Morgan Sindall Group
Annual Report 1999

Plain-text annual report

cover spread 12/6/00 1:59 PM Page 1 sil in on A n n u a l R e p o r t & A c c o u n t s 1 9 9 9 l o k Morgan Sindall plc 77 Newman Street, London W1P 3LA Tel: 020 7307 9200 Fax: 020 7307 9201 Visit our website at www.morgansindall.co.uk Annual Report & Accounts 1999 FINAL FRONT 12/6/00 2:58 PM Page 2 Morgan Sindall is a specialist construction group operating in the UK. It has four main activities - Fit Out, Regional Construction, Affordable Housing and Property Investment. These activities are carried out by eleven individually branded companies. The management of each of these companies has a great deal of autonomy but they must share our values and believe in aiming high. Our common goal is that the last job should be the best we’ve ever done and the next one even better. Our Group’s record shows the organic growth achieved by our policy of empowered management which has been added to by careful acquisition as opportunities arise. Taken together with the active management of our asset base, these are the keys to achieving our commitment to long term enhancement of shareholder value. FINAL FRONT 12/6/00 2:58 PM Page 3 Contents Financial Highlights Chairman’s Statement Chief Executive’s Review Fit Out Regional Construction Affordable Housing Property Group Overview Report of the Directors Corporate Governance Directors’ Responsibilities Auditors’ Report Group Profit and Loss Account Group Balance Sheet Company Balance Sheet Group Cash Flow Statement 1 2 4 6 8 10 12 14 16 21 24 24 25 26 27 28 Combined Statement of Movements in Reserves and 29 Shareholders’ Funds 30 Other Primary Statements 31 Principal Accounting Policies Notes to the Accounts 33 Notice of Annual General Meeting 45 48 Corporate Directory Turnover 1999 1998 £521m £425m % +23 Profit on ongoing activities before taxation £13.854m £10.018m +38 Profit on ordinary activities before taxation £10.075m £9.760m Earnings per ordinary share (EPS) 22.17p 22.15p EPS excluding exceptional loss 28.30p 22.15p Dividends per ordinary share 8.50p 6.50p Net assets Net cash funds £37.9m £23.2m £22.0m £28.4m +3 – +28 +31 +63 -23 Financial Highlights Turnover £m 99 98 97 96 95 520.6 424.6 331.2 283.1 175.2 Profit before tax £m 10.1 9.8 99 98 97 96 95 7.3 5.2 3.0 FINAL FRONT 12/6/00 2:58 PM Page 4 2 Chairman’s Statement ‘Whilst the size of the Group has increased dramatically, the sense of being different and the determination to succeed are as strong as ever.’ Growth and diversification FINAL FRONT 12/6/00 2:58 PM Page 5 1999 was another active and successful year for Morgan Sindall. Strategically our most significant development was the acquisition of Lovell Partnerships. This established a third core business activity for the Group in Affordable Housing, a significant and fast growing sector. Our Regional Construction business has made significant progress and our Fit Out business has had another record year. Turnover in 1999 reached £521m, an increase of I think that it is now appropriate for me to step 23% and profits before tax on ongoing businesses down as Chairman at this year’s AGM to allow John was £13.9m, an increase of 38%. Despite the loss Morgan to take on the role as Executive Chairman. arising from a discontinued business of £3.8m, At the same time Andy Stoddart will move from profit before tax was a record £10.1m. The Board Operations Director to Managing Director. I will is pleased to recommend a final dividend of 6.00p continue as a Non-Executive Director. making 8.50p for the year (1998: 6.50p). Whilst the size of the Group has increased It is ten years since I joined the Board of the dramatically, the sense of being different and the privately owned Morgan Lovell, and five years determination to succeed are still as strong as ever, since that company went public by the reverse and I am sure this momentum will carry the Group takeover that created Morgan Sindall. I am to further successes in the future. delighted to have been part of the team and proud to see the Group become one of the UK’s top construction companies. Sir Derek Hornby Chairman Dividend 99 98 97 96 95 8.50p 6.50p 5.25p 4.20p 2.70p Earnings per share 99 98 97 96 95 22.17p 22.15p 16.38p 13.13p 8.03p FINAL FRONT 12/6/00 2:58 PM Page 6 4 Chief Executive’s Review ‘Our vision is a balanced group of branded companies with above average growth prospects...’ Realising our goals FINAL FRONT 12/6/00 2:58 PM Page 7 1999 has been a significant year for the Group, not simply because of record turnover and profit, but I believe the diversification into Affordable Housing by the purchase of Lovell Partnerships is a clear demonstration of the way we see Morgan Sindall continuing to develop. Our Fit Out business, started 20 years ago, has provided a solid base for the Group. The formation of our network of Regional Construction companies began in 1994 and was completed nationally in 1998. They are becoming stronger each year and Prospects still have huge potential for growth. The next few years will see our hard work and investment in this business rewarded. The purchase in June 1999 of Lovell Partnerships introduces another core area of activity for us to develop whilst our other two businesses satisfy the demanding overall growth in returns we have set ourselves. Our vision is a balanced group of branded companies with above average growth prospects. The market remains strong and our Fit Out and Regional Construction companies entered 2000 with order books higher than last year, both in absolute terms and budget cover. Lovell Partnerships has strengthened its senior management team and is benefiting from the Group’s financial backing. I remain confident of the long term growth potential of this business. Overall I believe the Group is in a great position to move forward. The board changes detailed in the Chairman’s Statement reflect the need to ensure separate focus on strategic and operational issues as the Group develops. My enthusiasm and commitment to making Morgan Sindall the most exciting company in our sector remains undiminished. Year End Market Capitalisation £m 99 98 114 69 Year End Share Price £’s 99 98 3.06 2.05 FINAL FRONT 12/6/00 2:58 PM Page 8 6 Fit Out Our Fit Out business has had another Overbury work for clients who purchase excellent year. Strong market recognition fit out work in the traditional way through allows us selectivity in the open market professional teams. Both companies operate tender work, while repeat business from in London, the Home Counties and the satisfied clients showed the benefit to both Thames Valley undertaking contracts of parties of the efficiencies derived from up to £15m in value. established working relationships. Current order levels are satisfactory, Consequently, turnover of £174m produced albeit that the fast track nature of fit out operating profits of £7.6m, 20% ahead of does not provide long order cover. Over the last year, which itself was a record year. years brand loyalty has enabled us to be Morgan Lovell and Overbury have each resilient to construction peaks and troughs, developed a strong client base and both but as many companies who have tried are aware of the need to be ahead of their to enter the market have found it is competitors in this fast moving sector of a demanding and specialist segment. the industry. Both Morgan Lovell and Overbury Morgan Lovell work directly for end accept that success is only sustained by user clients and offer a complete workplace delighting clients and tackling each new solution including consultancy, design, project accordingly. construction and ongoing support. Creating value with clients FINAL FRONT 12/6/00 2:58 PM Page 9 “We believe to be successful“ in training our people People have a lot of freedom that they wouldn’t experience elsewhere, never mind in the construction industry “ “ Fit Out Turnover £’000s 99 98 174,146 162,967 Operating Profit £’000s 99 98 7,564 6,306 FINAL FRONT 12/6/00 2:58 PM Page 10 8 Regional Construction The second half results confirmed the This organic growth supports our belief that continuing trend in our Regional clients are pleased to entrust their work and Construction business of improving build relationships with companies that offer performance. Record annual turnover of a clear regional presence combined with the £275m and operating profits of £3.1m technical and financial strength of a large demonstrate the progress being made. All group. Our view remains unchanged seven operating Brands are now trading that the turnover of this business in its profitably and have good order books. We present format can double within three or believe this year will prove this business as four years. a major contributor to group profits. On 3 November 1999 we announced It is five years since Morgan Sindall the closure of our tendered term maintenance commenced development of a Regional business for housing associations. Although Construction network, with turnover in the the demand was evident we were unable first year being less than £40m. Whilst we to find satisfactory bases for trading. This have made four further acquisitions during business has adversely affected 1999 results this time, it has been the development of by £3.8m. We will continue to monitor this all these companies that has been the main market through our relationship with reason for the turnover increase. housing associations and Lovell Partnerships. Building relationships FINAL FRONT 12/6/00 2:58 PM Page 11 ...everybody is constantly saying what can we do to make it better, what can we do next? “ “ the freedom to question “our parent company provides the tradition within this industry “ Regional Construction Turnover £’000s 99 98 274,516 251,365 Ongoing Operating Profit £’000s 99 98 3,097 2,360 FINAL FRONT 12/6/00 2:58 PM Page 12 10 Affordable Housing Lovell Partnerships made a positive With the right structure and resource we contribution in its first six months within are looking to move the business forward the Group. Turnover of £65m and operating both in margin and volume terms. Key profits of £1.1m are in line with our to meeting this objective is our ability expectations at acquisition and similarly to increase the mix of open market our view for 2000 remains unchanged. The sale units to those built for housing inherent project time cycle of this sector, associations. This is particularly relevant involving lengthy pre-contract negotiations in mixed tenure schemes, for which means that the results of our increased Lovell Partnerships has such a strong investment in this business will take time track record. to materialise. The demand for affordable housing Since acquisition we have undertaken is huge and there are some interesting a thorough review and strengthening of opportunities for large urban regeneration management at both the head and regional schemes where Lovell Partnerships is clearly offices. This will ensure that the structure seen as one of the major brands. We are is capable of responding to the increased confident of the ability to develop this challenge that results from our commitment business to be a significant part of the to build this business. Morgan Sindall Group. A major brand FINAL FRONT 12/6/00 2:58 PM Page 13 work because there is a high level of trust between us and our clients “Our partnering arrangements “ Affordable Housing Turnover £’000s 99 (6 months) 65,065 Operating Profit £’000s 99 (6 months) 1,057 FINAL FRONT 12/6/00 2:58 PM Page 14 12 Property Before expansion into Affordable Housing, In the coming year the construction of the the Group’s trading operations were all Wigmore Street offices should be complete, cash generative and our policy had been and at present the rental market is strong to maintain reserves in cash and property and at higher levels than when we investment. Whilst Lovell Partnerships will purchased the building. Out of London, require working capital investment, the the strong market has enabled us to move continued strengthening of the balance ahead with a partnering agreement on our sheet from the growth in overall activity property in Chatham, and we are noting will result in the Group having ongoing interest in some of the undeveloped sectors funds to invest. Our approach will continue of our industrial estate in Cambridge. to be proactive but conservative. Primary Medical Property, our joint As highlighted in the interim report, venture business which develops and retains the current year’s Property profits are mainly primary medical buildings, has had another attributable to the sale of the office building successful year adding a further seven in Jockey’s Fields. properties to its portfolio. Whilst it is still premature to expect capital growth from rent reviews, it is clear that yields are already improving as appreciation of this type of investment broadens amongst private and institutional investors. Increasing returns FINAL FRONT 12/6/00 2:58 PM Page 15 “ Our approach to property will continue to be proactive but conservative “ Property Profits and Interest £’000s 99 98 3,661 2,794 FINAL FRONT 12/6/00 2:58 PM Page 16 14 Group Overview Committed to brands A top 20 UK construction company 2,500 employees 50 offices throughout England and Wales FINAL FRONT 12/6/00 2:58 PM Page 17 Regional construction Regional Construction Jersey & Guernsey Barnes & Elliott Hinkins & Frewin Roberts Sindall Snape Stansell Wheatley Fit Out Property Morgan Lovell The Workplace Specialist London Milton Keynes Redhill Wokingham Overbury The Fitting Out & Refurbishment Specialist Bracknell London Morgan Sindall London Cambridge Primary Medical Property London Ipswich Leeds Affordable Housing Lovell Partnerships FINAL FRONT 12/6/00 2:58 PM Page 18 16 Report of the Directors Jack Lovell (44) Client Director John Bishop (54) Finance Director John Morgan (44) Chief Executive Andy Stoddart (53) Operations Director Bernard Asher (63) Senior Non-executive Geraldine Gallacher (40) Non-executive Sir Derek Hornby (70) Chairman Report of the Directors Sir Derek Hornby Chairman of IRG plc 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. Bernard Asher 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 Plc and Midland Bank Plc. Geraldine Gallacher Founder and Managing Director of The Executive Coaching Consultancy having formerly been head of Group Management Development for Burton Group plc. FINAL FRONT 12/6/00 2:58 PM Page 19 Report of the Directors 17 The directors have pleasure in submitting their report to the members together with the audited accounts for the year ended 31 December 1999. Principal activities Morgan Sindall is a specialist construction group with activities including fit out, regional construction, affordable housing and property investment. The principal subsidiary companies are shown on page 44. All activities are carried out in the United Kingdom and the Channel Islands. Results and dividends Mr J J C Lovell and Ms G Gallacher are the directors to retire by rotation, and being eligible offer themselves for re-election. Biographical details of Ms G Gallacher are shown on page 16. Mr J J C Lovell (aged 44) was a co-founder with Mr J C Morgan of Morgan Lovell in 1977. He was managing director of Morgan Lovell and on the reverse take-over which formed the enlarged Group in October 1994 became a director of Morgan Sindall plc. He is currently Client Director, with particular responsibilities for client The Group made a profit for the year, after taxation, relationships and marketing strategy. of £8.165 million. The final dividend for the year recommended by the Non-executive directors directors is 6.00p per ordinary share, which together A short biographical note on each independent with the interim dividend of 2.50p per ordinary share gives non-executive director is shown on page 16. The role and a total dividend for the year of 8.50p per ordinary share. responsibilities of the non-executive directors have been Preference dividends paid or accrued amounted to formally established by the Board. Further information on £0.275 million. these matters may be found under corporate governance Review of business and future developments A general review of the Group’s activities, development and Corporate governance on pages 21 and 22. future prospects are included in the Chairman’s Statement The statement on corporate governance appears on pages on pages 2 and 3 and the Chief Executive’s Review on pages 21 to 23. 4 to 13. Fixed assets Substantial shareholdings Excluding directors, on 11 February 2000, the following External professional valuations of the Group’s investment shareholdings representing 3% or more of the issued properties were carried out as at 31 December 1999. The ordinary share capital have been notified to the Company: Hermes Asset Management Limited Jupiter Asset Management Limited Number of Shares Percentage Holding 2,016,000 1,700,000 5.42 4.57 directors have considered the carrying value of the Group’s other interests in property and consider that there is no substantial difference between market and balance sheet values. Directors The directors at the date of this report are as set out on page 48. Details of the changes to Board positions which will take place in the current year are given in the Chairman’s Statement on page 3. Further information on the Group Board’s constitution, policies and procedures is set out under corporate governance on pages 21 to 23. Pre.Accounts 12/6/00 2:11 PM Page 18 18 Report of the Directors Employment policies Year 2000 issues The Company insists that a policy of equal opportunity Following earlier investigative work in January 1998 the employment is demonstrably evident throughout the Group Board gave authority to a committee co-ordinated by the at all times. Selection criteria and procedures and training Group IT Manager to identify and, subject to approval, opportunities are designed to ensure that all individuals are introduce standardised IT financial management systems selected, treated and promoted on the basis of their merits, throughout the Group. The committee, which reports to abilities and potential. Subject to the nature of its a Main Board director was also charged with identifying, businesses in the construction industry, the policy of the assessing and minimising the risks associated with the Company is to ensure that there are fair opportunities in the year 2000. 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 such factors as location and numbers employed. 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 consistent with the principles contained in the Group environmental policy, copies of which are available on request. Creditor payment policy As at the date of this report, no problems have arisen which ought to be brought to the attention of shareholders. 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 consider that the external costs attributable solely to year 2000 issues were not significant. Annual General Meeting The Annual General Meeting will be held on 11 April 2000. The notice of the meeting is set out in pages 45 to 47 of this Annual Report. The notice contains items which are special business, being an increase to the Company’s authorised share capital, the authority to the Board to allot equity securities and changes to the retirement by rotation provisions for directors. Explanatory notes on the special business items are shown on page 47. The Company does not adhere to any formal Code regarding payments to its trade creditors. Its current policy Political and charitable contributions in this respect, which the Company endeavours to have its During the year charitable contributions amounted to subsidiary and joint venture companies also follow, is to: £16,000. No contributions were made to any political 1. use unamended terms of Standard Forms of Contract widely recognised in, and drawn up by, bodies representing the industry 2. 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 1999, the Group’s number of creditor days outstanding was 36. 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. Pre.Accounts 12/6/00 2:11 PM Page 19 Report of the Directors 19 Remuneration report The remuneration committee is comprised of: Ms G Gallacher (Chairman) Mr B H Asher Sir D P Hornby Policy on executive directors’ remuneration The remuneration of the executive directors is determined by the remuneration committee (“the committee”). The committee seeks to develop remuneration packages which satisfy the following principles: • • • to attract, retain and motivate the best possible 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 and Long Term Incentive Plan Performance related bonuses are a key feature of remuneration policy throughout the Group. Performance targets are set against matters in which the individual concerned has a direct influence. In subsidiary companies this means the performance of the relevant individual brand. For executive directors of Morgan Sindall plc and senior head office personnel the cash bonus is based on the performance of the Group against targets set annually by the remuneration committee. The targets comprise a scale that takes into account previous year’s result and growth expectations both internally set and those externally published. The Long Term Incentive Plan (the ‘LTIP’) approved by shareholders is designed to provide additional rewards for consistent out-performance and service over the longer period. It was introduced in 1997 for the executive directors of the Company and certain key senior management agreed by the remuneration committee. Shares are conditionally awarded to participants in each financial year and can be allocated in whole or part after the Group’s performance over the next three financial years has been measured and compared to a selected peer group. The comparison made is of the increase in total shareholder value over those years with the corresponding increase of the fourteen companies listed in the Financial Times as construction companies which are considered by the remuneration committee as having a comparable business to the Group. At the end of each three year period shares conditionally awarded can be allocated if the Company is ranked first in the peer group and none will be allocated if the ranking is in the middle of the peer group or lower. Shares are allocated on a graduated scale between these two positions. Participation in the LTIP is voluntary and requires the individual to forego payment of a proportion of the cash bonus part of remuneration for each year in return for the conditional award of the number of shares in the Company that the cash sum concerned would purchase at the then market price. The remuneration committee has confirmed that fourth position in the peer group has been achieved for the three years to 31 December 1999 and that an allocation of shares from those conditionally awarded for 1997 will be made on 30 June 2000. The interests of directors participating in the plan are the shares conditionally awarded as shown below: As at 31 December 1999 As at 31 December 1998 91,820 83,636 71,922 84,803 60,348 54,412 48,104 55,579 J C Morgan J M Bishop J J C Lovell A M Stoddart Once shares have been allocated, a participant is entitled to dividends paid in respect of those shares and to exercise voting rights. The participant is not entitled to transfer, sell or otherwise deal in the shares until a further two years have elapsed. None of the shares conditionally awarded to the executive directors have lapsed during the period. Pre.Accounts 12/6/00 2:11 PM Page 20 20 Report of the Directors Service contracts Executive directors’ contracts are terminable on one year’s notice. The service contracts of the directors who are seeking re-election at the Annual General Meeting, Mr J J C Lovell and Ms G Gallacher, do not have a notice period for termination which is in excess of one year’s duration. Directors’ interests The shareholdings of all directors are shown in Note 31 to the Accounts. Pensions Share option schemes It is the Company’s policy not to grant share options to the directors. Details of options granted to employees in the Group are shown in Note 23 to the Accounts. The total number of options which may be granted at any time is fixed by the remuneration committee acting with the advice of the Operations Director and the Finance Director, and the recommendations of subsidiary company Managing Directors. No further options can be granted under the Company’s 1988 Scheme. The exercise of options granted under the The Company contributes 10% of base salary to defined 1995 Scheme will be subject to performance targets and contribution schemes of the individual director’s choice. will normally be exercisable only if the percentage growth in There are no arrangements for the provision of benefits in earnings per share of the Company over a five year period excess of the Inland Revenue cap. 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. By order of the Board W R Johnston Company Secretary 15 February 2000 Pre.Accounts 12/6/00 2:11 PM Page 21 Corporate Governance 21 Policy statement Morgan Sindall plc supports the Principles of Good of the Company Secretary is a matter to be considered by the Board as a whole. Governance and the Code of Best Practice (‘the Combined As regards the periodic re-election of all directors (including Code’). Accordingly, this report will also deal with the non-executives) the practices of the Board comply with requirements of paragraphs (a) and (b) of Stock Exchange the Combined Code. Two changes to the Articles of Listing Rule 12.43A relating to Section 1 of the Association of the Company are included in the Special Combined Code. This report sets out how the principles of the Combined Code have been applied. Board constitution and procedures The Board is comprised of seven directors of whom three are non-executive and four are executive directors. The roles of Chairman and Chief Executive are clearly defined and separate. Business to be dealt with at the forthcoming Annual General Meeting. These changes merely formalise in the Company’s constitutional document what has in any event been the established practice of the Board. 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. Board committees The Board has established an audit, a remuneration and All of the non-executive directors are considered to be a nominations committee. independent of management and free from any business or other relationship which could materially affect their Audit committee independent judgement. Mr B H Asher is the senior The audit committee is comprised of the three 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. non-executive directors. Its duties include keeping 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 or the Chief Executive 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. The Board met on eleven scheduled occasions during the Remuneration committee year in addition to ad hoc meetings convened for particular The remuneration committee is composed of the three purposes. For each of the scheduled meetings, a non-executive directors and meetings are normally comprehensive information pack is provided in advance attended by the Chief Executive. Meetings will usually of the meeting to allow for proper detailed consideration. 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 19 and 20. 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 specifically reserved to the Board. 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. The Board has also resolved that any question of the removal from office Pre.Accounts 12/6/00 2:11 PM Page 22 22 Corporate Governance Nominations committee out the Board’s role and responsibilities, its overall The Board considers that because of its small size and the approach to management and acceptance of risk and manner in which it conducts its business, the full board will outlines the way in which it will annually review the comprise the nominations committee. effectiveness of the Group’s internal controls. This approach The Board’s policy on appointments to it is that every to risk management and the acceptance of risk has been Board member should have the opportunity of individual communicated to the directors of each brand business meetings with prospective candidates. who have in turn undertaken their own risk identification and assessment exercise tailored to their own individual Going concern circumstances. 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. Risk management and internal control are now considered by the Boards of the Company and each brand business at their monthly meetings. In addition, annually there will be comprehensive assessment of risk and controls. The Board has also reserved to itself the evaluation of any risk arising from the acquisition or development of any new 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. Internal control statement During the year to 31 December 1999, all procedures necessary to implement ‘Internal Control: Guidance for businesses or activities. Internal financial control The Board has formally acknowledged that it has overall responsibility for the Group’s system of internal financial control and for ongoing review of its effectiveness. Such a system can only provide reasonable, but not absolute, assurance that the Group’s assets are correctly stated and are protected against loss. Key features of the system are described under the following headings: Financial information 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 directors on the Combined Code’ were established and and the accurate reporting of profits. The Group has a put in place. This report follows the transitional approach to comprehensive system for monthly reporting to the Board. the internal control aspects of the Combined Code set out A group executive director also attends the monthly board in the letter from the London Stock Exchange to listed meeting of each brand business. companies dated 27 September 1999. Wider aspects of internal control Investment and capital expenditure appraisal There are clear policies, detailed procedures and defined The Board has reserved to itself specific responsibility for the levels of authority in relation to investment, capital formulation of the risk management strategy of the Group. expenditure, significant cost commitments and asset disposals. New procedures have been formulated with the help of external consultants. A formal process is now in place through which the Board identifies the significant risks attached to its strategic objectives, confirms the control strategy for each risk, and identifies the appropriate early warning mechanism for each risk. A risk management policy document has been adopted by the Board setting Pre.Accounts 12/6/00 2:11 PM Page 23 Corporate Governance 23 Computer systems Compliance statement The Group has established controls and procedures over the security of data held on computer systems. These controls and procedures are reviewed under the rolling examination programme described below under ‘Internal audit’. Controls over central functions 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. As permitted by the London Stock Exchange, the Company has complied with Code provision D.2.1 on A number of the Group’s key functions, including treasury internal control by reporting on internal financial control in and insurance, are dealt with centrally. Each of these accordance with the guidance on internal control and functions have detailed procedures manuals. financial reporting that was issued in December 1994. Internal audit The Board reviews from time to time the need or otherwise for an internal audit function and remains of the opinion that such a function is not necessary. Instead, led by specialist central Group personnel, there is a rolling programme of Peer Group examination in which selected staff participate in the examination and review of the practices and procedures of brand businesses other than their own. It is felt that this programme not only provides many of the benefits to be derived from an internal audit function but also assists in the professional development of the individual staff concerned whilst at the same time identifying and providing a mechanism for the cross-fertilisation of ideas and best practice throughout the Group. The Board has conducted a review of the effectiveness of the system of internal financial control for the year ended 31 December 1999 and up to the date of this report. The review was performed on the basis of the criteria set out in the Guidance for Directors ‘Internal Control and Financial Reporting’ issued in December 1994. Pre.Accounts 12/6/00 2:11 PM Page 24 24 Directors’ Responsibilities Company law requires the directors to prepare financial 2. Make judgements and estimates that are statements for each financial year which give a true and fair reasonable and prudent 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. Select suitable accounting policies and then apply them consistently 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 25 to 44 for our report if we become aware of any apparent which have been prepared under the historical cost convention misstatement or material inconsistencies with the as modified by the revaluation of certain fixed assets and the financial statements. accounting policies set out on pages 31 and 32. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual 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 Report, as described on this page of the financial the amounts and disclosures in the financial statements. It statements. Our responsibilities, as independent auditors, also includes an assessment of the significant estimates and are established by statute, the Auditing Practices Board, judgements made by the directors in the preparation of the the Listing Rules of the London Stock Exchange, and by financial statements, and of whether the accounting policies our profession’s ethical guidance. are appropriate to the Company’s and the Group’s We report to you our opinion as to whether the financial circumstances, consistently applied and adequately disclosed. statements give a true and fair view and are properly We planned and performed our audit so as to obtain all the prepared in accordance with the Companies Act 1985. We information and explanations which we considered also report to you if, in our opinion, the directors’ report is necessary in order to provide us with sufficient evidence to not consistent with the financial statements, if the company give reasonable assurance that the financial statements are has not kept proper accounting records, if we have not free from material misstatement, whether caused by fraud received all the information and explanations we require for or other irregularity or error. In forming our opinion, we also our audit, or if information specified by law or the Listing evaluated the overall adequacy of the presentation of Rules regarding directors’ remuneration and transactions information in the financial statements. with the Company is not disclosed. We review whether the corporate governance statement on page 23 reflects the Company’s compliance with the seven 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 consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. 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 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 1999 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 15 February 2000 Pre.Accounts 12/6/00 2:11 PM Page 25 Group Profit and Loss Account for the year ended 31 December 1999 25 Notes £’000s £’000s £’000s £’000s 1999 1998 Turnover Continuing operations Acquisitions Discontinued operations Less share of joint venture turnover Group turnover Cost of sales Gross profit Administrative expenses Other operating income Operating profit Continuing operations Acquisitions Discontinued operations 1 1 2 454,320 65,065 1,900 (658) 520,627 (465,584) 55,043 (44,299) 983 11,320 1,057 (650) 8,705 – (258) Total operating profit 1,3 Exceptional loss on closure of discontinued business 26 Share of profits of joint venture Net interest receivable Profit on ordinary activities before taxation Tax charge on profit on ordinary activities Profit on ordinary activities after taxation Dividends on equity and non-equity shares Retained profit for the year Earnings per ordinary share 4 5 6 8 Earnings per ordinary share before exceptional loss 8 Diluted earnings per ordinary share 8 11,727 (3,129) 51 1,426 10,075 (1,910) 8,165 (3,439) 4,726 22.17p 28.30p 21.34p 423,169 – 3,235 (1,837) 424,567 (379,084) 45,483 (38,081) 1,045 8,447 – 67 1,246 9,760 (2,046) 7,714 (2,464) 5,250 22.15p 22.15p 21.11p Accounts 12/6/00 2:06 PM Page 26 26 Group Balance Sheet at 31 December 1999 Notes £’000s £’000s £’000s £’000s 1999 1998 Fixed assets Intangible assets Tangible assets Share of joint venture gross assets Share of joint venture gross liabilities Investment in joint venture Investment in own shares Current assets Stocks Debtors Cash at bank and in hand 13,697 (12,904) 12 13 14 14 15 16 17 Creditors: amounts falling due within one year 18 23 24 Net current assets Net assets Capital and reserves Called up share capital Share premium account Revaluation reserve Profit and loss account Total shareholders’ funds Shareholders’ funds are attributable to: Equity shareholders’ funds Non-equity shareholders’ funds Approved by the Board on 15 February 2000 J C Morgan J M Bishop 11,768 12,637 793 1,170 26,368 24,812 88,820 22,042 135,674 (124,113) 11,561 37,929 6,714 11,794 3,963 15,458 37,929 33,076 4,853 37,929 6,754 (6,570) 3,970 11,384 184 690 16,228 7,155 67,828 28,386 103,369 (96,415) 6,954 23,182 6,619 3,419 2,620 10,524 23,182 18,247 4,935 23,182 Accounts 12/6/00 2:06 PM Page 27 Fixed assets Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current liabilities Total assets less current liabilities 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 Shareholders’ funds are attributable to: Equity shareholders’ funds Non-equity shareholders’ funds Approved by the Board on 15 February 2000 J C Morgan J M Bishop Company Balance Sheet at 31 December 1999 27 Notes 13 14 15 16 17 18 19 23 24 1999 £’000s 8,732 63,113 71,845 6,511 3,697 – 10,208 (21,794) (11,586) 60,259 (80) 60,179 6,714 11,794 3,074 13,644 24,953 60,179 55,326 4,853 60,179 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 35,564 4,935 40,499 Accounts 12/6/00 2:06 PM Page 28 28 Group Cash Flow Statement for the year ended 31 December 1999 Notes 28 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 Payments to acquire fixed asset investments Acquisitions and disposals Purchase of subsidiary undertakings Net cash/(overdrafts) acquired with subsidiary undertakings Sale of subsidiary undertaking Net cash disposed of with subsidiary undertaking 25 25 1999 £’000s 12,648 1,494 (395) (275) 824 1998 £’000s 9,276 1,358 (412) (278) 668 (2,191) (1,264) (3,286) 778 (480) (2,988) (20,689) 9 – – (2,000) 6,687 (190) 4,497 (424) (888) 35 (90) (20,680) (1,367) Equity dividends paid (2,427) (1,889) Net cash (outflow)/inflow before financing (14,814) 9,921 Financing Issue of shares, net of expenses Loans repaid Net cash inflow/(outflow) from financing activities 8,470 – 8,470 79 (4,334) (4,255) (Decrease)/increase in cash 29 (6,344) 5,666 Accounts 12/6/00 2:06 PM Page 29 Combined Statement of Movements in Reserves and Shareholders’ Funds for the year ended 31 December 1999 29 Group Share premium account £'000s Revaluation reserve £'000s Profit and loss account £'000s Total reserves £'000s Share capital £'000s 1999 Share- holders' funds 1998 Share- holders' funds £'000s £'000s Balance at 1 January 3,419 2,620 10,524 16,563 6,619 23,182 17,398 4,726 4,726 – 4,726 5,250 7,989 162 8,151 124 Retained profit for year – New shares issued net of expenses Converted preference shares Options exercised Goodwill realised on discontinued operations Transfer of realised revaluation reserve Surplus on revaluation 7,989 81 305 – – – – – – – – – – – 81 305 68 68 (140) 140 – 1,483 – 1,483 (81) 14 – – – – 319 68 – – 79 – – 1,483 331 Balance at 31 December 11,794 3,963 15,458 31,215 6,714 37,929 23,182 Included within the profit and loss account balance at 31 December 1999 is an amount for unrealised goodwill totalling £7,034,000 (1998: £7,102,000). Company Share premium account Profit Special Revaluation and loss reserve account reserve Total reserves £'000s £'000s £'000s £'000s £'000s Share capital £'000s 1999 Share- holders' funds 1998 Share- holders' funds £'000s £'000s Balance at 1 January 3,419 13,644 2,289 14,528 33,880 6,619 40,499 37,945 Retained profit for year New shares issued Converted preference shares Options exercised Transfer of realised revaluation reserve Surplus on revaluation – 7,989 81 305 – – – – – – – – 10,285 10,285 – 10,285 2,351 7,989 162 8,151 124 – – – – – – – 81 305 (81) 14 – – – 319 – 925 – 79 – – (140) 140 – 925 – 925 Balance at 31 December 11,794 13,644 3,074 24,953 53,465 6,714 60,179 40,499 Accounts 12/6/00 2:06 PM Page 30 30 Other Primary Statements Statement of Total Recognised Gains and Losses for the year ended 31 December 1999 Profit for the financial year before dividends Share of joint venture’s surplus on revaluation of investment property Surplus on revaluation of investment property 1999 £’000s 8,165 558 925 1998 £’000s 7,714 331 – Total recognised gains and losses 9,648 8,045 Note of Historical Cost Profits and Losses for the year ended 31 December 1999 Profit on ordinary activities before taxation Realisation of property valuation gains of prior years 1999 £’000s 10,075 140 1998 £’000s 9,760 4,032 Difference between the historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount 6 19 Historical cost profit on ordinary activities before taxation 10,221 13,811 Historical cost profit on ordinary activities after taxation and dividends 4,872 9,301 Accounts 12/6/00 2:06 PM Page 31 Principal Accounting Policies 31 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 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. Goodwill arising on consolidation is capitalised and written off in equal instalments over its useful economic life of 20 years. Goodwill that arose on acquisitions prior to 31 December 1997 is eliminated 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 venture 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 By adopting Financial Reporting Standard 15, non-investment properties are now held at cost. Under the transitional rules of the Standard, the Group has retained the book amounts of certain revalued properties and the valuation has not been updated. The date of the last valuation was 21 September 1994. 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 SSAP19. 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 SSAP19 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. Accounts 12/6/00 2:06 PM Page 32 32 Principal Accounting Policies 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” 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 27, the annual costs are charged to the profit and loss account. Accounts 12/6/00 2:06 PM Page 33 Notes to the Accounts 33 1 Analysis of turnover, gross profit, operating profit and net assets Turnover £’000s 274,516 174,146 65,065 5,000 – 518,727 1,900 1999 Profits/ (losses) £’000s 3,097 7,564 1,057 2,235 (1,576) 12,377 (650) 520,627 11,727 Turnover £’000s 251,365 162,967 – 7,000 – 421,332 3,235 424,567 Net assets £’000s (684) (4,427) 8,546 14,866 (4,190) 14,111 1,776 15,887 22,042 37,929 1998 Profits/ (losses) £’000s 2,360 6,306 – 1,548 (1,509) 8,705 (258) 8,447 Net assets £’000s (2,033) (11,005) – 14,404 (8,595) (7,229) 2,025 (5,204) 28,386 23,182 Regional construction Fit out Affordable housing Property Group activities Ongoing activities Discontinued operations Net cash balances Net assets Segmental net assets are stated after deducting interest bearing net cash balances. Continuing operations £’000s 453,662 (403,989) 49,673 (39,336) 983 11,320 Acquisitions £’000s Discontinued operations £’000s 1999 Total £’000s 1998 Total £’000s 65,065 (59,403) 5,662 (4,605) – 1,057 1,900 (2,192) 520,627 (465,584) 424,567 (379,084) (292) (358) – (650) 55,043 (44,299) 983 45,483 (38,081) 1,045 11,727 8,447 Group 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 1999 £’000s 983 1999 £’000s 1,660 379 6,155 1,759 2,517 15 170 30 1998 £’000s 1,045 1998 £’000s 1,507 191 4,584 1,026 1,269 11 139 34 Further fees of £71,000 (1998: nil) paid to Deloitte & Touche in 1999 are included in the cost of investment in subsidiary undertakings. Accounts 12/6/00 2:06 PM Page 34 34 Notes to the Accounts 4 Net interest receivable 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 30.25% (1998: 31%) (Over)/under provision in prior years Share of tax of joint venture Tax on exceptional loss 1999 £’000s 1,494 (395) – 1,099 327 1,426 1999 £’000s 3,000 (143) – (947) 1,910 The tax charge for the year is lower than the standard rate due to the availability of tax losses brought forward. 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 2.50p (1998: 2.05p) 6.00p (1998: 4.45p) 1999 £’000s 219 56 275 929 2,235 3,164 1998 £’000s 1,358 (394) (18) 946 300 1,246 1998 £’000s 1,773 273 – – 2,046 1998 £’000s 219 59 278 688 1,498 2,186 3,439 2,464 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 profit of the parent company for the financial year amounted to £13,724,000 (1998: £4,815,000). 8 Earnings per ordinary share The calculation of the earnings per share is based on the weighted average number of 35,591,000 ordinary shares in issue during the year (1998: 33,575,000) and on the profits for the year attributable to ordinary shareholders of £7,890,000 (1998: £7,436,000). In calculating the earnings per share before exceptional loss, earnings are adjusted for the exceptional loss of £3,129,000 (1998: nil) and the tax on exceptional loss of £947,000 (1998: nil) making adjusted earnings of £10,072,000 (1998: £7,436,000). Accounts 12/6/00 2:06 PM Page 35 Notes to the Accounts 35 In calculating the diluted earnings per share, earnings are adjusted for the preference dividend of £275,000 (1998: £278,000) making adjusted earnings of £8,165,000 (1998: £7,714,000). The weighted average number of ordinary shares are adjusted for the dilutive effect of the convertible preference shares by 1,941,000 (1998: 1,974,000) and share options by 722,000 (1998: 999,000) giving an adjusted number of ordinary shares of 38,254,000 (1998: 36,548,000). 9 Employees The average number of people employed by the Group during the year was: 1999 No. 2,122 1999 £’000s 56,932 5,732 1,205 1998 No. 1,869 1998 £’000s 46,461 4,284 1,051 63,869 51,796 Salary and fees £’000s Bonus £’000s Benefits £’000s Pension £’000s 147 137 137 111 – 532 36 20 20 76 32 29 29 24 – 114 – – – – 16 18 13 13 – 60 – – – – 15 14 14 11 – 54 – – – – 1999 Totals £’000s 210 198 193 159 – 760 36 20 20 76 1998 Totals £’000s 275 259 254 206 231 1,225 36 20 17 73 608 114 60 54 836 1,298 10 Staff costs Wages and salaries Social security costs Pension costs 11 Directors’ remuneration J C Morgan (Highest paid director) A M Stoddart J M Bishop J J C Lovell B J Moorhouse* Executive directors Sir D P Hornby (Chairman) G Gallacher B H Asher Non executive directors Totals The totals of directors’ remuneration shown above include fees of £76,000 (1998: £73,000). Pension contributions made on behalf of the executive directors are made to money purchase pension schemes. Further details of the directors’ remuneration are contained in the Directors’ Report on pages 19 and 20. * Includes £180,000 compensation for loss of office in 1998. 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 19. Conditional awards which have been made are shown therein. An amount of £133,000 has been accrued for potential awards relating to 1999 which will be calculated based on the three year period ending 31 December 2001. Accounts 12/6/00 2:06 PM Page 36 36 Notes to the Accounts 12 Intangible fixed assets Group Cost or valuation At 1 January 1999 Additions (see note 25) At 31 December 1999 Amortisation At 1 January 1999 Provided in the year At 31 December 1999 Net book value at 31 December 1999 Net book value at 31 December 1998 13 Tangible fixed assets (a) Group Cost or valuation At 1 January 1999 Additions Surplus/(deficit) on revaluation Acquisition of subsidiary undertaking Transfer to current assets Reclassification Disposals At 31 December 1999 Depreciation At 1 January 1999 Provided in the year Surplus on revaluation Acquisition of subsidiary undertaking Reclassification Disposals At 31 December 1999 Net book value at 31 December 1999 Net book value at 31 December 1998 Goodwill £’000s 4,161 8,177 12,338 191 379 570 11,768 3,970 Total £’000s 16,400 3,286 768 47 (535) – (1,857) Plant, machinery & equipment £’000s Motor vehicles £’000s Freehold property £’000s Leasehold property £’000s 5,655 1,868 – 47 – 49 (648) 6,971 3,413 1,357 – 4 2 (584) 4,192 2,779 2,242 1,249 54 – – – – (452) 6,367 1,034 812 – (535) – (640) 3,129 330 (44) – – (49) (117) 851 7,038 3,249 18,109 1,030 83 – – – (391) 722 129 219 177 46 – – – – 223 6,815 6,190 396 174 (157) – (2) (76) 335 2,914 2,733 5,016 1,660 (157) 4 – (1,051) 5,472 12,637 11,384 Accounts 12/6/00 2:06 PM Page 37 Notes to the Accounts 37 13 Tangible fixed assets (continued) (b) Company Cost or valuation At 1 January 1999 Additions Surplus/(deficit) on revaluation Transfer to current assets Disposals At 31 December 1999 Depreciation At 1 January 1999 Provided in the year Surplus on revaluation Disposals At 31 December 1999 Net book value at 31 December 1999 Net book value at 31 December 1998 Plant, machinery & equipment £’000s Freehold property £’000s Leasehold property £’000s 168 13 – – (19) 162 61 49 – (18) 92 70 107 5,832 1,034 812 (535) (125) 7,018 173 44 – – 217 6,801 5,659 1,888 51 (44) – (20) 1,875 151 37 (157) (17) 14 1,861 1,737 Total £’000s 7,888 1,098 768 (535) (164) 9,055 385 130 (157) (35) 323 8,732 7,503 The net book value of land and buildings comprises: Group Company Investment properties Freehold Short leasehold Other properties Freehold Short leasehold Total net book value 1999 £’000s 1998 £’000s 1999 £’000s 1998 £’000s 3,655 1,600 5,255 3,160 1,314 4,474 9,729 3,072 1,466 4,538 3,118 1,267 4,385 8,923 3,655 1,600 5,255 3,146 261 3,407 8,662 2,767 1,466 4,233 2,892 271 3,163 7,396 Land and buildings at cost or valuation are stated: Group Company At valuation 1994 1998 1999 At cost Comparable amounts determined according to the historical cost convention: 1999 £’000s 1,626 – 5,250 3,411 10,287 1998 £’000s 1,626 4,668 – 3,202 9,496 1999 £’000s 1,626 – 5,250 2,017 8,893 1998 £’000s 1,626 4,363 – 1,731 7,720 Cost 1999 £’000s Accumulated depreciation 1999 £’000s Net book value 1999 £’000s Net book value 1998 £’000s Land and buildings 7,946 1,248 6,698 6,303 An independent valuation of the Group’s investment properties was undertaken by Healy & Baker Real Estate Consultants as at 31 December 1999 on the basis of Existing Use Value in accordance with the RICS Appraisal and Valuation Manual. The directors have reflected these valuations in the financial statements as at the date of the valuation. The net surplus arising on revaluation of £925,000 was taken to the revaluation reserve. Accounts 12/6/00 2:06 PM Page 38 38 Notes to the Accounts 14 Investments (a) Group At 1 January 1999 Additions Share of results for the year Share of revaluation reserve At 31 December 1999 Joint venture £’000s Own shares at cost £’000s 184 – 51 558 793 690 480 – – 1,170 Investment in joint venture The Group’s joint venture investment is in Primary Medical Property Limited, which develops and invests in primary care health centres. The principal 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. Investment in own shares The own shares at cost represent 588,181 Morgan Sindall plc ordinary shares held in trust in connection with the long term incentive plan as detailed in the Directors’ Report on page 19. Based on the Company’s share price on 31 December 1999 of £3.06, the market value of the shares was £1,799,834. (b) Company Cost At 1 January 1999 Additions Repaid during the year At 31 December 1999 Provisions At 1 January 1999 (Release of provisions)/ provisions created in year At 31 December 1999 Net book value at 31 December 1999 Net book value at 31 December 1998 Own shares £’000s 690 480 – 1,170 – – – 1,170 690 Subsidiary undertakings Loans Shares £’000s £’000s Joint venture shares £’000s 33,893 28,189 – 62,082 852 (139) 713 61,369 33,041 2,251 – (611) 1,640 680 386 1,066 574 1,571 4 – – 4 4 – 4 – – Total £’000s 36,838 28,669 (611) 64,896 1,536 247 1,783 63,113 35,302 The additions to shares in subsidiary undertakings include the acquisition of Lovell Partnerships (see note 25), the issue of £3,400,000 share capital by existing subsidiaries and the transfer of the shareholding in Overbury plc from Morgan Lovell plc at a nominal value of £4,100,000. Accounts 12/6/00 2:06 PM Page 39 Notes to the Accounts 39 15 Stocks Group Company Development works and building land Trading properties Materials and equipment 1999 £’000s 23,863 863 86 24,812 1998 £’000s 4,364 2,628 163 7,155 1999 £’000s 5,931 580 – 6,511 1998 £’000s 4,364 2,628 – 6,992 Included within development works and building land is £224,000 (1998: £177,000) 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 1999 £’000s 48,387 36,755 – 276 – 2,196 1,206 1998 £’000s 31,591 33,826 – 40 – 1,369 1,002 88,820 67,828 1999 £’000s 270 – 3,014 40 – 163 210 3,697 1998 £’000s 219 – 2,452 40 200 614 130 3 , 6 5 5 17 Cash at bank and in hand The Group’s financial instruments comprise cash and various short-term items such as trade debtors and trade creditors that arise directly from its operations. In particular the Group holds cash in the form of sterling deposits with counterparties, which are at a fixed interest rate and for periods not exceeding three months. The objective of placing these deposits with financial institutions approved by the Board is to maximise interest received. The Group’s treasury policy sets out lending limits and minimum liquidity requirements to be met. By lending surplus funds to counterparties the Group’s risk profile is not significantly changed. During the period under review the Group did not enter into derivative transactions and has not undertaken trading in any financial instruments. 18 Creditors: amounts falling due within one year Bank overdraft Payments on account Trade creditors Amounts owed to subsidiary undertakings Other creditors Corporation tax Other tax and social security Accruals and deferred income Dividend Group Company 1999 £’000s – 8,162 49,127 – 2,917 1,388 2,253 57,975 2,291 1998 £’000s – – 32,271 – 1,988 1,669 2,896 56,034 1,557 1999 £’000s 1,119 – 695 15,815 127 262 36 2,069 1,671 124,113 96,415 21,794 1998 £’000s – – 74 11,543 167 – 185 2,636 1,557 16,162 Accounts 12/6/00 2:06 PM Page 40 40 Notes to the Accounts 19 Provisions for liabilities and charges Provisions for losses: At 1 January 1999 Reclassified as investment Released to profit and loss account At 31 December 1999 Group Company 1999 £’000s 1998 £’000s 1999 £’000s 1998 £’000s – – – – 218 (218) – – 80 – – 80 173 – (93) 80 The amounts of deferred taxation provided and not provided in the accounts are as follows: Group Provided Not provided Capital allowances in excess of depreciation Taxation loss relief and other timing differences 1999 £’000s 1998 £’000s 1999 £’000s – – – – – – 154 (154) – 1998 £’000s 235 (235) – There are taxation losses to carry forward of approximately £10 million (1998: £7 million). 20 Operating lease commitments At 31 December 1999 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 68 533 1,253 1,854 Other £’000s 589 2,184 148 2,921 1998 £’000s – 21 Financial commitments Group Company Capital expenditure Authorised and contracted 22 Contingent liabilities 1999 £’000s 53 1998 £’000s 78 1999 £’000s – Group bank accounts and 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. Accounts 12/6/00 2:06 PM Page 41 Notes to the Accounts 41 23 Called up share capital 1999 1998 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 No. ’000s £’000s No. ’000s £’000s 42,960 2,148 42,960 2,148 5,000 47,960 5,000 7,148 5,000 5,000 47,960 7 , 1 4 8 37,222 1,861 33,661 1,684 4,853 42,075 4,853 6,714 4,935 38,596 4,935 6,619 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. 3. 4. 3,249,612 ordinary shares by way of a Placing and Open Offer at 255p per share, the new shares being admitted to the Official List on 21 June 1999. 184,850 ordinary shares in respect of options exercised under the Company's 1988 Scheme (referred to below) for total consideration of £201,878. 93,000 ordinary shares in respect of options exercised under the Company's 1995 Scheme (referred to below) for total consideration of £116,930. 33,179 ordinary shares in respect of conversion rights attached to 82,950 convertible preference shares exercised as at 30 June 1999. 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 shareholders’ approval on 24 May 1995. Options granted under the 1988 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 1999 there remain 366,525 options outstanding under that Scheme exercisable at prices between £0.73 and £1.71. At the same date there were 1,568,925 options outstanding under the 1995 Scheme exercisable at prices between £0.73 and £2.01. No options have been granted to any members of the Morgan Sindall plc Board. 24 Revaluation reserve Group Company Investment property revaluation reserve Other property revaluation reserve 1999 £’000s 2,854 1,109 3,963 1998 £’000s 2,069 551 2,620 1999 £’000s 2,854 220 3,074 1998 £’000s 2,069 220 2,289 Accounts 12/6/00 2:06 PM Page 42 42 Notes to the Accounts 25 Acquisitions Lovell Partnerships On 16 June 1999 the Company acquired the entire issued share capital of Lovell Partnerships Limited, Lovell Partnerships (Northern) Limited and Lovell Partnerships (Southern) Limited (“Lovell Partnerships”) for cash consideration of £20.3m. The consolidated profits/(losses), after taxation, of Lovell Partnerships were as follows: Financial year ended 30 September 1998 1 October 1998 to date of acquisition (includes exceptional write-off of intercompany debt of £6,532,000) The following table analyses the book value of the major categories of assets and liabilities acquired: Book value at date of acquisition £’000s Provisional fair value adjustments £’000s – 18,815 12,069 946 9 (8,236) (8,380) 15,223 43 (2,262) (200) – – (53) (239) (2,711) Note a b b c c Tangible fixed assets Work in progress Trade debtors Other debtors Bank Trade creditors Other creditors and accruals Net assets Cash consideration Acquisition cost Total cost Goodwill £’000s 888 (6,592) Provisional fair value of net assets £’000s 43 16,553 11,869 946 9 (8,289) (8,619) 12,512 20,316 373 20,689 8,177 The acquisition has been accounted for by the acquisition method of accounting. The provisional fair value adjustments are explained as follows: a: Adjustments to align accounting policies b: Adjustment to carrying value of assets c: Provision for known liabilities Cash flow During the year, acquisitions contributed £5,580,000 to the Group's net operating cash flows, paid £235,000 in respect of net returns on investment and servicing of finance and paid £238,000 on investing activities. 26 Exceptional loss on closure of discontinued business On 3 November 1999, the Company announced the Group’s withdrawal from tendered term maintenance work for housing associations. At the year end the maintenance operation of SMHA Limited has been discontinued and existing agreements have been phased out. This has resulted in a charge in the year of £3,129,000, which represents the write down of assets to recoverable amounts and closure costs, and includes an amount of £68,000 goodwill previously eliminated against the profit and loss reserve. Accounts 12/6/00 2:06 PM Page 43 Notes to the Accounts 43 27 Pensions Defined contribution and hybrid schemes The Morgan Sindall Retirement Benefits Plan was established on 31 May 1995 and operates on defined contribution principles where contributions are invested to accumulated capital sums to provide members with retirement and death benefits. 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. In addition the Plan provides final salary related benefits for the members of the former Sindall Group Pension Fund in respect of benefits accrued before 31 May 1995. Subject as provided below, pension costs for the Plan and for other small defined contribution schemes in the Group represent the employers’ contributions actually paid in the year together with employers’ 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 of 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 until 31 May 2000 when the actuary will conduct a further review. The contributions paid by the Group for the year amounted to £1,205,000. 28 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 (Loss)/profit on sale of fixed assets Increase in stocks and work in progress Increase in debtors Increase in creditors Exceptional loss 1999 £’000s 11,727 1,660 379 – 28 (242) (8,177) 10,334 (3,061) 1998 £’000s 8,447 1,507 191 (40) (494) (285) (8,444) 8,394 – Net cash inflow from operating activities 12,648 9,276 29 Reconciliation and analysis of net cash flow to movement in net cash Cash at bank and in hand 28,386 (6,344) 22,042 1998 £’000s Cash flow £’000s 1999 £’000s Accounts 12/6/00 2:06 PM Page 44 44 Notes to the Accounts 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 Barnes & Elliott Limited Hinkins & Frewin Limited Lovell Partnerships Limited *Morgan Lovell London Limited *Morgan Lovell Regions Limited Overbury plc Roberts Construction Limited (formerly Roberts R Roberts (Leeds) Limited) Sindall Limited SMHA Limited (formerly Sindall Maintenance Limited) *Snape Limited Stansell Limited *Stansell QVC Limited The Snape Group Limited Wheatley Construction Limited Joint venture Primary Medical Property Limited (50%) Activity Construction Construction Affordable Housing 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 Intermediate holding company 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. 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 1999 and 1 January 1999 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 December 1999 5,452 6,206,926 12,814 6,183,706 5,000 – – 1 January 1999 5,452 6,206,926 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 15 February 2000. No director had any material interest in any contract with the Company. 32 Related party transaction During the year the Company appointed IRG plc as its Registrars. Sir Derek Hornby is the non-executive Chairman of IRG plc. From the date of taking up their duties on 22 November 1999 to the end of the period, IRG plc have been paid £1,550 for their services. No amounts are outstanding at the year end. Accounts 12/6/00 2:06 PM Page 45 Notice of Annual General Meeting 45 Notice is hereby given that the forty-third 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 11 April 2000 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 1999. To declare a final dividend of 6.00 pence per Ordinary Share. To re-elect Mr J J C Lovell a Director. To re-elect Ms G Gallacher 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 resolutions 7 and 8 will be proposed as Ordinary Resolutions and resolutions 9 and 10 will be proposed as Special Resolutions. 7. That the authorised share capital of the Company be increased from £7,148,000 to £7,500,000 by the creation of 7,040,000 new Ordinary Shares of 5p each ranking pari passu in all respects with the existing Ordinary Shares. 8. That subject to the passing of the previous resolution, 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 £638,895.50 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. 9. 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 Accounts 12/6/00 2:06 PM Page 46 46 Notice of Annual General Meeting ii) the allotment (otherwise than pursuant to sub-paragraphs i) above and iii) below) of equity securities up to an aggregate nominal amount of £93,055.23; and iii) the allotment of equity securities up to a total nominal amount of £97,050.20 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. 10. That the Articles of Association of the Company be amended as follows: i) ii) by deleting the second sentence in article 85; and by adding the following sentence to the end of article 86: “In addition, any Director who would not otherwise be required to retire shall retire by rotation at the third Annual General Meeting after his last appointment or re-appointment.” By order of the Board W R Johnston Company Secretary 15 February 2000 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 IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU as to arrive no later than 12 noon on 9 April 2000. Short biographical details of the directors seeking re-election are shown on page 16 and 17. 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. Accounts 12/6/00 2:06 PM Page 47 Notice of Annual General Meeting 47 8. Resolution 7 Pursuant to resolution 7 the authorised share capital of the Company would be increased from £7,148,000 to £7,500,000 representing an increase in the current authorised share capital of approximately 5% and an increase of approximately 16% in the current authorised Ordinary Share capital. This increase is being sought to ensure that the Company has adequate flexibility should the need arise to issue further Ordinary Shares, particularly following the new Ordinary Shares issued under the open offer in 1999, and the Ordinary Shares reserved for issue pursuant to the exercise of options and the conversion of Preference Shares requiring the issue of new Ordinary Shares. 9. Resolution 8 When resolution 8 in the notice of the Annual General Meeting is passed, the Board will have general and unconditional authority to allot 12,777,910 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. Of that number, 3,976,453 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 8,801,457 Ordinary Shares, representing approximately 24 per cent of the issued Ordinary Share capital of the Company, will remain authorised, unissued and unreserved. 10. Resolution 9 In addition to the above, on the passing of resolution 9, the Board will have authority to allot equity securities up to an aggregate value of £93,055.23, 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. 11. Resolution 10 Pursuant to resolution 10 it is proposed to amend the Articles of Association to ensure compliance with the Combined Code of the London Stock Exchange. Following this amendment, all directors, including the Chief Executive or Managing Director, will be subject to retirement by rotation and each director will be required to submit himself for re-election at least at every third Annual General Meeting. However, both of the changes in the resolution merely formally reflect what has been the Company’s policy and practice since 1994. 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. Accounts 12/6/00 2:06 PM Page 48 48 Corporate Directory Directors Shareholder communication Sir D P Hornby (Non-Executive Chairman) Contact with existing and prospective shareholders is J C Morgan (Chief Executive) welcomed by the Company. If you have any questions or 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: 020 7307 9200 Fax: 020 7307 9201 Registration No.00521970 Solicitors Charles Russell, enquiries about the Company or the activities of the Group, please contact: Jack Lovell, Client Director, at the registered office. Web Site www.morgansindall.co.uk 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. Financial Calendar 8-10 New Fetter Lane, London EC4 1RS Annual General Meeting: 11 April 2000 Auditors Deloitte & Touche, Ordinary shares Final dividend: Leda House, Station Road, Cambridge CB1 2RN Ex-dividend date: 13 March 2000 Tax Advisors Grant Thornton, Record date: Payment date: 17 March 2000 13 April 2000 Grant Thornton House, Melton Street, Euston Square, Interim results announcement: August 2000 London NW1 2EP Clearing Bankers Lloyds TSB Bank plc, Preference shares Dividend payment dates: 15 April 2000 15 October 2000 Po Box 17328, 11-15 Monument Street, London EC3V 9JA Next conversion date: 30 June 2000 Merchant Bankers Close Brothers Corporate Finance Limited, 10 Crown Place, Clifton Street, London EC2A 4FT Brokers Peel, Hunt & Company Limited, 62 Threadneedle Street, London EC2R 8HP Registrars IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU Accounts 12/6/00 2:06 PM Page 49 m a h g n m i r i B , s r e t n i r P y t i r u c e S & l a i c n a n i F m u i l o F y b d e t n i r P 1 1 W S i p h s r e n t r a P S G L e h T y b d e n g i s e D 

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