we have now
inflow has been invested on the treasury
achieved planning permission for greater
market and accounts for the significant
lettable space. It will be at least a year
increase in bank interest received.
before this property will be income
producing. We continue to enhance the
The freehold office investment we own in
value of our mixed office industrial estate
Jockeys Field, London is currently
in Cambridge, and with additional lettings
subject to rent reviews. We anticipate
having commenced in January 1999 the
increases that will either add £100,000 to
net rental income on this property has
our rent roll or offer us an opportunity to
increased to over £600,000.
realise the gain on this property.
Our joint venture, Primary Medical
Property, which commenced trading in
1994, had its best year to date. Not only
did it make a small trading profit but it
has now recouped its start up costs. It
owns some 14 doctors surgeries
including a multi-tenanted cottage
hospital in Yorkshire. This venture is now
fast becoming accepted as a market
leader in development and investment in
primary care health centres.
John Morgan
Chief Executive
10
Property activities
again returned over
15% on capital
in 1998.
Group Overview
Committed to brands
London Tel 0171 734 4466
London Tel 0171 307 9000
Cambridge Tel 01223 836611
Oxford Tel 01865 723221
Farnborough Tel 01252 893900
Taunton Tel 01823 444406
Manchester Tel 0161 872 1166
Leeds Tel 0113 287 3131
Birmingham Tel 0121 329 1500
London Tel 0171 307 8350
Fit out
A top 20 UK
construction company
1900 employees
40 offices throughout
England
Regional construction
Morgan Lovell
The Workplace Specialist
London
Wokingham
Overbury
The Fitting Out &
Refurbishment Specialist
Kingston upon Thames
London
LEEDS
NOTTINGHAM
MANCHESTER
BIRMINGHAM
KINGS LYNN
NORWICH
CAMBRIDGE
IPSWICH
CHELTENHAM
BRISTOL
SWINDON
BANBURY
OXFORD
MAIDENHEAD
HARPENDEN
ST.ALBANS
FARNBOROUGH
LONDON
BARNSTAPLE
TAUNTON
YEOVIL
FAREHAM
POOLE
BRIGHTON
NEWTON ABBOT
PLYMOUTH
JERSEY &
GUERNSEY
Stansell
Sindall
Barnes & Elliott
Roberts
Hinkins & Frewin
Wheatley
Snape
From left to right
1
Jack Lovell (43)
Client Director
2
John Bishop (53)
Finance Director
3
Geraldine Gallacher (39)
Non-executive
Founder and managing director of The Executive
Coaching Consultancy having formerly been head of
Group Management Development for Burton Group plc.
4
Andy Stoddart (52)
Operations Director
5
Sir Derek Hornby (69)
Chairman
Chairman of Independent Registrars Group Limited
and a non-executive director of a number of other
companies and charitable trusts. Formerly Chairman of
London & Continental Railways, Rank Xerox (UK)
Limited and the British Overseas Trade Board.
6
John Morgan (43)
Chief Executive
7
Bernard Asher (62)
Non-executive
Chairman of Lonrho Africa plc. Vice-Chairman of the
Court of Governors of The London School of
Economics, Non executive director of Legal & General
Group Plc, Remy Cointreau and Randgold Resources.
Formerly Chairman of HSBC Investment Bank Plc and
a director of HSBC Holdings Plc and Midland Bank Plc.
Report of the Directors
at 31 December 1998
The directors have pleasure in submitting their report to the members together with the
audited accounts for the year ended 31 December 1998.
Principal activities
Morgan Sindall is a specialist construction group with
activities including fit out, regional construction and
property investment. The principal subsidiary companies
are shown on page 40. All activities are carried out in the
United Kingdom and the Channel Islands.
Sir D P Hornby and Mr A M Stoddart are the directors to
retire by rotation, and being eligible offer themselves for
re-election as directors. Mr Stoddart joined the Board in
December 1996 after being a consultant to the Group
since 1994. He is widely experienced in the construction
industry and previously spent fourteen years with
Norwest Holst, latterly as its Group Operations Director.
Biographical details of Sir D P Hornby are shown on the
Results and dividends
opposite page.
The Group made a profit for the year, after taxation,
of £7.714 million.
Non-executive directors
The final dividend for the year recommended by the
A short biographical note on each independent
directors is 4.45p per ordinary share, which together with
non-executive director is shown on page 14. The role and
the interim dividend of 2.05p per share gives a total
responsibilities of the non-executive directors has been
dividend for the year of 6.50p per ordinary share.
formally established by the Board. Further information on
Preference dividends paid or accrued amounted to
these matters may be found under corporate governance
£0.278 million.
on pages 19 and 20.
Review of business and future
developments
A general review of the Group’s activities, development
and future prospects are included in the Chairman’s
Statement on page 2 and the Chief Executive’s Review on
Directors’ interests
The interests of the directors and their families in the
shares of the company are shown in Note 31 in the
financial statements.
pages 4 to 11.
Fixed assets
External professional valuations of the majority of the
Group’s properties were carried out in 1994. The directors
have considered the carrying value of the Group’s
interests in property and consider that there is no
substantial difference between market and balance sheet
value. The properties comprising the investment property
portfolio will be revalued during the current year.
Directors
The directors at the date of this report are as set out on
page 45. Details of the changes to Board membership
are given in the statement on corporate governance on
pages 19 and 20.
Further information on the Group Board’s constitution,
policies and procedures is set out under corporate
governance on pages 19 and 20.
Corporate governance
The statement on corporate governance appears this
year on pages 19 and 20.
Substantial shareholdings
Excluding directors, on 12 February 1999, the following
shareholdings representing 3% or more of the issued
ordinary share capital have been notified to the Company:
Number
of Shares
Percentage
Holding
Jupiter Asset
Management Limited
Hermes Asset
Management Limited
Mercury Asset
Management Limited
HSBC Asset
Management Limited
1,660,000
4.93
1,641,000
4.88
1,628,000
4.84
1,360,000
4.04
15
Report of the Directors
at 31 December 1998
Employment policies
Year 2000 issues
The Company insists that a policy of equal opportunity
employment is demonstrably evident throughout the
Group at all times. Selection criteria and procedures and
training opportunities are designed to ensure that all
individuals are selected, treated and promoted on the
basis of their merits, abilities and potential. Subject to the
nature of its businesses in the construction industry, the
policy of the Company is to ensure that there are fair
opportunities in the Group for the employment, training
and career development of disabled persons, including
continuity of employment with re-training where
appropriate.
The Group recognises the need to ensure effective
communication with employees. Policies and procedures,
including in-house newsletters, have been developed,
taking account of factors such as numbers employed and
location.
Environmental policy
Consistent with the Group’s policy of autonomous
operation and responsibility, each of the brand businesses
has developed its own Environmental Policy tailored to
the particular nature of its own activities.
Each policy statement is, however, consistent with the
principles contained in the Group Environmental Policy
copies of which are available on request.
Creditor payment policy
The Company does not adhere to any formal Code
regarding payments to its trade creditors. Its current
policy in this respect, which the Company endeavours to
have its subsidiary and joint venture companies also
follow, is to:
1.
2.
use unamended terms of Standard Forms of
Contract widely recognised in, and drawn up by
bodies representing the industry
clearly agree and set down the terms of payment
with suppliers and subcontractors
3. make payments in accordance with its obligations.
Calculated in accordance with Regulations made under
the Companies Act 1985, as at 31 December 1998, the
Company’s number of creditor days outstanding was
thirty-one.
Following earlier investigative work in January 1998 the
Board gave authority to a committee co-ordinated by the
Group IT Manager to identify and subject to approval
introduce standardised IT financial management systems
throughout the Group. The committee, which reports to a
Main Board director was also charged with identifying and
assessing the risks associated with the year 2000.
The committee has addressed the year 2000 problem in
two main areas:
i)
ii)
Internal operations – to ensure that all Group IT
systems are or will be year 2000 compliant by
1 June 1999.
External – to assess any impact on the Group as a
result of contract works carried out for clients. In a
review of a sample of contracts carried out from
1 January 1995, in no cases so far have chips been
identified which are not year 2000 compliant.
Guidelines have been issued to ensure that all future
contracts or projects take full account of all year
2000 issues.
In view of the nature of the Group’s activities and the
implementation of new IT systems as a part of the
Group’s developing control requirements, the Board’s
assessment of the external costs attributable solely to
year 2000 issues is limited to £100,000.
Annual General Meeting
The Annual General Meeting will be held on 13 April
1999. The notice of the meeting is set out in pages 42 to
44 of this Annual Report. The notice contains items which
are special business including the authority to the Board
to allot equity securities. Explanatory notes on the special
business items are shown on pages 43 and 44.
Political and charitable contributions
During the year charitable contributions amounted to
£6,000. No contributions were made to any political
parties during the year.
Auditors
A resolution for the reappointment of Deloitte & Touche as
auditors of the Company is to be proposed at the
forthcoming Annual General Meeting.
16
Report of the Directors
at 31 December 1998
Remuneration report
The remuneration committee is comprised of:
Ms G Gallacher (Chairman)
Mr B H Asher
Sir D P Hornby
Shares will be allocated to participants after three years
provided certain performance criteria are satisfied. Once
shares have been allocated, a participant will be entitled
to dividends paid in respect of those shares and to
exercise voting rights. The participant will not, however,
be entitled to transfer, sell or otherwise deal in the shares
until a further two years have elapsed.
Policy on executive directors’ remuneration
Performance will be measured over three years by
The remuneration of the executive directors is determined
comparing the increase in total shareholder value over
by the remuneration committee (“the committee”).
those years with the corresponding increase in relation to
The committee seeks to develop remuneration packages
which satisfy the following principles:
those fourteen of the companies listed in the Financial
Times as construction companies and which are
considered by the remuneration committee as having a
to attract, retain and motivate the best possible
comparable business to the Morgan Sindall Group.
•
•
•
person for each position.
to recognise the importance of achieving the
expectations of performance in short and long
term.
to align the interests of executives with those of the
shareholders.
The committee reviews salaries annually and seeks
independent professional advice when appropriate.
Remuneration details
Details of the remuneration of all directors who have held
office during the year are shown in Note 11 to the
Accounts.
Bonus arrangements
The cash bonuses shown in Note 11 to the Accounts
arise from a cash bonus scheme for executive directors
calculated from an annually agreed scale that compares
pre-tax profits to previous years’ performance and
external expectations of results, of which the major factor
of reference is the profit forecasts published by the
Company’s own broker.
Long term incentive plan
Following shareholders’ approval in 1997 a long term
incentive plan was introduced for the executive directors
of the Company and certain key senior management
employees in the Group recommended by the
remuneration committee to the Trustees of the plan.
The increase in total shareholder value is measured by
reference to the increase in share price plus gross
dividend income.
All shares awarded to a participant will be allocated if the
Company is ranked first of those companies referred to
above and no shares will be allocated if the Company is
ranked in the middle of the group or lower. Shares will be
allocated on a graduated level between these two
positions.
Conditional awards to executive directors of the
Company
Year
to
Cumulative
to
31 December
31 December
1998
35,329
32,805
26,497
32,805
1997
25,019
21,607
21,607
22,744
J C Morgan
J M Bishop
J J C Lovell
A M Stoddart
17
Report of the Directors
at 31 December 1998
Share option schemes
Service contracts
It is the Company’s present policy not to grant share
Executive directors’ contracts are terminable on one
options to the directors.
year’s notice.
Details of options granted to employees in the Group are
Of the directors who are seeking re-election at the Annual
shown in Note 23 to the Accounts. The total number of
General Meeting, the service contracts of Sir D P Hornby
options which may be granted at any time is fixed by the
and Mr A M Stoddart do not have a notice period for
remuneration committee acting with the advice of the
termination which is in excess of one year’s duration.
Operations Director and the Finance Director, and the
recommendations of subsidiary company Managing
Directors’ interests
Directors.
The shareholdings of all directors are shown in Note 31 to
No further options can now be granted under the
the Accounts.
Company’s 1988 Scheme. The exercise of options
granted under the 1995 Scheme will be subject to
performance targets and will normally be exercisable only
if the percentage growth in earnings per share of the
Company over a five year period has at least been equal
to the percentage growth in earnings per share of at least
three-fourths of the constituent companies in the FTSE
100 index over the same period.
Pensions
The Company contributes 10% of base salary to defined
contribution schemes of the individual director’s choice.
There are no arrangements for the provision of benefits in
excess of the Inland Revenue cap.
By order of the Board
W R Johnston
Company Secretary
16 February 1999
18
Corporate Governance
at 31 December 1998
Policy statement
Morgan Sindall plc fully supports the Principles of Good
Governance and the Code of Best Practice (‘the
Combined Code’). Accordingly, this report will also deal
with the requirements of paragraphs (a) and (b) of the new
Stock Exchange Listing Rule 12.43A relating to Section 1
of the Combined Code.
This report sets out how the principles of the Combined
Code have been applied.
The Company has throughout the year been in
compliance with the Code Provisions set out in Section 1
of the Combined Code on Corporate Governance issued
by the London Stock Exchange except as regards
(i) the nominations committee and the recognition of a
senior independent director and (ii) the period to 1 March
1998 when the appointment of Mr B H Asher brought the
number of non-executives to not less than one third of
the Board. The appointment followed a careful search for
a suitable candidate to ensure that non-executives would
also continue to be of sufficient calibre as well as number
to carry significant weight in the Board’s decisions.
As permitted by the London Stock Exchange, the
Company has complied with Code provision D.2.1 on
internal control by reporting on internal financial control in
accordance with the guidance for directors on internal
control and financial reporting that was issued in
December 1994.
Board constitution and procedures
Miss B J Moorhouse resigned as Group Finance Director
with effect from 31 May 1998 with her responsibilities
having been taken over by Mr J M Bishop, FCA,
Corporate Planning Director. His appointment as Group
Finance Director was formally confirmed on 24 June
1998.
Mr B H Asher was appointed as a non-executive director
with effect from 1 March 1998. Short biographical details
of Mr Asher are shown on page 14.
Consequent to these changes, the Board is comprised of
seven directors of whom three are non-executive and four
executive directors. The roles of Chairman and Chief
Executive are clearly defined and separate.
All of the non-executive directors are considered to be
independent of management and free from any business
or other relationship which could materially affect their
independent judgement. As the number of individuals
concerned is only two the Board do not feel that any
positive benefit would arise from following the Combined
Code provision that one of the non-executive directors
other than the Chairman should be recognised and
identified as being the senior independent director.
The composition of the Board satisfies the Code
Principles and provisions that the Board should have a
balance of executive and non-executive directors in terms
of number and relevant experience to enable it to have
effective leadership and control of the Company and its
subsidiaries. It also ensures that the decision making
process cannot be dominated by any individual or small
group of individuals.
The Board met on ten scheduled occasions during the
year in addition to ad hoc meetings convened for
particular purposes. For each of the scheduled meetings,
a comprehensive information pack is provided in advance
of the meeting to allow for proper detailed consideration.
The key purposes of these meetings were to review all
significant aspects of the Group’s activities, supervise the
executive management and to make decisions in relation
to those matters which are in the formal schedule
specifically reserved to the Board for decision.
There are agreed procedures by which Directors are able
to take independent professional advice on matters
relating to their duties, if necessary, at the expense of the
Company. For certain purposes the Company Secretary is
regarded as falling within that category of advisers and
has been instructed by the Board to act accordingly in
those circumstances. The Board has also resolved that
any question of the removal from office of the Company
Secretary is a matter to be considered by the Board as a
whole.
The Board considers that because of its small size and
the manner in which it conducts its business, a
nominations committee would not be appropriate.
The Board’s policy on appointments to it is that every
Board member should have the opportunity of individual
meetings with prospective candidates following which
there should be a unanimous view in favour of the
appointment. Care is taken to ensure that new
appointees are given a thorough understanding of the
Group’s activities and are able to meet its senior
management personnel.
As regards the periodic re-election of all Directors
(including non-executives) the practices of the Board
comply with the Combined Code. Where a non-executive
is appointed for a specified period, the appointment is in
any case subject to Companies Act provisions regarding
the removal of a director.
19
Corporate Governance
at 31 December 1998
Board committees
The Board has established an audit committee and a
remuneration committee. Membership is comprised
of all of the non-executive directors, Sir D P Hornby,
Mr B M Asher and Ms G Gallacher. Where appropriate
specialist members of staff may also participate.
Audit committee
The audit committee was established by resolution of
the Board which set out its written terms of reference.
These included a duty to keep under review the scope
and results of the audit, its cost effectiveness and the
objectivity of the auditors. Meetings of the committee
may be attended by the Finance Director and by a
representative of the external auditors. The committee
meets at least twice yearly and in addition, the external
auditors may request a meeting at any time they consider
it necessary.
Remuneration committee
Remuneration committee meetings are normally expected
to be attended by the Chief Executive. Meetings will
normally be held twice in each year to cover all elements
of the directors’ remuneration. A remuneration report is
included in the Directors Report on pages 17 and 18.
Internal financial control
The Board have formally acknowledged that they are
responsible for the Group’s system of internal financial
control. They are designed and operated so as to provide
reasonable, but not absolute, assurance that the Group’s
assets are correctly stated and are safeguarded against
loss. The main features of the system are as follows:
Financial reporting systems
The Board recognises that an essential part of the
responsibility for running a business is the effective
safeguarding of assets, the proper recognition of
liabilities and the accurate reporting of profits.
The Group has a comprehensive system for monthly
reporting to the Board of financial results with budget
comparisons and the Board is represented at all
subsidiary board meetings. Subsidiary companies
prepare rolling three year business plans which are
reviewed by the Board and are followed by detailed
annual budgets.
Quality and integrity of personnel
The Board has established a set of core values for
the Group. These are set out in its Business Plan
and are actively communicated to Group personnel
at all levels. Quality and integrity are key components
of those values and are regarded as central to the
maintenance of the effectiveness of the Group’s
system of internal financial control.
Risk management
Formulation of risk management strategy is a matter
specifically reserved for decision by the Board.
The Board also reserves to itself the evaluation of
any risk arising from the acquisition or development
of any new activities. Particular care is taken to
ensure that appropriate and adequate insurance
arrangements are in place.
Investment and capital expenditure appraisal
There are clear policies, detailed procedures and
defined levels of authority in relation to investment,
capital expenditure, significant cost commitments
and asset disposals.
Board reviews
The Board has reviewed the effectiveness of the
system of internal financial control for the accounting
year and for the period up to the date of approval of
the financial statements.
Going concern
After making enquiries, the directors have formed a
judgement at the time of approving the financial
statements that there is a reasonable expectation that
the Company has adequate resources to continue in
operational existence for the foreseeable future. For this
reason, the directors continue to adopt a going concern
basis in preparing the financial statements.
Relations with shareholders
The Company actively seeks to enter into dialogue with
institutional shareholders whenever possible. It also
endorses the Combined Code principles generally on the
conduct of Annual General Meetings including that it be
used as an opportunity for effective communication with
private shareholders whose participation in the
proceedings should be encouraged.
20
Directors’ Responsibilities
Company law requires the Directors to prepare financial
statements for each financial year which give a true and
fair view of the state of affairs of the Company and the
Group as at the end of the financial year and of the profit
or loss of the Group for that period. In preparing those
financial statements, the Directors are required to:
1.
2.
Select suitable accounting policies and then apply
them consistently
Make judgements and estimates that are
reasonable and prudent
3.
State whether applicable accounting standards
have been followed
The Directors are responsible for keeping proper
accounting records, for safeguarding the assets of the
Group, for the Group systems of internal financial control
and for the prevention and detection of fraud and other
irregularities.
Auditors’ Report
to the Members of Morgan Sindall plc
We have audited the financial statements on pages 22
to 41 which have been prepared under the historical cost
convention as modified by the revaluation of certain fixed
assets and the accounting policies set out on pages 27
and 28.
Respective responsibilities of directors and
auditors
The directors are responsible for preparing the Annual
Report, as described on this page of the financial
statements. Our responsibilities, as independent auditors,
are established by statute, the Auditing Practices Board,
the Listing Rules of the London Stock Exchange, and by
our profession’s ethical guidance.
We report to you our opinion as to whether the financial
statements give a true and fair view and are properly
prepared in accordance with the Companies Act. We also
report to you if, in our opinion, the directors’ report is not
consistent with the financial statements, if the company
has not kept proper accounting records, if we have not
received all the information and explanations we require
for our audit, or if information specified by law or the
Listing Rules regarding directors’ remuneration and
transactions with the company is not disclosed.
We review whether the statement on pages 19 and 20
reflects the company’s compliance with those provisions
of the Combined Code specified for our review by the
Stock Exchange, and we report if it does not. We are not
required to form an opinion on the effectiveness of the
company’s corporate governance procedures or its
internal controls.
We read the other information contained in the Annual
Report, including the corporate governance statement,
and consider whether it is consistent with the audited
financial statements. We consider the implications for our
report if we become aware of any apparent misstatement
or material inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing
Standards issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the
significant estimates and judgements made by the
directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to
the company’s and the Group’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence
to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion,
we also evaluated the overall presentation of information
in the financial statements.
Opinion
In our opinion the financial statements give a true and fair
view of the state of affairs of the Company and the Group
as at 31 December 1998 and of the profit of the Group for
the year then ended and have been properly prepared in
accordance with the Companies Act 1985.
Deloitte & Touche
Chartered Accountants and Registered Auditors
Leda House
Station Road
Cambridge
16 February 1999
21
Group Profit and Loss Account
for the year ended 31 December 1998
Notes
£’000s
£’000s
£’000s
£’000s
1998
1997
Turnover
Continuing operations
Acquisitions
Discontinued operations
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Continuing operations
Acquisitions
Discontinued operations
Total operating profit
Share of profits/(losses) of
joint venture
Net interest receivable/(payable)
Profit on ordinary activities before taxation
Tax charge on profit on ordinary activities
Profit on ordinary activities after taxation
Equity minority interest
1
1
2
1,3
4
5
Profit for the year attributable to
members of the parent company
Dividends on equity and non-equity shares
6
Retained profit for the year
Earnings per ordinary share
Diluted earnings per ordinary share
8
8
405,156
17,005
2,406
–––––––
424,567
(379,084)
–––––––
45,483
(38,081)
1,045
–––––––
8,531
(91)
7
–––––––
7,476
–
70
–––––––
8,447
67
1,246
–––––––
9,760
(2,046)
–––––––
7,714
–
–––––––
7,714
(2,464)
–––––––
5,250
–––––––
22.15p
–––––––
21.11p
–––––––
328,233
–
3,003
–––––––
331,236
(293,085)
–––––––
38,151
(32,218)
1,613
–––––––
7,546
(250)
(36)
–––––––
7,260
(1,412)
–––––––
5,848
(88)
–––––––
5,760
(2,038)
–––––––
3,722
–––––––
16.38p
–––––––
15.97p
–––––––
22
Combined Balance Sheets
at 31 December 1998
Group
Company
Fixed assets
Intangible assets
Tangible assets
Investment in joint venture
Investments
Current assets
Stocks
Debtors
Cash at bank and in hand
Notes
12
13
14
14
15
16
Creditors: amounts falling due within one year 17
18
19
23
28
Net current assets/(liabilities)
Total assets less current liabilities
Creditors: amounts falling due after
more than one year
Provisions for liabilities and charges
Net assets
Capital and reserves
Called up share capital
Share premium account
Revaluation reserve
Special reserve
Profit and loss account
Total shareholders’ funds
Equity minority interests
Total capital employed
Shareholders’ funds are attributable to:
Equity shareholders’ funds
Non-equity shareholders’ funds
Approved by the Board on 16 February 1999
J C Morgan
J M Bishop
1998
£’000s
3,970
11,384
184
690
–––––––
16,228
–––––––
7,155
67,828
28,386
–––––––
103,369
–––––––
(96,415)
–––––––
6,954
–––––––
23,182
–
–
–––––––
23,182
–––––––
6,619
3,419
2,620
–
10,524
–––––––
23,182
–
–––––––
23,182
–––––––
18,247
4,935
–––––––
23,182
–––––––
1997
£’000s
–
17,035
4
500
–––––––
17,539
–––––––
6,464
54,937
22,720
–––––––
84,121
–––––––
(80,468)
–––––––
3,653
–––––––
21,192
(3,458)
(218)
–––––––
17,516
–––––––
6,616
3,219
6,321
–
1,242
–––––––
17,398
118
–––––––
17,516
–––––––
12,460
4,938
–––––––
17,398
–––––––
1998
£’000s
–
7,503
–
35,302
–––––––
42,805
–––––––
6,992
3,655
3,289
–––––––
13,936
–––––––
(16,162)
–––––––
(2,226)
–––––––
40,579
–
(80)
–––––––
40,499
–––––––
6,619
3,419
2,289
13,644
14,528
–––––––
40,499
–
–––––––
40,499
–––––––
35,564
4,935
–––––––
40,499
–––––––
1997
£’000s
–
13,537
–
31,911
–––––––
45,448
–––––––
5,981
1,926
1,045
–––––––
8,952
–––––––
(12,824)
–––––––
(3,872)
–––––––
41,576
(3,458)
(173)
–––––––
37,945
–––––––
6,616
3,219
6,321
13,644
8,145
–––––––
37,945
–
–––––––
37,945
–––––––
33,007
4,938
–––––––
37,945
–––––––
23
Group Cash Flow Statement
for the year ended 31 December 1998
Notes
26
Net cash inflow from operating activities
Returns on investments and servicing of finance
Interest received
Interest paid
Dividends paid to preference shareholders
Taxation
Corporation tax paid
Capital expenditure and financial investment
Payments to acquire tangible fixed assets
Receipts from sale of tangible fixed assets
Repayment of loans from associated undertakings
Payments to acquire fixed asset investments
Acquisitions and disposals
Purchase of subsidiary undertakings
Net overdrafts acquired with subsidiary undertakings
Sale of subsidiary undertaking
Net cash disposed of with subsidiary undertaking
Equity dividends paid
Net cash inflow before financing
Financing
Issue of shares, net of expenses
New loans acquired
Loans repaid
Net cash outflow from financing activities
Increase in cash
27
1998
£’000s
9,276
–––––––
1,358
(412)
(278)
–––––––
668
–––––––
(1,264)
–––––––
(2,000)
6,687
–
(190)
–––––––
4,497
–––––––
(424)
(888)
35
(90)
–––––––
(1,367)
–––––––
(1,889)
–––––––
9,921
–––––––
79
–
(4,334)
–––––––
(4,255)
–––––––
5,666
–––––––
1997
£’000s
11,584
–––––––
711
(1,083)
(278)
–––––––
(650)
–––––––
(999)
–––––––
(2,628)
7,176
450
(500)
–––––––
4,498
–––––––
(916)
(467)
390
(32)
–––––––
(1,025)
–––––––
(1,510)
–––––––
11,898
–––––––
126
4,500
(9,111)
–––––––
(4,485)
–––––––
7,413
–––––––
24
Combined Statement of Movements in Reserves and Shareholders’ Funds
for the year ended 31 December 1998
Group
Share
premium Goodwill Revaluation
reserve
reserve
account
£'000s
£'000s
£'000s
Profit
and loss
account
£'000s
Total
reserves
£'000s
Share
capital
£'000s
1998
Share-
holders'
funds
£'000s
1997
Share-
holders'
funds
£'000s
Balance at 1 January
3,219
(7,102)
6,321
8,344
10,782
6,616
17,398
14,468
Retained profit for year
New shares issued
Options exercised
Transfer of realised
revaluation reserve
Elimination of goodwill
reserve
Surplus on revaluation
Acquisition of subsidiary
undertakings
Balance at 31 December
–
–
–
–
–
122
78
–
–
–
–
–
–
5,250
5,250
–
–
122
78
(4,032)
4,032
–
–
7,102
–
(7,102)
–
331
–
331
–
2
1
–
–
–
5,250
3,722
124
79
–
126
–
–
–
–
331
1,461
–
–
––––––– –––––––
–
––––––– –––––––
3,419
–
–
(2,379)
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
17,398
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
10,524
23,182
16,563
6,619
2,620
–
–
–
Included within the profit and loss account balance at 31 December 1998 is an amount for unrealised goodwill
totalling £7,102,000.
Company
Share
premium
account
£'000s
Special Revaluation
reserve
reserve
£'000s
£'000s
Profit
and loss
account
£'000s
Total
reserves
£'000s
Share
capital
£'000s
1998
Share-
holders'
funds
£'000s
1997
Share-
holders'
funds
£'000s
Balance at 1 January
3,219
13,644
6,321
8,145
31,329
6,616
37,945
31,753
Retained profit for year
New shares issued
Options exercised
Transfer of realised
revaluation reserve
Surplus on revaluation
Balance at 31 December
–
122
78
–
–
–
–
–
–
–
–
2,351
2,351
–
–
122
78
(4,032)
4,032
–
–
2
1
–
2,351
4,605
124
79
–
126
–
–
–
–
––––––– –––––––
13,644
––––––– –––––––
3,419
–
–
1,461
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
37,945
––––––– ––––––– ––––––– ––––––– ––––––– –––––––
14,528
33,880
40,499
6,619
2,289
–
–
–
25
Other Primary Statements
for the year ended 31 December 1998
Statement of Total Recognised Gains and Losses
for the year ended 31 December 1998
Profit for the financial year before dividends
Share of joint venture’s surplus on revaluation of investment property
Surplus on revaluation of investment property
Total recognised gains and losses
1998
£’000s
7,714
331
–
–––––––
8,045
–––––––
1997
£’000s
5,848
–
1,461
–––––––
7,309
–––––––
Note of Historical Cost Profits and Losses
for the year ended 31 December 1998
Profit on ordinary activities before taxation
Realisation of property valuation gains of prior years
Difference between the historical cost depreciation charge and the actual
depreciation charge for the year calculated on the revalued amount
Historical cost profit on ordinary activities before taxation
Historical cost profit on ordinary activities after taxation,
minority interests and dividends
1998
£’000s
9,760
4,032
19
–––––––
13,811
–––––––
9,301
–––––––
1997
£’000s
7,260
328
22
–––––––
7,610
–––––––
4,072
–––––––
26
Principal Accounting Policies
for the year ended 31 December 1998
Basis of accounting
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain
fixed asset properties, and in accordance with applicable accounting standards. Compliance with SSAP19 accounting for
investment properties requires departure from the requirements of the Companies Act 1985 relating to depreciation and an
explanation is given below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary
undertakings.
Acquisitions and disposals
Change in accounting policy
The results of subsidiaries acquired during the year are included in the consolidated profit and loss account from the date of
acquisition. Goodwill is the difference between the fair value of consideration given on acquisition of a business and the
aggregate fair value of its separable net assets. From 1 January 1998 goodwill arising on consolidation is capitalised and is
being written off in equal instalments over its useful economic life of 20 years.
In accordance with the transitional rules of Financial Reporting Standard 10 the accounting policy for goodwill arising on
acquisition, in previous years held in the goodwill reserve, is to eliminate it against the profit and loss reserve. Amounts will
be charged or credited to the profit and loss account on subsequent disposal of the business to which it relates.
Turnover
Turnover is defined as the value of goods and services rendered excluding VAT.
Fixed asset investments
Except as stated below, investments held as fixed assets are stated at cost less provision for any impairment in value. In the
consolidated accounts the Group’s share of the results of the joint ventures is shown each year in the profit and loss account
and the Group’s share of retained profits and reserves is added to the cost of the investment in the balance sheet.
Fixed assets and depreciation
No depreciation is provided on freehold land. On other assets depreciation is provided in equal annual instalments at rates
calculated to write off the cost or valuation of fixed assets over their estimated useful lives as follows:
Freehold buildings
Leasehold property
Plant, machinery, motor vehicles and equipment
–
–
–
50 years
period of the lease
between 3 and 10 years
No depreciation is provided in respect of freehold investment properties which are revalued annually and the aggregate
surplus or deficit is transferred to revaluation reserve. The Companies Act 1985 requires all properties to be depreciated.
However, this requirement conflicts with the generally held accounting principle set out in SSAP 19. The Directors consider
that, as these properties are not held for consumption, but for their investment potential, to depreciate them would not give
a true and fair view, and that it is necessary to adopt SSAP 19 in order to give a true and fair view.
If this departure from the Act had not been made, the profit for the financial year would have been reduced by depreciation.
However, the amount of depreciation cannot reasonably be quantified because depreciation is only one of many factors
reflected in the annual valuation and the amount which might otherwise have been shown cannot be separately identified or
quantified.
27
Principal Accounting Policies
for the year ended 31 December 1998
Stocks
Stocks are valued at the lower of cost and net realisable value. Interest incurred on borrowings to finance specific
developments is capitalised.
Contract accounting
Contracts are accounted for as long term contracts. Anticipated net sales value of contracts include a proportion of
attributable profit where a profitable outcome can be foreseen, provision being made for foreseeable losses. Turnover less
progress payments is recorded in “amounts recoverable on contracts”, within debtors. Where progress payments exceed
turnover and other contract balances the excess is shown as “payments on account on contracts” in creditors.
Deferred taxation
Provision under the liability method is made for deferred taxation at the current rate of corporation tax on all timing differences,
to the extent that they are expected to crystallise.
Leases
Rental costs under operating leases are charged to the profit and loss account in equal amounts over the period of the
leases.
Pensions
The Group contributes to The Morgan Sindall Retirement Benefits Plan and to other employees’ personal pension
arrangements which are of a defined contribution type. Subject to the circumstances referred to in Note 25, the annual
costs are charged to the profit and loss account.
28
Notes to the Accounts
for the year ended 31 December 1998
1 Analysis of turnover, gross profit, operating profit and net assets
Regional construction
Fit out
Construction activities
Property
Group activities
Net cash balances
Turnover
£’000s
254,600
162,967
––––––––
417,567
7,000
–
––––––––
424,567
––––––––
1998
Profits/
(losses)
£’000s
2,102
6,306
––––––––
8,408
1,548
(1,509)
––––––––
8,447
––––––––
Turnover
£’000s
184,027
139,539
––––––––
323,566
7,670
–
––––––––
331,236
––––––––
Net assets
£’000s
(8)
(11,005)
––––––––
(11,013)
14,404
(8,595)
––––––––
(5,204)
28,386
––––––––
23,182
––––––––
Net assets are stated after deducting interest bearing net cash balances.
Continuing
operations
£’000s
Acquisitions
£’000s
Discontinued
operations
£’000s
405,156
(361,173)
––––––––
43,983
(36,497)
1,045
––––––––
8,531
––––––––
17,005
(15,896)
––––––––
1,109
(1,200)
–
––––––––
(91)
––––––––
2,406
(2,015)
––––––––
391
(384)
–
––––––––
7
––––––––
Turnover
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
2 Other operating income
Rent receivable
3 Operating profit
Operating profit is stated after charging
Depreciation
Amortisation of goodwill
Hire of plant and machinery
Operating lease costs
Land and buildings
Other
Auditors’ remuneration Audit – Morgan Sindall plc
Audit – Subsidiary undertakings
Other
1997
Profits/
(losses)
£’000s
2,870
3,575
––––––––
6,445
2,279
(1,178)
––––––––
7,546
––––––––
1998
Total
£’000s
424,567
(379,084)
––––––––
45,483
(38,081)
1,045
––––––––
8,447
––––––––
Net assets
£’000s
(3,896)
(6,622)
––––––––
(10,518)
17,777
(8,129)
––––––––
(870)
18,386
––––––––
17,516
––––––––
1997
Total
£’000s
331,236
(293,085)
––––––––
38,151
(32,218)
1,613
––––––––
7,546
––––––––
1998
£’000s
1997
£’000s
1,045
––––––––
1,613
––––––––
1998
£’000s
1,507
191
4,584
1,026
1,269
11
139
34
1997
£’000s
1,554
–
4,809
826
1,007
11
138
4
29
Notes to the Accounts
for the year ended 31 December 1998
4 Net interest receivable/(payable)
Interest receivable
Interest payable on bank loans and overdrafts
Interest payable on other loans
Add: Interest capitalised
5 Tax charge on profit on ordinary activities
Corporation tax payable at 31% (1997: 33%)
Under provision in prior years
Share of tax of joint venture
1998
£’000s
1,358
(394)
(18)
––––––––
946
300
––––––––
1,246
––––––––
1998
£’000s
1,773
273
–
––––––––
2,046
––––––––
1997
£’000s
789
(1,123)
–
––––––––
(334)
298
––––––––
(36)
––––––––
1997
£’000s
1,237
158
17
––––––––
1,412
––––––––
The tax charge for the year is lower than the standard rate due to the availability of tax losses brought forward and the
utilisation of advance corporation tax previously written off.
6 Dividends on equity and non-equity shares
Non-equity dividends on preference shares
Paid
Accrued
Equity dividends on ordinary shares
Interim paid
Final proposed
2.05p (1997: 1.67p)
4.45p (1997: 3.58p)
1998
£’000s
219
59
––––––––
278
––––––––
688
1,498
––––––––
2,186
––––––––
2,464
––––––––
1997
£’000s
219
59
––––––––
278
––––––––
559
1,201
––––––––
1,760
––––––––
2,038
––––––––
7 Profit of parent company
The Company has taken advantage of s230 of the Companies Act 1985 and consequently the profit and loss account of the
parent company is not presented as part of these accounts. The parent’s profit for the financial year amounted to £4,815,000
(1997: £6,643,000).
8 Earnings per ordinary share
The calculation of the earnings per share is based on the weighted average number of 33,575,000 ordinary shares in
issue during the year (1997: 33,461,000) and on the profits for the year attributable to ordinary shareholders of £7,436,000
(1997: £5,482,000).
In calculating the diluted earnings per share, earnings are adjusted for the preference dividend of £278,000 (1997: £278,000)
making adjusted earnings of £7,714,000. The weighted average number of ordinary shares are adjusted for the dilutive effect
of the convertible preference shares by 1,974,000 (1997: 1,975,000) and share options by 999,000 (1997: 624,000) giving
an adjusted number of ordinary shares of 36,548,000 (1997: 36,060,000).
30
Notes to the Accounts
for the year ended 31 December 1998
9 Employees
The average number of people employed by the Group during the period was:
10 Staff costs
Wages and salaries
Social security costs
Pension costs
1998
No.
1997
No.
1,869
––––––––
1,237
––––––––
1998
£’000s
46,461
4,284
1,051
––––––––
51,796
––––––––
1997
£’000s
30,395
2,905
769
––––––––
34,069
––––––––
11 Directors’ remuneration
J C Morgan (Highest paid director)
A M Stoddart
J M Bishop
J J C Lovell
B J Moorhouse
A T Sloan*
Executive directors
Sir D P Hornby (Chairman)
G Gallacher
B Asher
Non executive directors
Totals
Salary
and fees
£’000s
Bonus
£’000s
Benefits
£’000s
Compensation
for loss of
office
£’000s
Pension
£’000s
1998
Totals
£’000s
1997
Totals
£’000s
140
130
130
105
41
–
–––––
546
–––––
36
20
17
–––––
73
–––––
619
–––––
105
98
98
77
–
–
–––––
378
–––––
–
–
–
–––––
–
–––––
378
–––––
16
18
13
13
6
–
–––––
66
–––––
–
–
–
–––––
–
–––––
66
–––––
14
13
13
11
4
–
–––––
55
–––––
–
–
–
–––––
–
–––––
55
–––––
–
–
–
–
180
–
–––––
180
–––––
–
–
–
–––––
–
–––––
180
–––––
275
259
254
206
231
–
–––––
1,225
–––––
36
20
17
–––––
73
–––––
1,298
–––––
207
188
178
176
172
73
–––––
994
–––––
36
20
–
–––––
56
–––––
1,050
–––––
The totals of directors’ remuneration shown above include fees of £73,000 (1997: £56,000). Pension contributions made on
behalf of the five executive directors are made to money purchase pension schemes. Further details of the directors’
remuneration are contained in the Directors’ Report on pages 17 and 18.
* Includes £30,000 compensation for loss of office in 1997.
Long term incentive plan
A long term incentive plan has been established as explained in detail in the long term incentive plan section of the Directors’
Report on page 17. Conditional awards of shares which have been made are shown therein. An amount of £126,000 has
been accrued for potential future awards relating to 1998 which will be calculated based on the three year period ending
31 December 2000.
31
Notes to the Accounts
for the year ended 31 December 1998
12 Intangible fixed assets
Group
Cost or valuation
At 1 January 1998
Additions
At 31 December 1998
Amortisation
At 1 January 1998
Provided in the year
At 31 December 1998
Net book value at 31 December 1998
Net book value at 31 December 1997
13 Tangible fixed assets
(a) Group
Cost or valuation
At 1 January 1998
Additions
Acquisition of subsidiary undertaking
Reclassification
Disposals
Disposal of subsidiary undertaking
At 31 December 1998
Depreciation
At 1 January 1998
Provided in the year
Acquisition of subsidiary undertaking
Disposals
Disposal of subsidiary undertaking
At 31 December 1998
Net book value at 31 December 1998
Net book value at 31 December 1997
Plant, machinery
& equipment
£’000s
5,563
1,565
305
(654)
(1,031)
(93)
––––––––
5,655
––––––––
2,867
1,141
211
(730)
(76)
––––––––
3,413
––––––––
2,242
––––––––
2,696
––––––––
Motor
vehicles
£’000s
1,687
111
134
–
(613)
(70)
––––––––
1,249
––––––––
1,322
163
119
(547)
(27)
––––––––
1,030
––––––––
219
––––––––
365
––––––––
Freehold
property
£’000s
12,023
170
–
–
(5,826)
–
––––––––
6,367
––––––––
131
46
–
–
–
––––––––
177
––––––––
6,190
––––––––
11,892
––––––––
Leasehold
property
£’000s
2,321
154
–
654
–
–
––––––––
3,129
––––––––
239
157
–
–
–
––––––––
396
––––––––
2,733
––––––––
2,082
––––––––
32
Goodwill
£’000s
–
4,161
––––––––
4,161
––––––––
–
191
––––––––
191
––––––––
3,970
––––––––
–
––––––––
Total
£’000s
21,594
2,000
439
–
(7,470)
(163)
––––––––
16,400
––––––––
4,559
1,507
330
(1,277)
(103)
––––––––
5,016
––––––––
11,384
––––––––
17,035
––––––––
Notes to the Accounts
for the year ended 31 December 1998
13 Tangible fixed assets (continued)
(b) Company
Cost or valuation
At 1 January 1998
Additions
Disposals
At 31 December 1998
Depreciation
At 1 January 1998
Provided in the year
Disposals
At 31 December 1998
Net book value at 31 December 1998
Net book value at 31 December 1997
Plant, machinery
& equipment
£’000s
299
183
(314)
––––––––
168
––––––––
66
41
(46)
––––––––
61
––––––––
107
––––––––
233
––––––––
Freehold
property
£’000s
11,658
–
(5,826)
––––––––
5,832
––––––––
129
44
–
––––––––
173
––––––––
5,659
––––––––
11,529
––––––––
The net book value of land and buildings comprises:
Group
Investment properties
Freehold
Short leasehold
Other properties
Freehold
Short leasehold
1998
£’000s
3,072
1,466
––––––––
4,538
––––––––
3,118
1,267
––––––––
4,385
––––––––
8,923
––––––––
1997
£’000s
8,572
1,499
––––––––
10,071
––––––––
3,320
583
––––––––
3,903
––––––––
13,974
––––––––
Land and buildings at cost or valuation are stated:
Group
At valuation
1994
1997
1998
At cost
Comparable amounts determined according to
the historical cost convention:
Land and buildings
1998
£’000s
1,626
–
4,668
3,202
––––––––
9,496
––––––––
1997
£’000s
1,973
10,134
–
2,237
––––––––
14,344
––––––––
Cost
1998
£’000s
Accumulated
depreciation
1998
£’000s
7,841
––––––––
881
––––––––
Leasehold
property
£’000s
1,888
–
–
––––––––
1,888
––––––––
113
38
–
––––––––
151
––––––––
1,737
––––––––
1,775
––––––––
1998
£’000s
2,767
1,466
––––––––
4,233
––––––––
2,892
271
––––––––
3,163
––––––––
7,396
––––––––
1998
£’000s
1,626
–
4,363
1,731
––––––––
7,720
––––––––
Net book
value
1998
£’000s
6,960
––––––––
Total
£’000s
13,845
183
(6,140)
––––––––
7,888
––––––––
308
123
(46)
––––––––
385
––––––––
7,503
––––––––
13,537
––––––––
Company
1997
£’000s
8,267
1,499
––––––––
9,766
––––––––
3,262
276
––––––––
3,538
––––––––
13,304
––––––––
Company
1997
£’000s
1,973
9,829
–
1,744
––––––––
13,546
––––––––
Net book
value
1997
£’000s
8,023
––––––––
The directors have revalued the Group’s investment properties on 31 December 1998 at open market value. They consider
that the carrying value is equivalent to current market value.
33
Notes to the Accounts
for the year ended 31 December 1998
14 Investments
(a) Group
At 1 January 1998
Additions
Share of results for the year
Share of revaluation reserve
Reclassification from provisions for liabilities and charges
At 31 December 1998
Investment in joint venture
Group share of gross assets
Group share of gross liabilities
Group shares of joint venture net assets
Group share of turnover
Investment
in joint
venture
£’000s
Own shares
at cost
£’000s
4
–
67
331
(218)
––––––––
184
––––––––
1998
£’000s
6,754
(6,570)
––––––––
184
––––––––
1,837
––––––––
500
190
–
–
–
––––––––
690
––––––––
1997
£’000s
3,646
(3,860)
––––––––
(214)
––––––––
219
––––––––
The Group’s investment in Primary Medical Property Limited, previously classified as an associated undertaking, has
been reclassified as a joint venture in accordance with Financial Reporting Standard 9 “Associates and joint ventures”.
The Group’s share of joint venture turnover and disclosure of gross assets and liabilities is shown by way of note due to their
immateriality in relation to corresponding amounts for the Group and because the term bank loans which form the majority
of the gross liabilities of Primary Medical Property Limited is non-recourse to Morgan Sindall plc. The principle place of
business of Primary Medical Property Limited is 77 Newman Street, London W1P 3LA.
Morgan Sindall plc’s involvement in the management of Primary Medical Property Limited is restricted to the appointment of
two directors under the terms of a shareholder agreement under which certain matters may only be undertaken by the
Company with the approval of all directors.
Own shares
The own shares at cost represent 400,000 Morgan Sindall plc ordinary shares held in trust in connection with the long term
incentive plan as detailed in the Directors’ Report. Based on the Company’s share price on 31 December 1998 of £2.045,
the market value of the shares was £818,000.
(b) Company
Cost at 1 January 1998
Additions
Disposals
Repaid during the year
Cost at 31 December 1998
Provisions at 1 January 1998
Disposals
(Release of provisions)/
provisions created in year
Provisions at 31 December 1998
Net book value at 31 December 1998
Net book value at 31 December 1997
Other
loans
£’000s
500
190
–
–
––––––––
690
––––––––
–
–
–
––––––––
–
––––––––
690
––––––––
500
––––––––
Subsidiary undertakings
Loans
Shares
£’000s
£’000s
29,070
6,696
(1,873)
–
––––––––
33,893
––––––––
1,993
(1,123)
(18)
––––––––
182
––––––––
33,041
––––––––
27,077
––––––––
4,814
–
–
(2,563)
––––––––
2,251
––––––––
480
–
200
––––––––
680
––––––––
1,571
––––––––
4,334
––––––––
Joint
venture
shares
£’000s
4
–
–
–
––––––––
4
––––––––
4
–
–
––––––––
4
––––––––
–
––––––––
–
––––––––
Total
£’000s
34,388
6,886
(1,873)
(2,563)
––––––––
36,838
––––––––
2,477
(1,123)
182
––––––––
1,536
––––––––
35,302
––––––––
31,911
––––––––
34
Notes to the Accounts
for the year ended 31 December 1998
15 Stocks
Development works and building land
Trading properties
Materials and equipment
Group
Company
1998
£’000s
4,364
2,628
163
––––––––
7,155
––––––––
1997
£’000s
3,728
2,628
108
––––––––
6,464
––––––––
1998
£’000s
4,364
2,628
–
––––––––
6,992
––––––––
1997
£’000s
3,353
2,628
–
––––––––
5,981
––––––––
Included within development works and building land is £177,000 (1997: £15,000) in respect of interest capitalised.
16 Debtors
Group
Company
Trade debtors
Amounts recoverable on contracts
Amounts owed by subsidiary undertakings
Amounts owed by joint venture
Corporation tax recoverable
Other debtors
Prepayments and accrued income
17 Creditors: amounts falling due within one year
Bank loans
Trade creditors
Amounts owed to subsidiary undertakings
Other creditors
Corporation tax
Other tax and social security
Accruals and deferred income
Dividend
1998
£’000s
31,591
33,826
–
40
–
1,369
1,002
––––––––
67,828
––––––––
1998
£’000s
–
32,271
–
1,988
1,669
2,896
56,034
1,557
––––––––
96,415
––––––––
1997
£’000s
23,810
29,709
–
74
–
736
608
––––––––
54,937
––––––––
1998
£’000s
219
–
2,452
40
200
614
130
––––––––
3,655
––––––––
1997
£’000s
165
–
710
74
328
622
27
––––––––
1,926
––––––––
Group
Company
1997
£’000s
876
27,092
–
2,705
886
2,387
45,262
1,260
––––––––
80,468
––––––––
1998
£’000s
–
74
11,543
167
–
185
2,636
1,557
––––––––
16,162
––––––––
1997
£’000s
876
49
7,551
1,181
–
63
1,844
1,260
––––––––
12,824
––––––––
18 Creditors: amounts falling due after more than one year
Bank loans
Group
Company
1998
£’000s
1997
£’000s
1998
£’000s
1997
£’000s
–
––––––––
3,458
––––––––
–
––––––––
3,458
––––––––
The bank loans which were outstanding at 1 January 1998 and which were repayable in quarterly instalments between 1998
and 2006 were repaid during the year.
35
Notes to the Accounts
for the year ended 31 December 1998
19 Provisions for liabilities and charges
Group
Provisions for losses:
At 1 January 1998
Reclassified as investment
Released to profit and loss account
Share of joint venture losses
Provision for losses of subsidiary undertakings
At 31 December 1998
1998
£’000s
218
(218)
–
–
–
––––––––
–
––––––––
1997
£’000s
–
–
–
218
–
––––––––
218
––––––––
Company
1998
£’000s
1997
£’000s
173
–
(93)
–
–
––––––––
80
––––––––
616
–
(554)
–
111
––––––––
173
––––––––
The amounts of deferred taxation provided and not provided in the accounts are as follows:
Group
Capital allowances in excess of depreciation
Taxation loss relief and other timing differences
1998
£’000s
–
–
––––––––
–
––––––––
Provided
Not provided
1997
£’000s
–
–
––––––––
–
––––––––
1998
£’000s
235
(235)
––––––––
–
––––––––
1997
£’000s
–
–
––––––––
–
––––––––
Advance corporation tax amounting to £154,000 (1997: £502,000) written off within the accounts remains available to
offset against future taxable profits. In addition there are taxation losses to carry forward of approximately £7 million
(1997: £6 million).
20 Disposal of business
On 7 December 1998 the sale of a subsidiary company, Sotham Engineering Services Limited was completed for a cash
consideration of £35,000. Deferred consideration of up to £238,000 is receivable in cash over a four year period on the
achievement of certain performance criteria regarding contracts and profits. The total consideration would be in excess of
the net assets of the company at the date of sale.
The purchasers were the management team of Sotham Engineering Services Limited and included Mr P R Kerrison, one of
its directors and accordingly a related party as defined in The Listing Rules of the London Stock Exchange. This note
complies with an undertaking given to the London Stock Exchange to include details of the transaction in these Accounts.
During the year until the date of disposal the business had a net operating cash outflow of £293,000 and spent £29,000 on
capital expenditure and financial investment.
36
Notes to the Accounts
for the year ended 31 December 1998
21 Acquisitions
John E. B. Wheatley Limited
On 4 February 1998 the Company acquired the entire issued share capital of John E. B. Wheatley Limited for a total
consideration of £365,000 in cash. The losses, after taxation, of John E. B. Wheatley Limited were as follows:
1 April 1997 to date of acquisition
Preceding financial year ending 31 March 1997
The following table analyses the book value of the major categories of assets and liabilities acquired:
Tangible fixed assets
Current assets
Creditors
Net cash balances
Net liabilities
Cost of acquisition including expenses
Goodwill
Book value
at date of
acquisition
£'000
Provisional
fair value
adjustments
£'000
109
5,344
(5,164)
(888)
––––––––
(599)
––––––––
–
–
(3,138)
–
––––––––
(3,138)
––––––––
£'000's
(1,399)
(47)
Fair value
of net
assets
£'000
109
5,344
(8,302)
(888)
––––––––
(3,737)
(424)
––––––––
(4,161)
––––––––
The acquisition has been accounted for by the acquisition method of accounting. The provisional fair value adjustments
mainly relate to contract accruals following the assessment of contract profitability.
Ottervale Estates Limited
On 14 July 1998 the Company acquired the remaining 14.3% share of the issued share capital of its subsidiary undertaking,
Ottervale Estates Limited for a consideration of 50,000 ordinary shares of Morgan Sindall plc which had a book and fair value
on the date of acquisition of £124,250.
Cash flow
During the year, acquisitions contributed £120,000 to the Group's net operating cash flows, paid £1,000 in respect of net
returns on investment and servicing of finance and received £113,000 from investing activities.
22 Financial commitments
Capital expenditure
Authorised and contracted
Group
Company
1998
£’000s
1997
£’000s
1998
£’000s
1997
£’000s
78
––––––––
104
––––––––
–
––––––––
43
––––––––
37
Notes to the Accounts
for the year ended 31 December 1998
23 Called up share capital
Authorised
Ordinary shares of 5p each
5.625% Convertible cumulative redeemable
preference shares of £1 each
Issued and fully paid
Ordinary shares of 5p each
5.625% Convertible cumulative redeemable
preference shares of £1 each
1998
1997
No. ’000s
£’000s
No. ’000s
42,960
2,148
42,960
5,000
––––––––
47,960
––––––––
5,000
––––––––
7,148
––––––––
5,000
––––––––
47,960
––––––––
£’000s
2,148
5,000
––––––––
7,148
––––––––
33,661
1,684
33,519
1,678
4,935
––––––––
38,596
––––––––
4,935
––––––––
6,619
––––––––
4,938
––––––––
38,457
––––––––
4,938
––––––––
6,616
––––––––
Ordinary shares
The ordinary shares of 5p each of the Company issued during the year are shown below. Details of the share option schemes
referred to are given later in this note.
1.
2.
91,550 ordinary shares in respect of options exercised under the Company's 1988 Scheme (referred to below) for total
consideration of £79,000.
1,300 ordinary shares in respect of conversion rights attached to 3,250 convertible preference shares exercised as at
30 June 1998.
3.
50,000 ordinary shares in respect of the acquisition of shares in Ottervale Estates Limited as described in Note 21.
Preference shares
The convertible preference shares are convertible at the option of the holder on 30 June in each of the years 1991 to 2003
inclusive on the basis of 40 ordinary shares for every 100 convertible preference shares. After conversion of 75% of the
convertible preference shares the Company has the right to require the conversion of the outstanding balance. The
convertible preference shares are redeemable at par at the Company's option after the last date of conversion in 2003 and
are finally redeemable on 30 June 2005. There is no premium payable on a return of capital on a winding up and the
convertible preference shares do not entitle the holders to any participation in the profits or assets of the Company beyond
their preference dividend entitlement.
Options
The company has two share option schemes. The first scheme ('the 1988 Scheme') was introduced on 21 January 1988
and the second scheme ('the 1995 Scheme') received approval on 24 May 1995.
Options granted under the 1998 Scheme are exercisable between three and ten years from the date of grant and under the
1995 Scheme are exercisable between five and seven years from the date of grant.
The period for the granting of options under the 1988 Scheme expired in January 1998. As at 31 December 1998 there
remain 579,350 options outstanding under that Scheme exercisable at prices between £0.73 and £1.71.
At the same date there were 1,734,300 options outstanding under the 1995 Scheme exercisable at prices between £0.73
and £2.01.
No options have been granted to any present members of the Morgan Sindall plc Board.
24 Contingent liabilities
Group bank accounts are supported by cross-guarantees given by the Company and floating and fixed charges on certain
Group properties. Performance bond facilities are supported by cross-guarantees given by the Company and participating
trading companies in the Group. The overdraft facility of the joint venture is supported by a Group guarantee.
38
Notes to the Accounts
for the year ended 31 December 1998
25 Pensions
Defined contribution and hybrid schemes
The Morgan Sindall Retirement Benefits Plan was established on 31 May 1995 and is a defined contributions arrangement
which is now available to all permanent salaried staff in all Group companies. The Plan includes some defined benefit liabilities
and transfers of funds representing the accrued benefit rights of former active and deferred members of pension plans of
companies which are part of the Group as it now stands.
Subject as provided below, pension costs for the Plan and for other small defined contributions schemes in the Group
represent the employer’s contributions actually paid in the year together with employer’s contributions to the personal pension
plans of individuals, where applicable.
The latest actuarial valuation was dated 1 June 1998 and was prepared using the assumptions of rate of investment return
of 6.5% per annum, rate of earnings escalation; 5.5% per annum and rate of inflation of 4.5% per annum. The ongoing
liabilities of the Plan were assessed using the attained age method whereas the assets were taken at realisable market value.
The defined benefit liabilities are fully funded. The actuarial valuation referred to shows that on an ongoing basis, the value of
the assets represented 137% of the value of these liabilities. The actuarial valuation also showed that the realisable market
value of the Plan’s assets is in excess of its minimum liabilities when assessed on the Minimum Funding Requirement basis
(as defined in the Pensions Act 1995).
Accordingly, on the recommendation of the Plan actuary, certain employers’ contributions during the year have been funded
using the Unallocated Reserve of the Plan assets and in these circumstances no charge to the Profit and Loss Account of
the employer is recorded. The Plan actuary has recommended that this practice should continue to apply for the remainder
of the current year. The contributions paid by the Group for the year amounted to £686,000.
26 Reconciliation of operating profit to net cash inflow from operating activities
Operating profit
Depreciation of tangible fixed assets
Amortisation of goodwill
Profit on disposal of business
Profit on sale of fixed assets
(Increase)/decrease in stocks and work in progress
(Increase)/decrease in debtors
Increase in creditors
Net cash inflow from operating activities
27 Reconciliation and analysis of net cash flow to movement in net cash
Bank loans
due after
more than
one year
£’000s
Bank loans
due within
one year
£’000s
Cash at
bank and
in hand
£’000s
At 1 January 1998
Cash inflow
Cash outflow from financing
At 31 December 1998
22,720
5,666
–
––––––––
28,386
––––––––
(876)
–
876
––––––––
–
––––––––
(3,458)
–
3,458
––––––––
–
––––––––
1998
£’000s
8,447
1,507
191
(40)
(494)
(285)
(8,444)
8,394
––––––––
9,276
––––––––
1998
Net
cash
£’000s
18,386
5,666
4,334
––––––––
28,386
––––––––
1997
£’000s
7,546
1,554
–
–
(671)
37
704
2,414
––––––––
11,584
––––––––
1997
Net
cash
£’000s
9,296
7.413
1,677
––––––––
18,386
––––––––
39
Notes to the Accounts
for the year ended 31 December 1998
28 Revaluation reserve
Group
Company
Investment property revaluation reserve
Other property revaluation reserve
29 Operating lease commitments
1998
£’000s
2,069
551
––––––––
2,620
––––––––
1997
£’000s
6,101
220
––––––––
6,321
––––––––
1998
£’000s
2,069
220
––––––––
2,289
––––––––
1997
£’000s
6,101
220
––––––––
6,321
––––––––
At 31 December 1998 the Group was committed to making the following payments during the next year in respect of
non-cancellable operating leases
Leases which expire:
Within one year
Within two to five years
After five years
Land and
buildings
£’000s
92
437
764
––––––––
1,293
––––––––
Other
£’000s
344
1,335
–
––––––––
1,679
––––––––
30 Additional information on subsidiary undertakings and joint venture
The Company acts as a holding company for the Group and has the following principal subsidiary undertakings and joint
venture which affected the Group's results or net assets.
Subsidiary undertakings
*Morgan Lovell London Limited
*Morgan Lovell Regions Limited
*Overbury plc
Sindall Limited (formerly Sindall Construction Limited)
Sindall Maintenance Limited
*Sindall Norwich Limited
Barnes & Elliott Limited
T. J. Braybon & Son Limited
Hinkins & Frewin Limited
Stansell Limited
*Stansell QVC Limited
The Snape Group Limited
*Snape Limited
Robert R Roberts (Leeds) Limited
Wheatley Construction Limited
(formerly John E. B. Wheatley Limited)
Joint venture
Primary Medical Property Limited (50%)
Activity
Office design, fitting out and refurbishment specialists
Office design, fitting out and refurbishment specialists
Fitting out and refurbishment contractor
Construction
Construction
Construction
Construction
Construction
Construction
Construction
Construction
Intermediate holding company
Construction
Construction
Construction
Development and investment of medical properties
All subsidiary undertakings are wholly owned unless shown otherwise and with the exception of companies marked * all
shareholdings are in the name of Morgan Sindall plc. With the exception of Stansell QVC Limited, registered and operating
in Jersey, all undertakings are registered in England and England is the principal place of business.
40
Notes to the Accounts
for the year ended 31 December 1998
31 Directors’ interests
According to the register maintained as required by the Companies Act 1985, the interests of the directors in office at
31 December 1998 and 1 January 1998 (or the date of appointment if later) were as follows:
Sir D P Hornby
J C Morgan
J M Bishop
J J C Lovell
A M Stoddart
G Gallacher
B H Asher
5p Ordinary
Beneficial
31.12.98
5,452
6,206,926
20,000
6,183,706
5,000
–
–
1.1.98
5,452
6,186,926
20,000
6,183,706
5,000
–
–
No director had any non beneficial interest in the ordinary shares or any interest in the preference shares of the Company.
There have been no changes in the interests of the directors between the year end and 16 February 1999. No director had
any material interest in any contract with the Company.
41
Notice of Annual General Meeting
for the year ended 31 December 1998
Notice is hereby given that the forty-second Annual General Meeting of the Company will be held in the
Drawing Room of The Armourers’ Hall, 81 Coleman Street, London, EC2R 5BJ at 12 noon on Tuesday, 13 April 1999 for the
following purposes:
Ordinary business
1.
2.
3.
4.
5.
6.
To receive the Reports of the Directors and the Auditors and the Accounts for the year ended 31 December 1998.
To declare a final dividend of 4.45 pence per Ordinary Share.
To re-elect Sir D P Hornby a Director.
To re-elect Mr A M Stoddart a Director
To re-appoint Deloitte & Touche as Auditors.
To authorise the Directors to fix the Auditors remuneration.
Special business
To consider and if thought fit pass the following resolutions of which resolution 7 will be proposed as an Ordinary Resolution
and resolution 8 will be proposed as a Special Resolution.
7.
That the Directors be and are hereby generally and unconditionally authorised in accordance with section 80 of the
Companies Act 1985 (‘the Act’) to exercise all of the powers of the Company to allot relevant securities (within the
meaning of that section) of the Company up to an aggregate amount of £464,927.55 such authority (unless previously
revoked or varied) to expire on the earlier of the conclusion of the Company’s next Annual General Meeting and fifteen
months from the date of the passing of this resolution save that the Company may make offers or agreements which
would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities
in pursuance of such offers or agreements as if the authority conferred hereby had not expired.
8.
That, subject to the passing of the previous resolution, the Directors be and they are hereby authorised and
empowered pursuant to section 95 of the Act to allot equity securities (as defined in section 94 of the Act) for cash
pursuant to the authority given in the previous resolution as if section 89(1) of the Act did not apply to such allotment,
provided that such power be limited to:
i)
the allotment of equity securities which are offered to all the holders of equity securities of the Company (at a
date specified by the Directors) where the equity securities respectively attributable to the interests of such
holders are as nearly as practicable in proportion to the respective number of equity securities held by them,
but subject to such exclusions and other arrangements as the Directors may deem necessary or expedient in
relation to fractional entitlements and any legal or practical problems under any laws, or requirements of any
regulatory body or stock exchange in any territory or otherwise; and
42
Notice of Annual General Meeting
for the year ended 31 December 1998
ii)
the allotment (otherwise than pursuant to sub-paragraphs i) above and iii) below) of equity securities up to an
aggregate nominal amount of £84,153.62; and
iii)
the allotment of equity securities up to a total nominal amount of £98,709.20 in connection with the satisfaction
of conversion rights attached to the 5.625% Convertible Cumulative Redeemable Preference Shares of £1 each
currently in issue
and this power shall expire on the earlier of the conclusion of the Company’s next Annual General Meeting and
fifteen months from the date of the passing of this resolution save that the Company may make an offer or enter
into an agreement before the expiry of that date which would or might require equity securities to be allotted
after that date and the Directors may allot equity securities in pursuance of such an offer as if the power
conferred hereby had not expired.
By order of the Board
W R Johnston
Company Secretary
16 February 1999
Notes:
Registered Office
77 Newman Street
London
W1P 3LA
1.
2.
3.
4.
5.
6.
7.
A member entitled to attend and vote at this meeting is entitled to appoint one or more proxies to attend and vote on
a poll in his place. A proxy need not also be a member of the Company. A form of proxy accompanies this notice.
In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted
to the exclusion of the votes of any other joint holders. For these purposes, seniority shall be determined by the order
in which the names stand in the register of members in respect of the joint holding.
In the case of a corporation the form of proxy must be executed under its common seal or signed on its behalf by a
duly authorised attorney or a duly authorised officer of the corporation.
To be effective, the form of proxy, together with any power of attorney or other authority under which it is executed or
a notarially certified copy thereof must be sent to Connaught St Michaels Limited, PO Box 30 Victoria Street, Luton,
Bedfordshire, LU1 2PZ so as to arrive no later than 12 noon on 11 April 1999.
Short biographical details of the directors seeking re-election are shown on pages 14 and 15.
Service contracts of Directors will be available for inspection at 77 Newman Street, London, W1P 3LA during usual
business hours on any business day from the date of this notice until the date of the meeting and for 15 minutes prior
to the meeting at The Armourers’ Hall, 81 Coleman Street, London, EC2R 5BJ.
The Company, pursuant to regulation 34 of The Uncertificated Securities Regulations 1995, specifies that only those
ordinary shareholders registered in the register of members of the Company 48 hours before the meeting shall be
entitled to attend or vote at the meeting in respect of the number of shares registered in their name at that time.
Changes to entries on the relevant register of securities after that time will be disregarded in determining the rights of
any person to attend or vote at the meeting.
43
Notice of Annual General Meeting
for the year ended 31 December 1998
Notes: (continued)
8.
Resolution 7
When resolution 7 in the notice of the Annual General Meeting is passed, the Board will have general and unconditional
authority to allot 9,298,551 Ordinary Shares, which authority will expire fifteen months from the date on which this
resolution is passed or, if earlier, at the conclusion of the next Annual General Meeting. 4,288,334 authorised but
unissued Ordinary Shares will be reserved in respect of share options granted under the two Share Option Schemes
which members have approved and to provide for the conversion of Preference Shares. Accordingly, following the
passing of this resolution 5,010,217 Ordinary Shares, representing approximately 15 per cent of the issued share
capital of the Company, will remain authorised, unissued and unreserved.
9.
Resolution 8
In addition to the above, on the passing of resolution 8, the Board will have authority to allot equity securities up to an
aggregate value of £84,153.62, representing approximately 5 per cent of the issued Ordinary Share capital of the
Company for cash otherwise than pro-rata to existing shareholders, which authority will expire fifteen months from the
date on which the resolution is passed or, if earlier, at the conclusion of the next Annual General Meeting of the
Company. The Board will also have authority to allot equity securities in order to satisfy the conversion rights attaching
to the Preference Shares. However, currently there is no intention to issue any further share capital otherwise than
pursuant to the exercise of conversion rights in respect of the Preference Shares in issue and in the exercise of any
options under the two Share Option Schemes.
Private Shareholders
For ease of reference paragraph C.2 of the Principles of Good Governance as set out in Section 1 of the Combined Code is
reproduced below.
C.2 Constructive Use of the AGM
Principle
Boards should use the AGM to communicate with private investors and encourage their participation.
Code Provisions
C.2.1 Companies should count all proxy votes and, except where a poll is called, should indicate the level of proxies
lodged on each resolution, and the balance for and against the resolution, after it has been dealt with on a
show of hands.
C.2.2 Companies should propose a separate resolution at the AGM on each substantially separate issue, and
should in particular propose a resolution at the AGM relating to the report and accounts.
C.2.3
The chairman of the board should arrange for the chairmen of the audit, remuneration and nomination
committees to be available to answer questions at the AGM.
C.2.4 Companies should arrange for the Notice of the AGM and related papers to be sent to shareholders at least
20 working days before the meeting.
The Board would welcome the views of private investors regarding any change or addition which would make the
proceedings of the Annual General Meeting more meaningful to them.
44