Interim Results

Morgan Sindall PLC 16 August 2000 MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Morgan Sindall Plc, the construction brands group, today announces interim results for the six months to 30 June 2000 6 months to 6 months Year to 30 June to 30 June 31 December 2000 1999 1999 Turnover (£m) 289 221 521 Profit before tax on ongoing businesses (£m) 6.469 6.389 13.854 Profit before tax (£m) 5.785 6.275 10.075 Earning per share (p) 11.08 14.01 22.17 Interim dividend (p) 3.00 2.50 8.50 Financial * Interim results affected by two factors - property profits realised in the first half of 1999 - regional construction contracts for 2000 are weighted heavily to the second half * Strong position for the second half with favourable trading conditions in all businesses and margins in regional construction improving Operational * Market place strong * Fit Out - operating profits ahead 13% at £4.24 million (1999: £3.74 million) - further expansion * Regional Construction - operating profit up 48% at £1.70 million - all seven brands traded profitably * Affordable Housing - satisfactory operating profit of £1.10 million - uniquely placed to benefit from increase in Government spending John Morgan, Executive Chairman of Morgan Sindall plc, said: 'We continue to be delighted by the pace and performance of our brands. All have real opportunities for the short, medium and long term which gives us confidence that Morgan Sindall will again perform well in the current year.' 16 August 2000 Enquiries: Morgan Sindall plc Tel: 020 7307 9200 John Morgan, Executive Chairman John Bishop, Finance Director College Hill Tel: 020 7457 2020 Kate Pope MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 CHAIRMAN'S STATEMENT Year 2000 has started well for Morgan Sindall, with all our core businesses experiencing favourable trading conditions. Interim profits before tax from ongoing businesses were £6.469m (1999: £6.389m). Last year the majority of the property trading profits fell in the first half of the year, this year we anticipate them falling into the second half. The increase in profits arose from improved performances in both Fit Out and Regional Construction aided by a second satisfactory contribution from Affordable Housing. Earnings per share of 11.08p (1999: 14.01p) were reduced by a final loss of £684,000 arising from the discontinued housing term maintenance business closed in November 1999. In spite of this exceptional item, and in the light of strong current trading expectations the Board has agreed to declare an interim dividend of 3.00p (1999: 2.50p). Operating Performance Fit Out Operating profits for the first half from Fit Out of £4.24m were 13% ahead of the previous year on turnover of £97m (1999: £77m). After a period of holding this business to a very tight focus to improve margin, this year it has been possible to allow both Morgan Lovell and Overbury to gradually expand both geographically and in the ongoing workplace support services they provide to their strong client base. I believe the Fit Out business will continue to grow. Regional Construction Interim operating profits for Regional Construction of £1.70m were 48% ahead of last year on turnover of £143m, marginally ahead of £138m in 1999. The profit improvement reflects that all seven brands are now profitable. Even more encouraging is that timing of contracts in many cases has resulted in turnover forecast for the second six months of the year being considerably greater than that achieved in the first half. Consequently I anticipate an improved result in the second six months. Affordable Housing Turnover for the first six months was £50m and generated an operating profit of £1.10m. As our entry to this sector was the purchase of Lovell in June 1999, there is no first half comparison, although results are broadly in line with the six months to December 1999. The recently announced government comprehensive spending review 2001/2004 has pledged increased resources for public housing rising by 12% per annum in real terms and reaching £1.6 billion above current levels by 2004. We are convinced that Lovell is uniquely placed to benefit from increased spending in this area. Much has been done to strengthen the business in this first year; restructuring offices, recruitment and upgrading systems. With Morgan Sindall's resources behind them, the Lovell management are finding increasingly attractive investment opportunities for mixed tenure housing development both in conventional partnership schemes and PFI projects. Our goal to balance the design and build construction contracts with open market developments will take time to work through but new orders won in the first half of the year have almost exactly the 50:50 split we are seeking. This more balanced split, together with improved commercial and operational support systems will lead to improved margins. Investments Property profits and interest of £0.78m were behind previous year's £2.40m. Over the last five years property trading has been a regular support to the core activities, and last year the sale of an office building, Jockey's Field, London, accounted for the majority of this profit and fell into the first six months. This year the redevelopment of an office in Wigmore Street, London was completed in July and it is now being marketed. The building when let will either add to the rental stream or present an opportunity for a profitable trading sale. Outlook At the half way stage of the year I feel we are in a strong position. All our businesses have made a reasonable start and have a healthy workload. The market place overall remains good and workload for 2001 is building at a faster pace than in any previous year. Lovell is fitting in successfully to the Group and is well positioned in a market sector that should see strong growth for some time. We have strengthened our central management team to ensure we have the capacity to take advantage of the potential we see in the immediate future. Longer term the pressure of consolidation within the construction sector will create opportunities for the companies with the track record, resources and appetite to grow. I am determined that Morgan Sindall will be at the forefront of this new generation of successful construction groups. John Morgan Executive Chairman 16 August 2000 MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Group Profit and Loss Account (Unaudited) Unaudited Unaudited Audited Six months Six months Year to to to June 2000 June 1999 December 1999 £'000s £'000s £'000s Turnover Continuing operations 289,003 220,002 519,385 Discontinued operation - 1,435 1,900 Less share of joint venture (249) (236) (658) turnover 288,754 221,201 520,627 Cost of sales (257,799) (196,634) (465,584) Gross profit 30,955 24,567 55,043 Administrative expenses (25,433) (19,435) (44,299) Other operating income 394 462 983 Operating profit Continuing operations 5,916 5,708 12,377 Discontinued operation - (114) (650) Total operating profit 5,916 5,594 11,727 Exceptional loss on closure of discontinued operation (684) - (3,129) Share of profits of joint venture - 8 51 Net interest receivable 553 673 1,426 Profit on ordinary activities before taxation 5,785 6,275 10,075 Tax charge on ordinary activities (1,590) (1,372) (1,910) Profit on ordinary activities after taxation 4,195 4,903 8,165 Dividends on equity and non-equity shares (1,238) (1,068) (3,439) Retained profit for the period 2,957 3,835 4,726 Earnings per ordinary share 11.08p 14.01p 22.17p Diluted earnings per ordinary 10.67p 13.38p 21.34p share MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Group Balance Sheet (Unaudited) Unaudited Unaudited Audited June 2000 June 1999 December 1999 £'000s £'000s £'000s Fixed assets Intangible assets 11,426 9,934 11,768 Tangible assets 12,981 11,065 12,637 Share of joint venture gross assets 15,291 9,098 13,697 Share of joint venture gross (14,498) (8,906) (12,904) liabilities Investment in joint venture 793 192 793 Investments 1,213 935 1,170 26,413 22,126 26,368 Current assets Stocks 33,813 32,243 24,812 Debtors 104,384 89,403 88,820 Cash at bank and in hand 14,057 24,716 22,042 152,254 146,362 135,674 Creditors: amounts falling due within one year (137,765) (133,217) (124,113) Net current assets 14,489 13,145 11,561 Net assets 40,902 35,271 37,929 Capital and reserves Called up share capital 6,714 6,787 6,714 Share premium account 11,810 11,505 11,794 Revaluation reserve 3,963 2,620 3,963 Profit and loss account 18,415 14,359 15,458 Total shareholders' funds 40,902 35,271 37,929 Shareholders' funds are attributable to: Equity shareholders' funds 36,049 30,336 33,076 Non-equity shareholders' funds 4,853 4,935 4,853 40,902 35,271 37,929 MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Group Cash Flow Statement (Unaudited) Unaudited Unaudited Audited June 2000 June 1999 December 1999 £'000s £'000s £'000s Net cash (outflow)/inflow from operating activities (4,475) 5,293 12,648 Returns on investments and servicing of finance Interest received 677 742 1,494 Interest paid (281) (175) (395) Dividends paid to preference (136) (139) (275) shareholders 260 428 824 Taxation Corporation tax paid (214) (232) (2,191) Capital expenditure and financial investment Receipts from sale of tangible 104 283 778 fixed assets Payments to acquire tangible (1,434) (694) (3,286) fixed assets Payments to acquire fixed asset (43) (245) (480) investments (1,373) (656) (2,988) Acquisitions and disposals Purchase of subsidiary - (15,268) (20,689) undertakings Net cash acquired - 9 9 - (15,259) (20,680) Equity dividends paid (2,199) (1,498) (2,427) Net cash outflow before financing (8,001) (11,924) (14,814) Financing Issue of share capital, net of 16 8,254 8,470 expenses Net cash inflow from financing 16 8,254 8,470 activities Decrease in cash (7,985) (3,670) (6,344) MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Statement of Movements in Shareholders' Funds (Unaudited) Unaudited Unaudited Audited June 2000 June 1999 December 1999 £'000s £'000s £'000s Opening shareholders' funds 37,929 23,182 23,182 Retained profit for the period 2,957 3,835 4,726 Options exercised 16 102 319 New shares issued net of expenses - 8,152 8,151 Surplus on revaluation - - 1,483 Goodwill realised on discontinued - - 68 operations Closing shareholders' funds 40,902 35,271 37,929 MORGAN SINDALL PLC Interim Results for the six months to 30 June 2000 Notes to the Interim Report 1. Analysis of turnover and operating profit Unaudited six months to Unaudited six months to June 2000 June 1999 £'000s £'000s £'000s £'000s Turnover Profit/ Turnover Profit/ (losses) (losses) Regional construction 142,585 1,699 137,683 1,147 Fit out 95,678 4,235 77,084 3,742 Affordable housing 49,591 1,103 - - Property - 223 5,000 1,729 Group activities - (1,344) - 910) Ongoing activities 288,754 5,916 219,767 5,708 Discontinued operations - - 1,435 (114) 288,754 5,916 221,202 5,594 2. Earnings per share The calculation of the earnings per ordinary share is based on the weighted average number of 36,631,000 ordinary shares in issue during the period and on the profit for the period attributable to ordinary shareholders of £4,059,000. In calculating the diluted earnings per share, earnings are adjusted for the preference dividend of £136,000 giving adjusted earnings of £4,195,000. The weighted average number of ordinary shares are adjusted for the dilutive effect of the convertible preference shares by 1,941,000 and share options by 725,000 giving an adjusted number of ordinary shares of 39,297,000. 3. Taxation Taxation on current period profits is charged at 25.5% being the estimated effective rate of taxation for the year. 4. Reconciliation of operating profit to net cash inflow/(outflow) from operating activities Unaudited Unaudited Audited Six Six Year to months to months to December June 2000 June 1999 1999 £'000s £'000s £'000s Operating profit 5,916 5,594 11,727 Depreciation of tangible fixed assets 1,006 750 1,660 Amortisation of goodwill 342 104 379 (Profit)/loss on sale of fixed assets (21) (20) 28 (Increase)/decrease in stocks and work in (8,844) 2,826 (242) progress Increase in debtors (15,564) (8,559) (8,177) Increase in creditors 13,374 4,598 10,334 Exceptional loss (684) - (3,061) Net cash (outflow)/inflow from operating (4,475) 5,293 12,648 activities 5. Reconciliation and analysis of net cash flow to movement in net cash 2000 1999 Net cash Net cash £'000s £'000s At 1 January 2000 22,042 28,386 Cash outflow (7,985) (6,344) Cash at bank at 30 June 2000 14,057 22,042 6. Interim dividend The interim dividend of 3.00p per share (1998: 2.50p) will be paid on 15 September 2000 to shareholders on the register at 4 September 2000. The ex-dividend date will be 29 August 2000.

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