Final Results

Morgan Sindall PLC 11 February 2003 MORGAN SINDALL PLC ('Morgan Sindall' or 'the Group') Preliminary Results for the year ended 31 December 2002 Morgan Sindall plc, the construction brands group, today announces preliminary results for the year ended 31 December 2002 • Second best result in Group's history • Affordable housing and Infrastructure Services divisions achieve record results • Fit-out maintained profitability despite tightened market conditions • Bluestone restructuring programme completed. Encouraging progress with focus on repeat work resulting in a longer order book • Current Group order book of £1.35billion Financial • Pre tax profit of £15.53 million impacted predominately by the restructuring of the construction business to create Bluestone • EPS of 25.32p • Cash balances remain positive • Dividend increased 7% to 15.0p John Morgan, Executive Chairman, commented: 'The decisions made in 2002 have created a stronger business for the future. Morgan Sindall is well balanced and has adapted quickly to the changing nature of some of our markets. We have built industry leading positions in niche markets where the Group can benefit from its competitive advantage.' 11 February 2003 ENQUIRIES: Morgan Sindall plc Tel: 020 7307 9200 John Morgan, Executive Chairman John Bishop, Finance Director College Hill Tel: 020 7457 2020 Kate Pope/Matthew Smallwood MORGAN SINDALL PLC Preliminary results for the year ended 31 December 2002 Chairman's Statement 2002 has been the second most profitable year in the Group's history with three Divisions recording strong or record results. For our fourth Division, Regional Construction, it was a year of restructure. Whilst this resulted in, as forecast, a trading loss for the Division, future years will benefit from the improvements achieved. Turnover for the year was £1,038m (2001: £909m) and whilst earnings per share for 2002 were 25.3p compared to 36.0p in the previous year this still represents an 18% compound growth since 1995. Looking at our four Divisions individually and collectively I believe the Group is now stronger than it has ever been. Acquired in January 2002 Pipeline Constructors Group, a utilities services provider, has been successfully integrated into Morgan Est enhancing its reputation as a leading infrastructure services business. Lovell grows in stature as the market leader in affordable housing, a sector attracting considerable profile and funding. Our Fit Out Division continues to perform well reflecting the strength of its brands. Bluestone is emerging as a recognised national construction brand serving both national and regional clients and delivering quality projects locally. This balance of activity over a broad range of types of construction activity, in both the public and private sector, welded together by a common culture and underpinned by a sound balance sheet is the key to the Group's strength. The Board's confidence in the underlying business is the basis for recommending an increase in final dividend to 10.75p making a total of 15.0p for the year (2001: 14.0p). Trading Overview Fit Out Overbury and Morgan Lovell have had another excellent year managing to maintain operating profit despite a 17% reduction in turnover which occurred in the second half of the year. The reduction in the take up of office space has meant lower levels of new fit out work, a trend which will probably continue into 2003. However, the Division is seeing increased demand for refurbishment of used empty space for re-letting and for refurbishment 'in occupation' where companies seek to maximise usage of their existing space resource. Overall we go into 2003 with a £66m order book which is only £3m less than last year. Two new businesses, Vivid Interiors and Backbone Furniture, were established in the year, which will utilise the skill base and broaden the Division's market opportunities. Regional Construction During 2002 the Division has successfully merged the six regional brands into one national brand. This strategic step was essential to align the Division with the needs of the market and to meet the requirements of its customers in a consistent and coordinated way. Bluestone is increasingly establishing itself with its customers and suppliers and has a more rigorous and cost effective management structure. What is equally important to me is that Bluestone employees are excited by the opportunities the single brand and new structure offers. Bluestone's expanding skill set is increasingly providing access to a broader spectrum of customers who operate either nationally or locally and this flexibility represents one of the Division's key strengths. This, in conjunction with its controlled entry into longer term partnerships, should see this Division return to profitability during 2003. Affordable Housing Lovell has had another excellent year. Turnover was up 43%, operating profit increased to £6.0m from £4.3m and the order book has risen to £565m from £255m. Even more exciting from a longer term perspective are the projects currently at the planning stage. All of this has meant an increase in both personnel and investment but there is no doubt that Lovell has market leadership in its specialist field of mixed tenure affordable housing, a market where there is huge opportunity. Infrastructure Services 2001 saw the establishment by acquisition of our Infrastructure Services Division and in January 2002 we added to it with the purchase of a utility services provider. The 2002 result, comprising turnover of £281m and operating profit of £6.5m has therefore no meaningful prior year comparison but does show an early return on the £38m total investment. Morgan Est's main markets are within the public sector, with its strong presence in water, utilities, tunnelling and specialised civil engineering projects. The sizeable order book is a reflection of the partnering culture that is increasingly used in this sector of the construction industry and by Morgan Est. There is still much to be achieved in terms of margin and working capital management but we see infrastructure services as a strong market offering us exciting opportunities. Financial The development of the Group has impacted on the balance sheet and cash profile. Historically the Group only had Divisions that were cash generative and supporting activities such as property investment and development were undertaken to maximise returns on surplus cash. Recent acquisitions have utilised these cash surpluses and with our Affordable Housing division we have opportunity for profitable reinvestment of future cash flows. Whilst the 2002 Balance Sheet shows net cash of £6.8m, during the year we have utilised modest overdraft facilities. Looking forward I believe the Group cash profile will still be cash generative with retained profits sufficient to finance growth in Affordable Housing. Working capital fluctuations particularly from Infrastructure Services will continue to be covered by our existing banking overdraft facilities. This is a sustainable financial model and creates a more efficient balance sheet structure. Corporate Social Responsibility In 2002 we established a top level committee comprising representatives from main board and senior operational management to emphasise the importance within the Group of adopting a proactive approach to environmental, health and safety and social responsibility issues. Whilst the primary objective of any company must be to generate shareholder value we firmly believe that there is a valid business case for increasing the Group's commitment in this area rather than merely conforming to legal and industry minimum requirements. The Group cannot ignore the impact of its activities on the community but by responsible and positive behaviour it should in turn gain from reciprocal fair treatment from employees, clients and suppliers. Outlook We are already experiencing some reduction in demand from the private sector economy which has affected both our Fit Out and Regional Construction Divisions. On the other hand expenditure in the public sector is forecast to increase and our year end order books in both Affordable Housing and Infrastructure Services have never been higher. The hard decisions made in 2002 have created a stronger business. We have industry leading positions in specific segments where the Group will benefit from their competitive advantage and as such I remain hugely optimistic for the prospects of the Group. Operational Overview Fit Out The reduction of the office market in 2002 meant lower levels of work and greater competition for the Fit Out Division. Despite this the Division has achieved a high level of consistent performance resulting in an operating profit of £10.5m. Overbury and Morgan Lovell continue to respond well to the dynamics of the office market. Sectors targeted in the public and private markets have secured a consistent workload for both these companies. Morgan Lovell has won £12 million of public sector work and expects to further increase its penetration, being well placed to provide the service and value demanded. As is usual at this stage of the economic cycle the Division is now seeing more demand for refurbishment in occupation as companies seek to sublet or use space more effectively. Central to the quality of the service offered is the Division's continuous improvement initiative 'Perfect Delivery'. This places the Fit Out Division ahead of the industry in terms of its service delivery and drives business improvement across the Division resulting in a high level of repeat orders, measured client satisfaction and consistent profitability. 2002 saw the launch of the 'Perfect Delivery' initiative in Morgan Lovell and Vivid Interiors and it was the fourth year of development within Overbury, where Perfectly Delivered projects included the largest single refurbishment 'in occupation' project carried out to date. This highly complex logistical project for IBM took six months to plan and 18 months to carry out and involved the refurbishment of 18,500 m(2) of space. The Division has further extended its capability and market reach by creating two new businesses, Vivid Interiors and Backbone Furniture. Vivid Interiors was formed in March 2002 and provides fit out and refurbishment for the retail, leisure and entertainment sectors. Backbone Furniture was formed in October 2002 as an independent supplier of furniture for commercial interiors. A commitment to improving relationships throughout the supply chain is being actively pursued to ensure that it is consistent, reliable, efficient and non-confrontational. The past year has seen the Division introduce many new initiatives. The most notable of these is to become the first contractor in the fit out market to operate a 'No Retentions' scheme. This has involved the introduction of an approved trade contractor scheme to forge long term relationships with suppliers and subcontractors. Fit Out has built on its 25 years as the market leader, extending both its capability and quality of delivery. This places the Division in a strong position to return a sound performance in 2003, despite expected tougher market conditions. Contract Profile Overbury Specialist in fit out and refurbishment of offices. 155 projects completed in 2002. Projects included a 75 week £17m refurbishment in occupation for IBM, and a 7 week £0.12m refurbishment for Allied Insurance Services. The average project size in 2002 was £0.98m with an average project duration of 14 weeks. Morgan Lovell Design, fit out and refurbishment of offices for end user clients. 102 projects completed in 2002. Projects included a 19 week, £1.3m office design and refurbishment whilst 'in occupation' for URS in Bedford, and a 20 week design and fit out of Citadel Investment Group offices in the City of London. Vivid Interiors Fit out and refurbishment for the retail and leisure and entertainment sectors. Five projects completed in 2002 including a 10 week refurbishment of front of house facilities at The National Film Theatre on London's Southbank. Backbone Furniture Furniture services for commercial interiors Formed in October 2002, one contract completed. Regional Construction This year saw the successful creation of the Group's regional construction brand, Bluestone, by the merger of our six regional companies. This has been carried out in a remarkably short period through the commitment of our workforce and supported by major IT upgrades and systems integration. Bluestone is quickly establishing itself as an important player across England and Wales and has 25 regional offices employing 1,400 people. It has positioned itself in the less competitive market for national delivery of smaller to medium value contracts. Turnover has been controlled as the business re-focuses on its target markets. The effect of these changes impacted the first half result when the Division reported a £4m loss. In the second half a further £1m loss was incurred as the restructure was completed, however the underlying performance demonstrates clear signs of recovery which is set to continue. Repeat business increased with Bluestone winning more work this year from key clients who include BUPA, Langtree Group plc, Pegasus Retirement Homes and international leisure park specialists, Center Parcs. Following the completion of the 'Aqua Sana' project at Sherwood Forest for Center Parcs, Bluestone won further negotiated work to build a similar new facility in Elveden, East Anglia. In 2002 Bluestone was one of six firms selected by Devon County Council to participate in a £200 million major building projects framework, a five-year programme to upgrade schools, libraries and care centres. The Division's leading expertise in large industrial warehouse construction was highlighted with the award of a £14m contract to build a 350,000 sq ft warehouse for major DIY supplier Screwfix in Stoke-on-Trent. The facility, which could accommodate up to eight football pitches, is the first fully automated high-bay warehouse in the country. In London, Bluestone completed the sixth and final Quinlan Terry designed villa on the Regent's Park Canal, part of a 14-year construction project which started in 1988. The internal finishes are of the very highest standards and feature stone and slate floors, ornamental fireplaces and enriched plastered ceilings. At St Edmundsbury Cathedral, Bury St. Edmonds, Bluestone has been building the north transept, cloister, choir aisle, crypt chapel and main tower. All materials and work specifications are aimed at a building lifespan of at least a thousand years. In healthcare, Bluestone has won several projects and has recently topped out the £8.3 million renal unit for the Royal Sussex County Hospital. As the contracting partner in a consortium Bluestone has entered the Government's innovative 25 year NHS Local Improvement Finance Trust Iniative (NHS LIFT), This public private partnership programme is for the modernization of primary health and social care premises across the UK. Bluestone has been short-listed on its first two submissions for Barnsley and Camden & Islington NHS LIFT schemes. Bluestone's technical skills were acknowledged by the winning of The Prime Minister's Award for Better Public Building, which was awarded to Bristol City Learning Centres at Brislington. Following in the footsteps of last year's winner, Tate Modern, the centres have been recognised for excellence of design, construction, financial management and relationship to the local community. The eye-catching centres were built from original designs to completion in ten months. The Division also joined a national initiative with other major UK construction providers, in Partners in Constructing a Safer Environment (PICSE), which aims to educate both directly and indirectly employed construction workers on health and safety and create opportunities for workers to gain additional qualifications. Bluestone has received a number of Health and Safety awards, including two Gold awards from the Royal Society for the Prevention of Accidents (RoSPA), in recognition of its commitment to continuous Health And Safety improvement Bluestone sees the latest market developments and changes in customer procurement routes as a very exciting challenge. The Division is working at a pace to ensure that it is properly positioned to take full advantage in 2003 and beyond. The development of its ability to work in partnership with its customers, consultants and supply chain will increasingly distinguish it from the competition. A great deal of work has already been done, and there is a great deal more to do, but Bluestone approaches the future with genuine enthusiasm and vigour. Notable Contracts • Center Parcs A £2.6m contract to build a new leisure facility at Elveden Forest Holiday Village in East Anglia. • Kings College Cambridge A £5.3m refurbishment of Grade II listed student accommodation and retail units in the centre of Cambridge. • BUPA A £4.5m scheme to build an operating theatre and extend outpatient and day-care departments at BUPA Hospital's Roundhay Hall site in Leeds. • Stoke-on-Trent Regeneration A £14m high-bay new build distribution centre project in Stoke-on-Trent for end users Screwfix • West Sussex County Council A £7.5m school at Crawley for children with special needs • Queen Elizabeth II Hospital A £2.5m ward refurbishment at Kings Lynn, Norfolk • Bristol City Council A £2.2m project for two state-of-the-art learning centres using innovative design and fast track construction • University College London An £8.7m project to build the new London Centre for Nanotechnology. • Marston Hotel Group A £5.5m extension to the Hampshire Centrecourt Hotel at Basingstoke Affordable Housing Lovell has had its best year on record with a 43% increase in turnover and operating profit up to £6.0m from £4.3m. The order book has grown to £565m from £255m and employee numbers have increased to over one thousand. The Group's Affordable Housing Division is well positioned to benefit from current Government plans. Recognising the very poor condition of a large number of traditional council properties, the Government has established the Decent Homes Standard, which has set a target of 2010 for every social rented home in the country to meet this standard. This has resulted in a number of initiatives to fund these works such as PFI and large scale stock transfers to Housing Associations. The Government is also trying to address the increasing demand for affordable homes, particularly in London and the South East and kick-start regeneration in areas of severe deprivation through programmes such as 'Market Renewal' and 'New Deal for Communities'. Working from eight regions in England, Scotland and Wales with 11 local offices, Lovell has the experience, expertise and capacity to meet this increasing demand for refurbishment and new build mixed tenure opportunities. By the middle of 2003, Lovell will be refurbishing properties across the United Kingdom at a rate of more than 2,000 per month. In 2002, Lovell won its first mixed tenure development scheme in Scotland having been selected as preferred developer for a £20m mixed tenure development in Southhouse, Edinburgh. The project is in partnership with Home in Scotland, Edinburgh City Council and the Southhouse and Burdiehouse Residents Organisation. Lovell has been appointed preferred bidder by North East Derbyshire District Council for the £40m PFI Pathfinder Project which has a construction value of £20m. This is for the refurbishment of 530 council houses in a former coalfield area over two and a half years. In London, Lovell was selected as part of the Metropolitan West Hendon consortium to build 2,000 homes in a £275m estate regeneration scheme for Barnet Council. Lovell is skilled in cost modelling and cross subsidy arrangements to fund community activities, buildings and affordable rented housing. It is also committed to local labour and apprentice training with a detailed range of innovative training initiatives. Training solutions include the 'Craft Management Academy', a pioneering approach to apprentice training and the ' Company Mentoring Scheme', a partnership between regional offices and local secondary schools to raise the profile of the construction industry and which aims to attract talented individuals into the industry. Expanding its regional operations, Lovell has established an East Anglian office. Housing demand in the region is expected to rise significantly with 25% household growth forecast over the next 20 years compared with 19% nationally. For the second year in a row, Lovell has won the prestigious Affordable Housing Provider of the Year award at the 2002 Building Homes Quality Awards. 2002 has been an excellent year and sees Lovell well placed in a growth market through 2003 and beyond. Notable Contracts • First mixed tenure development scheme in Scotland for a three year £20m scheme at Southhouse, Edinburgh. The project will provide 111 homes for open market sale, 37 for rent as well as refurbishing 176 flats and undertaking major environmental works. • Social housing PFI pathfinder project, as part of the Village Homes consortium, having been appointed preferred bidder by North East Derbyshire District Council for a £40m project to refurbish and maintain 530 council houses in a former coalfield area over a 30 year period. • Bowlee Park Housing Association - Lovell is the developer for a £40m housing regeneration programme in Langley, Greater Manchester. • Tower Hamlets Housing Action Trust - a £40m scheme in partnership with The Guinness Trust to build 262 flats and houses in Bow, East London. • Castle Vale Housing Action Trust - a £20m design and build project to create 237 homes at Castle Vale, Birmingham. Infrastructure Services 2002 has been a landmark year for Morgan Est, which now has over two thousand employees. Turnover grew to £281m with a forward order book in excess of £550m. The business operates through the core disciplines of water, utilities, tunnelling and specialised civil engineering and has secured large contracts, which include Channel Tunnel Rail Link contract CTRL 310, Heathrow Airport Airside Road Tunnel and Terminal 5 Tunnels and projects in the United Utilities Asset Management Programme (AMP3). Through Morgan Water and Morgan Utilities, the Division has established itself as one of the single largest contractors in the water industry with well established joint venture partnerships and two major additional framework agreements, one of which is a £250 million project for United Utilities over three years for asset management of two hundred waste water, clean water and sewerage projects. Morgan Water is well placed for 2003 to secure further framework agreements and to extend its total capability offering. The Division is working closely with its clients on the next phase of five year maintenance contracts which are due to start in 2004/5 (AMP4). Since the January 2002 acquisition of a leading utilities provider Pipeline Constructors Group, Morgan Utilities has grown significantly and has successfully moved into key parts of electricity services. In 2003, further penetration is planned into the electricity market with the biggest growth potential in the electricity distribution sector which has upwards of £1bn annual expenditure in areas that Morgan Utilities can strongly compete. Morgan Tunnelling remains the principal tunnelling contractor in the UK. It is in a joint venture with Vinci Construction Grands Projets to construct the £150 million tunnels associated with the Terminal 5 Project at Heathrow Airport. At King's Cross, Morgan Tunnelling has also started a two and a half year scheme to design and construct new passageways between King's Cross, St Pancras and Thameslink for London Underground Limited. Technological advancements developed by Morgan Tunnelling will speed up the construction of concrete sprayed lined tunnels and with the establishment of a pre-cast concrete plant, Morgan Tunnelling now offers a complete design, technical and manufacturing service. Morgan Civil Engineering has continued to deliver a strong performance winning a third contract on the Channel Tunnel Rail Link project to build three viaducts and railway works between Dagenham and Thurrock at a value of £178 million. Success also with the £55 million PFI road project to provide, maintain and operate the Newport Southern Distributor Road for Newport City Council. With the planned Government spending on road and rail projects as part of the £180 billion 10 year investment plan for transport Morgan Civil Engineering is in a strong position to capitalise on current market opportunities. In 2002, Morgan Est took two top industry awards at the Contract Journal Awards - Civil Engineering Contractor of the Year and the Silver Helmet Award for Safety. Recognition was also received from RoSPA for outstanding performance in health and safety by a company or organisation within a particular industry or sector. The Division starts 2003 with a long order book which reflects the strength and depth of the relationships with its clients. This together with the Government's commitment to major infrastructure investment provides Morgan Est the opportunity for long term sustainable growth. Notable Contracts • United Utilities - a three-year framework agreement with joint venture partners Barhale and Harbour & General Works for the delivery of a significant part of United Utilities remaining AMP 3 programme. The programme comprises two hundred individual wastewater, clean water and sewerage projects with total value of £250 million located in North Lancashire and Cumbria. • Severn Trent - a three-year, £85m contract for the repair and maintenance of the water distribution network, the sewerage network and associated reinstatement activities covering Derbyshire, Nottinghamshire, Warwickshire and Northamptonshire. • Union Railways (North) - £178 million CTRL 310 joint venture to design and construct three viaducts and railway works for the Channel Tunnel Rail Link between the London tunnels at Dagenham and Thames tunnel at Thurrock. • Heathrow Airport Airside Road and Terminal 5 Tunnels - Morgan Tunnelling is in a joint venture with Vinci Construction to construct the tunnels associated with the Terminal 5 Project at Heathrow Airport. The £150 million contract, which includes the Heathrow Express and Piccadilly Line extensions, started in April and is due for completion in 2005. • Newport Southern Distributor Road - a £55 million PFI project for the provision, operation and maintenance of a distributor road including a river crossing. John Morgan Executive Chairman 11 February 2003 Group Profit and Loss Account for the year ended 31 December 2002(unaudited) 2002 2001 £'000s £'000s £'000s £'000s Turnover Continuing operations 937,313 910,766 Acquisitions 103,333 - Less share of joint ventures turnover (2,259) (1,598) Group turnover 1,038,387 909,168 Cost of sales (942,782) (820,004) Gross profit 95,605 89,164 Administrative expenses (80,672) (70,709) Other operating income 758 1,133 Operating profit Continuing operations 13,359 19,588 Acquisitions 2,332 - Total operating profit (note 1) 15,691 19,588 Share of profit of joint ventures 603 17 Net interest (payable)/receivable (764) 1,165 Profit on ordinary activities before taxation 15,530 20,770 Tax charge on profit on ordinary activities (note 2) (5,138) (6,536) Profit on ordinary activities after taxation 10,392 14,234 Dividends on equity and non-equity shares (note 3) (6,254) (5,824) Retained profit for the year 4,138 8,410 Earnings per ordinary share (note 4) 25.32p 36.03p Diluted earnings per ordinary share 25.00p 34.87p Group Balance Sheet at 31 December 2002 (unaudited) 2002 2001 £'000s £'000s £'000s £'000s Fixed assets Intangible assets 54,395 40,009 Tangible assets 21,308 19,887 Share of joint ventures gross assets 31,771 22,151 Share of joint ventures gross liabilities (27,287) (20,551) Investment in joint ventures 4,484 1,600 Other investments 1,337 1,366 81,524 62,862 Current assets Stocks 49,644 36,028 Debtors 176,491 155,261 Cash at bank and in hand 6,849 34,639 232,984 225,928 Creditors: amounts falling due within one year (243,657) (224,418) Net current (liabilities)/assets (10,673) 1,510 Total assets less current liabilities 70,851 64,372 Creditors: amounts falling due after more than one year (571) (629) Net assets 70,280 63,743 Capital and reserves Called up share capital 3,646 4,993 Share premium account 24,275 22,896 Revaluation reserve 6,941 4,627 Profit and loss account 35,318 31,227 Total shareholders' funds 70,280 63,743 Shareholders' funds are attributable to: Equity shareholders' funds 68,696 60,779 Non-equity shareholders' funds 1,584 2,964 70,280 63,743 Group Cash Flow Statement for the year ended 31 December 2002 (unaudited) 2002 2001 £'000s £'000s Net cash inflow from operating activities (note 5) 630 36,159 Returns on investments and servicing of finance Interest received 821 1,434 Interest paid (1,557) (727) Dividends paid to preference shareholders (128) (190) Interest paid on finance lease charges (56) (62) (920) 455 Taxation Corporation tax paid (6,349) (6,079) Capital expenditure and financial investment Payments to acquire tangible fixed assets (5,282) (3,330) Receipts from sale of tangible fixed assets 416 551 Payments to acquire fixed asset investments (103) (311) (4,969) (3,090) Acquisitions and disposals Purchase of subsidiary undertakings (10,606) (25,658) Net cash acquired with subsidiary undertakings 506 4,720 (10,100) (20,938) Equity dividends paid (5,755) (4,368) Net cash (outflow)/inflow before financing (27,463) 2,139 Financing Issue of shares, net of expenses 132 9,139 Capital element of finance leases (459) (113) Net cash (outflow)/inflow from financing activities (327) 9,026 (Decrease)/increase in cash (notes 6 & 7) (27,790) 11,165 Group Combined Statement of Movements in Reserves and Shareholders' Funds for the year ended 31 December 2002 (unaudited) 2002 2001 Share Profit Share- Share- premium Revaluation and loss Total Share holders' holders' account reserve account reserves capital funds funds £'000s £'000s £'000s £'000s £'000s £'000s £'000s Balance at 1 January 22,896 4,627 31,227 58,750 4,993 63,743 45,700 Retained profit for the year - - 4,138 4,138 - 4,138 8,410 Converted preference shares 1,352 - - 1,352 (1,352) - - Options exercised 127 - - 127 5 132 774 Unrealised loss on deemed disposal of joint venture interest - - (47) (47) - (47) - Share of joint venture - 2,314 - 2,314 - 2,314 494 revaluation surplus New shares issued - - - - - - 8,365 Balance at 31 December 24,375 6,941 35,318 66,634 3,646 70,280 63,743 Included within the profit and loss account balance at 31 December 2002 is an amount for unrealised goodwill totalling £7,034,000 (2001: £7,034,000). Notes (Unaudited) 1. Analysis of turnover, cost of sales, administrative expenses, operating profit and net assets 2002 2001 Profit/ Net Profit/ Net Turnover (loss) assets Turnover (loss) assets £'000s £'000s £'000s £'000s £'000s £'000s Fit out 192,934 10,483 (9,109) 232,513 10,717 (12,077) Regional construction 337,027 (4,952) 2,241 402,609 4,034 1,118 Affordable housing 223,558 5,965 12,032 155,971 4,292 19,833 Infrastructure services 280,565 6,548 27,769 95,384 2,662 15,202 Group activities and 38,461 investments 4,303 (2,353) 22,691 (2,117) 5,882 1,038,387 15,691 71,394 909,168 19,588 29,958 Net funds (note 6) (1,114) 33,785 Net assets 70,280 63,743 Segmental net assets are stated after deducting interest bearing net debt/funds. All activities are carried out in the United Kingdom and Channel Islands. Included within cost of sales is an amount of £97,370,000 derived from acquisitions and £845,412,000 from continuing operations. Administrative expenses includes an amount of £3,631,000 relating to acquisitions and £77,041,000 to continuing operations. 2. Tax charge on profit on ordinary activities 2002 2001 £'000s £'000s Current taxation Uk corporation tax charge for the year 5,525 6,286 Adjustment in respect of prior years 199 250 Total current tax 5,724 6,536 Deferred taxation Origination and reversal of timing differences (572) - Share of taxation of associated undertaking (14) - Tax charge on profit on ordinary activities 5,138 6,536 Adoption of Financial Reporting Standard 19, Deferred Tax, has required a change in the method of accounting for deferred tax. The impact of this change is a deferred tax credit in the year of £572,000. This represents an asset brought forward of £270,000 and a movement during the year of a further credit of £302,000. The prior year result has not been restated as the impact is not considered material. 3. Dividends on equity and non-equity shares 2002 2001 £'000s £'000s Non-equity dividends on preference shares Paid 82 144 Accrued 46 46 128 190 Equity dividends on ordinary shares Interim paid 1,756 1,542 Final proposed 4,433 4,151 6,189 5,693 Total dividends 6,317 5,883 Dividends on shares held in trust relating to the Long Term Incentive Plan (63) (59) 6,254 5,824 The proposed final dividend will be paid on 2 April 2003 to shareholders on the register at 7 March 2003. The ex-dividend date is 5 March 2003. 4. Earnings per ordinary share The calculation of the earnings per share is based on the weighted average number of 40,535,000 (2001: 38,974,000) ordinary shares in issue during the year and on the profits for the year attributable to ordinary shareholders of £10,264,000 (2001: £14,043,000). In calculating the diluted earnings per share, earnings are adjusted for the preference dividend of £128,000 (2001: £190,000) making adjusted earnings of £10,392,000 (2001: £14,233,000). The weighted average number of ordinary shares are adjusted for the dilutive effect of the convertible preference shares by 634,000 (2001: 1,185,000) and share options by 398,000 (2001: 561,000) and contingent Long Term Incentive Plan shares by nil (2001: 94,000) giving an adjusted number of ordinary shares of 41,567,000 (2001: 40,814,000). 5. Reconciliation of operating profit to net cash inflow from operating activities 2002 2001 £'000s £'000s Operating profit 15,691 19,588 Depreciation of tangible fixed assets 4,069 3,119 Amortisation of goodwill 3,116 1,478 Profit on sale of fixed assets (166) (80) (Increase)/decrease in stocks and work in progress (11,292) 231 Increase in debtors (5,480) (4,825) (Decrease)/increase in creditors (5,308) 16,648 Net cash inflow from operating activities 630 36,159 6. Analysis of net (debt)/funds Acquisition of 31 31 December subsidiary December 2001 Cash flow undertaking 2002 £'000s £'000s £'000s £'000s Cash at bank 34,639 (27,790) - 6,849 Finance leases (854) 459 (407) (802) Loan notes - - (7,161) (7,161) Total 33,785 (27,331) (7,568) (1,114) 7. Reconciliation of net cash flow to movement in net (debt)/funds £'000s Decrease in cash (27,790) Cash outflow from decrease in finance leases 459 Changes in net funds from cashflows (27,331) Finance leases acquired with subsidiary undertaking (407) Loan notes raised (7,161) (34,899) Net funds at 1 January 2002 33,785 Net debt at 31 December 2002 (1,114) 8. Accounting policies This announcement is prepared on the basis of accounting policies as stated in the financial statements for the year ended 31 December 2001 except for the adoption of Financial Reporting Standard 19 as outlined in note 2. The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2002 and 2001. No accounts for the Company or its subsidiaries in respect of the year ended 31 December 2002 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 2002 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 21 February 2002 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 2001 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. This information is provided by RNS The company news service from the London Stock Exchange

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