Morgan Sindall Annual Report & Accounts 1998
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MORGAN SINDALL ANNUAL REPORT & ACCOUNTS 1998 ANNUAL REPORT ANNUAL REPORT & ACCOUNTS 1998 Morgan Sindall plc 77 Newman Street, London W1P 3LA Tel: 0171 307 9200 Fax: 0171 307 9201 Visit our website at www.morgansindall.co.uk Corporate Directory Directors Solicitors Sir D P Hornby (Chairman) Charles Russell, 8-10 New Fetter Lane, London EC4 1RS J C Morgan (Chief Executive) Auditors J M Bishop Deloitte & Touche, J J C Lovell Morgan Sindall is a specialist construction group whose principal Leda House, Station Road, Cambridge CB1 2RN A M Stoddart activities are fit out, regional construction and property investment. B H Asher (Non-Executive) Merchant Bankers G Gallacher (Non-Executive) Close Brothers Corporate Finance Limited, The fit out companies operate primarily in the South of England, 12 Appold Street, London EC2A 2AW Secretary whilst the regional construction business comprises a network of Brokers W R Johnston branded companies covering the whole of England. Together these Peel, Hunt & Company Limited, 62 Threadneedle Street, London EC2R 8HP businesses form the basis of a balanced construction group. Registered Office 77 Newman Street, London W1P 3LA Registrars Morgan Sindall has pace and continues to challenge the status quo Tel: 0171 307 9200 Connaught St Michaels Limited, in this traditional industry. The full year results show significant Fax: 0171 307 9201 PO Box 30, CSM House, Victoria Street, Luton LU1 2PZ progress towards achieving the objective of long term enhancement of shareholder value through organic growth, careful acquisition and the active management of a property portfolio. Financial Calendar Annual General Meeting: 13 April 1999 Shareholder communication Contact with existing and prospective shareholders is welcomed by the Company. If you have any questions or Ordinary shares Contents enquiries about the Company or the activities of the Group, please contact: Jack Lovell, Client Director, at the Final dividend: 1 Financial Highlights 22 Group Profit and Loss Account registered office shown above. Ex-dividend date: 22 March 1999 2 Chairman's Statement 23 Combined Balance Sheets 4 Chief Executive's Review 24 Group Cash Flow Statement Record date: 26 March 1999 Share prices (FT Cityline) 6 Fit Out 25 Combined Statement of Movements Payment date: 14 April 1999 in Reserves and Shareholders' Funds Current buying and selling prices of the Company’s 8 Regional Construction 26 Other Primary Statements shares, together with recorded information on key dates, 10 Property 27 Principal Accounting Policies can be obtained by dialling 0336 434027. 12 Group Overview Interim results announcement: August 1999 29 Notes to the Accounts 14 The Board 42 Notice of Annual General Meeting 15 Report of the Directors 45 Corporate Directory Preference shares 17 Remuneration Report 45 Financial Calendar 19 Corporate Governance Dividend payment dates: 15 April 1999 15 October 1999 21 Directors’ Responsibilities 21 Auditors’ Report Next conversion date: 30 June 1999 Designed by Jarvis White 45 Financial Highlights 1998 1997 INCREASE % Turnover £425m £331m + 28 Profit on ordinary activities before taxation £9.760m £7.260m + 34 Profit on ordinary activities after taxation £7.714m £5.848m + 32 Earnings per ordinary share 22.15p 16.38p + 35 Dividends per ordinary share 6.50p 5.25p + 24 Net assets £23.2m £17.5m + 33 Net cash funds £28.4m £18.4m + 54 9.8 424.6 7.3 331.2 283.1 5.2 175.2 3.0 95 96 97 98 95 96 97 98 Turnover £m Profit before tax £m Chairman’s Statement Making a difference - together I am pleased to report another excellent year for balance sheet remains sufficiently strong to support the Group with profit before tax up 34% to the level of turnover and as such we will have funds £9.760m from both increased turnover and margin. to invest. Our approach will continue to be cautious Earnings per share has risen 35% to 22.15p and but our track record demonstrates that above the Board is recommending a final ordinary average returns may still be achieved by selective dividend of 4.45p making 6.50p for the year acquisition and proactive management. (1997: 5.25p). Trading conditions overall, in the markets in which Our fit out business has performed well despite we operate, show little sign of the much publicised increased competition and reflects the strength of slowdown in the economy. Although there are our brands Morgan Lovell and Overbury, both long marked reductions in work volumes in certain established and well recognised in their sector. The sectors, this is being compensated by increased managers of these two companies, both of whom spending in other areas. We closely monitor the were promoted in recent years, have refocused order inflow and have contingency plans ready their companies on proven business strengths and should the trading environment deteriorate. For the have achieved profit growth from margin rather present however, we are pleased to have entered than volume. 1999 with an order book giving us similar percentage cover of our budgeted turnover to The regional construction business has continued previous years. to make progress with turnover up nearly 40%, albeit this growth in turnover has not been reflected Profit has grown at an average of 48% per annum yet in bottom line profit. However there is no doubt compound over the last three years and I believe that much of the hard work has been done and this this momentum is a powerful driving force. The business will be the major driver to the Group's economy for 1999 and beyond remains difficult to earnings over the coming years. forecast but with a strong balance sheet and net cash of £28.4m we are well prepared for both the Returns from investment of our asset base in challenges and opportunities that will arise. property and cash have again contributed significantly, aided by a trading profit on property as reported at the half year. We must ensure that the Sir Derek Hornby Chairman 2 Earnings per share has grown at an average of 40% per annum compound over the last three years 6.50p 5.25p 4.20p 2.70p 95 96 97 98 Dividend 22.15p 16.38p 13.13p 8.03p 95 96 97 98 Earnings per share Chief Executive’s Review Taking the business forward 1998 has seen Morgan Sindall make further years repeatedly stressed as we go round the progress. Turnover and operating profits from our companies. This year several of them have started construction activities are up 29% and 30% small torch groups comprising a mixture of site and respectively on the previous year. In broad terms office staff from different disciplines to debate how turnover growth arose from our regional the culture affects them and how it will make the construction business and profit growth from fit company stronger than the competition. With out. The spread of our client base is proving to be commitment at every level I believe we can a strength. With nine brands comprising distinct continue to have an edge and keep ahead of our profit centres it is always possible for one or two of competitors. these to have disappointing results without hindering the Group overall performance. Last year Future prospects fit out had a poor first six months, this year one of As we approach the end of this millennium it is not the regional construction brands suffered growing surprising that we reflect on past experiences and pains. Remedial action has been taken and 1999 consider what the future may offer. Morgan Sindall will I believe see regional construction make a has established itself as a top twenty UK significantly stronger contribution. With a good construction group and the 1998 results show return from our property, a strong cash position another year of above average growth. Our balance and central overheads reduced, the Group sheet is strong and I believe our real assets, the earnings per share has increased from 16.38p management and staff, have never been better. to 22.15p. However, rather than satisfaction in what has been achieved I feel excited by the opportunity and We remain committed to our policy of branded challenge ahead of us. The economic future is construction companies empowered to make their uncertain, the construction industry is quite own decisions within an agreed marketing strategy. correctly being pressed to improve and many of the Each brand management team develop their own major historic names in the industry are questioning company and are rewarded well for the success whether they wish to continue in construction. they achieve. There are benefits to each brand from Nevertheless the construction industry will continue being within the Group, sound financial backing, to be a major sector of the economy in the next ability to benchmark, cross-fertilisation of skills and millennium and only those companies that are common clients. However, the real power of the structured to accept change will flourish. I believe Group is the strength of our people motivated by that Morgan Sindall has the passion to win and that running their own company and the knowledge the next few years will be very exciting and that they can make a difference. rewarding for us all. The only non-negotiable is the Morgan Sindall culture. A commitment to the client, talented people who challenge the status quo and conservatism in financial matters are the ground rules that I and my colleagues have for 4 Fit Out Improved environment enhances performance Our fit out business had another record year with all parts of the business performing strongly. Both Morgan Lovell and Overbury are recognised as brand Morgan Lovell's clients are largely in leaders in their niche speciality. It is this the South East and the Midlands and specialisation – or as they explain it "they are serviced from offices in London, only do what they know they do well" – Wokingham and Heathrow.