Final Results

Morgan Sindall PLC 13 February 2001 MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Morgan Sindall plc, the construction brands group, today announces a sixth consecutive year of record results. 2000 1999 Increase Turnover £655m £521m +26% Pre-tax profits on ordinary activities £15.36m £10.08m +52% Earnings per share 29.75p 22.17p +34% Net assets £45.7m £37.9m +20% Net cash funds £23.5m £22.0m +6% Proposed final dividend 7.5p 6.0p +25% Financial * Strong financial performance - sixth record year despite lower property profits * Strong organic growth and improved profitability in all core operational Divisions * Strong position for 2001 with a year-end order book of £406m (1999: £ 273m) Operational * Fit out £229m turnover; £8.7m operating profit (1999: £7.6m) - Market continues to be healthy - Wider spectrum of contract size delivered growth in volume * Construction £318m turnover; £4.5m operating profit (1999: £3.1m) - Dramatic growth in margin and profit - Trend towards more negotiated work * Affordable housing £108m turnover; £2.7m operating profit in first full year of ownership - Affordable housing beginning to show its potential - Margin increase to 2.5% (+55%) despite continued investment - Order book for 2001 of £102m - margins set for continued growth John Morgan, Executive Chairman said: 'Our businesses have again demonstrated their ability to consistently grow. With healthy market conditions spanning all of our Divisions and a sound financial position, 2001 will be a year of acceleration and pace.' 13 February 2001 ENQUIRIES: Morgan Sindall plc Today: 020 7457 2020 John Morgan, Executive Chairman Thereafter: 020 7307 9200 John Bishop, Finance Director College Hill Tel: 020 7457 2020 Matthew Smallwood MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Chairman's Statement It is always a pleasure to report on a successful year, 2000 being the sixth consecutive record performance. More importantly, I believe 2001 can be even better. The Group entered the year with an order book of £406m, an improvement of 49% on last year. Our three core business Divisions are stronger from a management perspective than ever before. With a restructured central management team in support and increased potential returns from the investment of our balance sheet we look ahead with confidence. Financial Results Turnover in 2000 of £655m is 26% ahead of the previous year and whilst this is flattered by a full year's turnover from Lovell compared to six months in 1999, the second half Group turnover was still ahead of last year by 22%. Profit before tax on ongoing businesses increased by 16% to £16.0m despite reduced contribution from property investment, where one major property completion originally expected for 2000 is now anticipated this year. The bottom line result is that profits available to ordinary shareholders are up 41% to £11.2m. The Board is pleased to recommend a further increase in dividend with a proposed final dividend of 7.5p (1999: 6.0p) to make a total of l0.5p for the year (1999: 8.5p). Board Changes Against a backdrop of good news I am sorry to inform you that Andy Stoddart our Managing Director will today be resigning due to ill health. His contribution to the Group over the last six years has been immense and all of us wish him success in overcoming his health problems and a long and happy retirement. It is typical of the man that he leaves us with a newly reshaped and improved structure. Whereas previously all Brands reported to the centre, this year has seen the creation of three Divisional boards moving more of the decision-making closer to the operational front. The Divisions are supported at the centre by Paul Whitmore, who joined us in April 2000 as Commercial Director, and Jack Lovell and John Bishop who have been with the Group since its creation in 1994. The three Divisional Managing Directors will now report to me as Executive Chairman and as such the Board believes the structure needs no further expansion at this time. Trading Overview The Fit Out Division traded well throughout 2000. Changes in procurement patterns such as partnering, framework agreements and ongoing maintenance support have demanded greater flexibility and closer co-operation between our Fit Out Brands. The new divisional structure will assist in ensuring that we offer the best service to our clients irrespective of historic Brand boundaries. In addition, I believe that a divisional structure will accelerate the opportunities of expansion of this business into related areas. MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Chairman's statement (cont'd) The Construction Division is headed by Chris Saxton who, as Managing Director of Snape, was responsible for transforming that company from losses to a successful regional Brand with margins of over 3%. All seven Brands are profitable and have reached varying degrees of success in establishing themselves as regional forces. The formation of the Division will not only improve the Brands' individual performances, but enable them to respond better to national clients and initiatives. The Affordable Housing Division has undergone intense scrutiny and significant strengthening since its acquisition in June 1999. I have always been confident that Lovell's Brand strength and the Morgan Sindall resource and motivation would be a winning combination. The results for 2000 are a welcome improvement ahead of expectation. The fact that the improvement has been achieved whilst investing in new staff and increasing Lovell's forward opportunity levels augurs well for the future. Fit Out It was a lively year for Fit Out. The market sector has been healthy and the Division was able to generate increased levels of repeat orders from a customer base that has been carefully nurtured. The growth of the Fit Out Division continued with a turnover of £229m and operating profits of £8.7m, a 15.2% profit increase from last year. A significant proportion of growth came from the major projects team which has successfully become a leading contender for large projects in London and the Home Counties. Our newest team, Overbury Special Projects, established to manage small works, had a good first year and proved an effective way of consolidating established customer relationships. The Fit Out Division is now able to offer customers a service from the smallest to largest project that we believe will enable us to further lock out competitors. Both Morgan Lovell and Overbury have continued their successful growth in the southern Home Counties and particularly the Thames Valley, working with a broad mix of old and new economy customers. Growth outside of London will continue with Morgan Lovell seeking to establish themselves in the northern Home Counties with a new Milton Keynes office. Current order levels show a strong start for the year ahead. The establishment of a divisional structure gives the Overbury and Morgan Lovell Brands a unique opportunity to learn from each other's strengths and consequently offer customers a strong and effective service, regardless of procurement route. It also gives us a wider base from which to investigate opportunities to expand the Fit Out Division into new related areas. MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Chairman's statement (cont'd) Construction In 2000, the Construction Division delivered a record annual turnover of £318m and a record operating profit of £4.5m up 47% on last year's profit. The second half result demonstrated a continuing improvement in our business. All our Construction Brands are profitable, have strong order books for 2001 and are in a good position to show further growth in the coming year. Since 1994 seven Brands have been acquired providing a network which now covers England and Wales. Dramatic organic growth in turnover has been achieved and the opportunity for future expansion remains as exciting. The present emphasis however is to lift margins by improving Brand performance and building lasting relationships with our clients and our supply chain. We will achieve this by promoting the individual abilities of the profit centre units, all of which are continually developing a track record in specific areas of construction. Collectively, we are also able to pool the resources of our network to respond to national clients and national initiatives. Our divisional management structure will facilitate our ability to respond to such market opportunities. Strong profit centre teams who deliver on promises to clients are the key to achieving net margins over industry norms. The Morgan Sindall culture of decentralised management will continue to encourage the enthusiasm and motivation of our people upon whom our future success depends. Affordable Housing Lovell produced very pleasing results in 2000 with turnover of £108m and operating profit of £2.7m, an increase in margin of 55% to 2.5%. This was despite considerable continued investment in people, premises and new systems. The value of new contracts secured in the year was £l56m with an even mix between partnership housing and open market in line with the business plan. The Government continues its commitment to increase the provision of social and affordable housing from which Lovell is ideally positioned to benefit, particularly in mixed tenure urban regeneration schemes. One such project secured this year is the £l6m regeneration of the Trowbridge Estate in Hackney which involves the building over three years of 220 mixed tenure homes. Price was only one of many factors considered in the award of this project. Other opportunities for Lovell include Private Finance Initiative housing schemes. In 2000 eight Pathfinder schemes were announced with a further thirty schemes expected to be released in 2001. MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Chairman's statement (cont'd) Whilst lead in times are lengthy on these types of project, Lovell entered 2001 with a healthy forward order book significantly ahead of this time last year. A considerable proportion of this new work was secured under the principles of Best Value. In addition Lovell is in discussions on a range of exciting projects where they have been appointed preferred developer and from which they will secure work for 2002 and beyond. Investments In 2000 the return from our property profits and interest was £2.2m (1999 £ 3.7m) which was lower than expected due to a delay in the letting of our office development in Wigmore Street, London. Our refurbishment of offices in Shepherds Bush which we purchased in 2000 will also be completed shortly and is already attracting interest from potential tenants. Whilst we will continue to look for further property opportunities, we have established a company for investing in PFI projects. This will assist the core Divisions in pursuing PFI opportunities, and will also become an important investment vehicle gradually acquiring a quality stream of income through its holdings in individual project companies. Primary Medical Property, our joint venture business, which develops and retains primary care buildings, continues to expand its portfolio and now has £41m of projects either completed or under construction. This investment has excellent capital growth potential, provides construction work opportunities for Group companies and is proving invaluable as a partner when we are dealing with national Government procurement of medical facilities. It remains the Group's policy to keep strengthening the balance sheet, as buyers of construction services increasingly favour companies whose turnover is sufficiently supported by assets. Our policy has been to invest our reserves in a mixture of cash and property and to be proactive but conservative. Future Prospects I feel optimistic for the coming year with the three Divisions all in good shape. Returns from property should be ahead as the delayed 2000 project completes and this will give us extra income to offset the early costs of investing in PFI projects, which in the longer term will give us a more steady income flow. I see that there is both the potential and the determination to achieve substantial organic growth. This will not preclude us from looking at further strategic developments but should ensure that we only make moves that are truly capable of taking the Group up to the next level. John Morgan Executive Chairman MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Group Profit and Loss Account for the year ended 31 December 2000 (unaudited) 2000 1999 £ £'000s £ £'000s '000s '000s Turnover Continuing operations 655,980 519,385 Discontinued operations - 1,900 Less share of joint venture (1,144) (658) turnover Group turnover 654,836 520,627 Cost of sales (588,180) (465,584) Gross profit 66,656 55,043 Administrative expenses (52,804) (44,299) Other operating income 897 983 Operating profit Continuing operations 14,749 12,377 Discontinued operations - (650) Total operating profit 14,749 11,727 Exceptional loss on closure of (684) (3,129) discontinued business Share of profits of joint venture - 51 Net interest receivable 1,295 1,426 Profit on ordinary activities 15,360 10,075 before taxation Tax charge on profit on ordinary (3,964) (1,910) activities Profit on ordinary activities after 11,396 8,165 taxation Dividends on equity and non-equity (4,163) (3,439) shares Retained profit for the year 7,233 4,726 Earnings per ordinary share 29.75p 22.17p Diluted earnings per ordinary share 28.58p 21.34p MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Group Balance Sheet at 31 December 2000 (unaudited) 2000 1999 £'000s £'000s £'000s £'000s Fixed Assets Intangible assets 11,218 11,768 Tangible assets 11,865 12,637 Share of joint venture gross 17,929 13,697 assets Share of joint venture gross (16,840) (12,904) liabilities Investment in joint venture 1,089 793 Investment in own shares 1,245 1,170 25,417 26,368 Current Assets Stocks 35,355 24,812 Debtors 117,964 88,820 Cash at bank and in hand 23,474 22,042 176,793 135,674 Creditors: amounts falling due (156,510) (124,113) within one year Net current assets 20,283 11,561 Net assets 45,700 37,929 Capital and reserves Called up share capital 5,686 6,714 Share premium account 13,064 11,794 Revaluation reserve 4,259 3,963 Profit and loss account 22,691 15,458 Total shareholders' funds 45,700 37,929 Shareholders' funds are attributable to: Equity shareholders' funds 41,907 33,076 Non-equity shareholders' funds 3,793 4,853 45,700 37,929 MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Group Cash Flow Statement for the year ended 31 December 2000 (unaudited) 2000 1999 £'000s £'000s Net cash inflow from operating activities 8,211 12,648 Returns on investments and servicing of finance Interest received 1,411 1,494 Interest paid (615) (395) Dividends paid to preference shareholders (253) (275) 543 824 Taxation Corporation tax paid (2,563) (2,191) Capital expenditure and financial investment Payments to acquire tangible fixed assets (2,288) (3,286) Receipts from sale of tangible fixed assets 8 778 Payments to acquire fixed asset investments (155) (480) (2,435) (2,988) Acquisitions and disposals Repayment of purchase consideration 750 - Purchase of subsidiary undertakings - (20,689) Net cash acquired with subsidiary undertakings - 9 750 (20,680) Equity dividends paid (3,316) (2,427) Net cash inflow/(outflow) before financing 1,190 (14,814) Financing Issue of shares, net of expenses 242 8,470 Net cash inflow from financing activities 242 8,470 Increase/(decrease) in cash 1,432 (6,344) MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Statement of Total Recognised Gains and Losses for the year ended 31 December 2000 (unaudited) 2000 1999 £'000s £'000s Profit for the financial year before dividends 11,396 8,165 Share of joint venture's surplus on revaluation of investment 296 558 property Surplus on revaluation of investment property - 925 Total recognised gains and losses 11,692 9,648 Note of Historical Cost Profits and Losses for the year ended 31 December 2000 (unaudited) 2000 1999 £'000s £'000s Profit on ordinary activities before taxation 15,360 10,075 Realisation of property valuation gains of prior years - 140 Difference between the historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued 73 6 amount Historical cost profit on ordinary activities before taxation 15,433 10,221 Historical cost profit on ordinary activities after taxation and dividends 7,306 4,872 MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Combined Statement of Movements in Reserves and Shareholders' Funds for the year ended 31 December 2000 (unaudited) 2000 1999 Share Revalua- Profit Share- Share- premium tion and loss Total Share holders' holders' account reserve account reserves capital funds funds Group £'000s £'000s £'000s £'000s £'000s £'000s £'000s Balance at 11,794 3,963 15,458 31,215 6,714 37,929 23,182 1 January Retained - - 7,233 7,233 - 7,233 4,726 profit for year New shares - - - - - - 8,151 issued Converted 1,038 - - 1,038 (1,038) - - preference shares Options 232 - - 232 10 242 319 exercised Goodwill - - - - - - 68 realised on discontinued operation Surplus on - 296 - 296 - 296 1,483 revaluation Balance at 13,064 4,259 22,691 40,014 5,686 45,700 37,929 31 December Included within the profit and loss account balance at 31 December 2000 is an amount for unrealised goodwill totalling £7,034,000 (1999: £7,034,000). MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2000 Notes (Unaudited) 1. Analysis of turnover, operating profit and net assets 2000 1999 Profits/ Net Profits/ Net Turnover (losses) assets Turnover (losses) assets £'000s £'000s £'000s £'000s £'000s £'000s Construction 317,605 4,542 (2,366) 274,516 3,097 (684) Fit out 229,350 8,716 (13,817) 174,146 7,564 (4,427) Affordable housing 107,709 2,715 16,879 65,065 1,057 8,546 Investments 172 892 22,487 5,000 2,235 14,866 Group activities - (2,116) (957) - (1,576)(4,190) Continuing operation 654,836 14,749 22,226 518,727 12,377 14,111 Discontinued - - - 1,900 (650) 1,776 operations 654,836 14,749 22,226 520,627 11,727 15,887 Net cash balances 23,474 22,042 Net assets 45,700 37,929 Segmental net assets are stated after deducting interest bearing net cash balances. All activities are carried out in the United Kingdom and Channel Islands. 2. Tax charge on profit on ordinary activities 2000 1999 £'000s £'000s Corporation tax payable at 30% (1999: 30.25%) 4,073 3,000 Under/(over) provision in prior years 96 (143) Share of tax of joint venture - - Tax on exceptional loss (205) (947) 3,964 1,910 The tax charge for the year is lower than the standard rate due to the availability of tax losses brought forward. 3. Dividends on equity and non-equity shares 2000 1999 £'000s £'000s Non-equity dividends on preference shares Paid 197 219 Accrued 46 56 243 275 Equity dividends on ordinary shares Interim paid 3.00p (1999: 2.50p) 1,113 929 Final proposed 7.50p (1999: 6.00p) 2,839 2,235 3,972 3,164 Total dividends 4,215 3,439 Dividends on shares held in trust relating to the Long Term (52) - Incentive Plan 4,163 3,439 The proposed final dividend will be paid on 12 April 2001 to shareholders on the register at 9 March 2001. The ex-dividend date is 7 March 2001. 4. Earnings per ordinary share The calculation of the earnings per share is based on the weighted average number of 37,494,000 (1999: 35,591,000) ordinary shares in issue during the year and on the profits for the year attributable to ordinary shareholders of £11,153,000 (1999: £7,890,000). In calculating the diluted earnings per share, earnings are adjusted for the preference dividend of £243,000 (1999: £275,000) making adjusted earnings of £ 11,396,000 (1999: £8,165,000). The weighted average number of ordinary shares are adjusted for the dilutive effect of the convertible preference shares by 1,517,000 (1999: 1,941,000) and share options by 554,000 (1999: 722,000) and contingent Long Term Incentive Plan shares by 290,000 (1999: nil) giving an adjusted number of ordinary shares of 39,855,000 (1999: 38,254,000). 5. Reconciliation of operating profit to net cash inflow from operating activities 2000 1999 £'000s £'000s Operating profit 14,749 11,727 Depreciation of tangible fixed assets 2,082 1,660 Amortisation of goodwill 650 379 (Profit)/loss on sale of fixed assets (360) 28 Increase in stocks and work in progress (10,044) (242) Increase in debtors (28,564) (8,177) Increase in creditors 30,382 10,334 Exceptional loss (684) (3,061) Net cash inflow from operating activities 8,211 12,648 6. Reconciliation and analysis of net cash flow to movement in net cash 1999 Cash flow 2000 £'000s £'000s £'000s Cash at bank and in hand 22,042 1,432 23,474 7. Accounting Policies This announcement is prepared on the basis of accounting policies as stated in the financial statements for the year ended 31 December 1999. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2000 and 1999. No accounts for the Company or its subsidiaries in respect of the year ended 31 December 2000 have been delivered to the Registrar of Companies, nor have the auditors of the Company or its subsidiaries made a report under Section 236 of the Companies Act 1985 in respect of any accounts for that financial year. The statutory accounts for the year ended 31 December 2000 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be posted to shareholders by 2 March 2001 and delivered to the Registrar of Companies following the Company's Annual General Meeting. Full accounts for the Group for the year ended 31 December 1999 have been delivered to the Registrar of Companies and contain an unqualified audit report, and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. END p FR UUVBRASRUAAR

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