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Mouchel Group plc 2008Mouchel Group Report Annual and Accounts Building great relationships 2008 Annual Report and Accounts www.mouchel.com Who we are Mouchel is a consulting and business services group that improves day-to-day life for millions of people by providing the many design, management and operational skills needed to transform essential public services and to sustain vital infrastructure. We provide safer, more reliable roads and railways, better teaching and learning environments, more sustainable energy and waste solutions, cleaner drinking water and more accessible public services. We help our clients find better ways to run their own services and to reap the rewards of better investment in technology and systems. We go the extra mile – and more – to do the right thing for our clients, lead the way in our markets, keep our promises to our people and offer a fair return to our investors. This is Mouchel. This is the way we do business. Building great relationships Mouchel’s business is built upon great relationships – with our customers, our stakeholders and our people. They enable us to provide services that help our clients improve day-to-day life for millions of people… Acknowledgements Mouchel would like to thank all those who participated in producing this report, particularly the members of staff, for their contributions. Cover and main case study photography by Arnhel de Serra. Designed and produced by The College www.thecollege.uk.com Printed in the UK by Royle Corporate Print, a carbon-neutral printing company which is ISO 14001 and FSC certified. This report is printed on Think4 Bright paper, which is FSC certified, 100% ECF (Elemental Chlorine Free) and totally recyclable. Contents This report is available on our website: www.mouchel.com 01 Highlights 56 Consolidated Income 60 Company Statement 02 Mouchel at a Glance Statement of Recognised Income If you have finished reading the report and no longer wish to retain it, please pass it on to other interested readers, return it to Mouchel or dispose 04 Chairman’s Statement 57 Group and Company and Expense of it in your recycled paper waste. 06 Business Review Balance Sheets 61 Independent Auditors’ Report 40 Board of Directors 58 Consolidated Cash 62 Notes to the Financial Thank you. 43 Directors’ Report Flow Statement Statements 46 Corporate Governance Report 59 Consolidated Statement 103 Five-year Financial Summary 51 Remuneration Report of Recognised Income 104 Shareholder Information and Expense TT-COC-002228 Introduction Report and Accounts 2008 Mouchel Group plc Financial highlights Highlights • Revenue growth of 46%, increasing sales to £656.7 million and strong organic revenue growth of 14%; • Underlying operating profit2 up 27% to £41.7 million. Operating margins as expected at 6.4% following acquisition of HBS (2007: 7.4%); • Excellent cash performance with more than 90% of underlying operating profit2 converted into operating cash flow; • Continuing excellent earnings visibility with future prospects underpinned by forward order book of £2.1 billion and bidding pipeline of £2.2 billion. Business highlights • Integration of HBS and Hedra successfully concluded following acquisition during the year, with anticipated synergies of £3 million and £1 million secured in full; • EnterpriseMouchel joint venture appointed to undertake the Highways Agency Super Agency maintenance and network management commission in Southern England (Area 3); • Secured extensions of highways contract with Hertfordshire County Council and bundled services contract with Lincolnshire County Council; Revenue (£m)1 • Launched parking management business following earlier 08 656.7 acquisition of Traffic Support and secured first parking services commission in the London Borough of Hillingdon; 07 448.4 06 374.0 • Appointed as preferred bidder on the Group’s first Building 05 308.0 Schools for the Future commission in the London Borough of Hackney with financial close imminent; 04 271.9 • Good contract win and renewal rates with performance Underlying operating profit 1,2 for the year still within our target range of 33% to 40% (£m) of contracts tendered by value; 08 41.7 07 33.0 • Strengthened both senior management team and plc Board through new appointments and placed as one 06 26.8 of the Sunday Times Top 20 ‘Best Big Companies to 05 21.2 Work For’ in the UK; 04 19.2 • Rebranded to Mouchel Group in December 2007. Adjusted earnings per share (pence)1,3 08 25.7 07 21.0 06 17.8 05 13.5 04 12.6 Forward order book (£bn)4 08 2.1 07 1.5 2.2 06 1.2 05 1.0 04 0.9 HBS 1 Figures for 2004 under UK GAAP, IFRS thereafter. 2 Underlying operating profit, operating margins and profit before tax and exceptional items are before amortisation of intangible assets arising from business combinations of £5.7 million (2007: £2.4 million) and other exceptional items of £6.8 million. These relate to the integration and transition costs associated with the acquisitions of HBS and Hedra and the Group rebranding. The Group also benefited from a net pension gain of £18.2 million in 2007. 3 Adjusted earnings per share is calculated after adding back shares held by the employee share trusts to the weighted average number of shares and adjusting earnings for exceptional items (net of taxation). 4 2007 figures include HBS order book of £0.7 billion. Highlights 2008 Annual Report and Accounts 01 Mouchel Group plc Mouchel Effective, reliable public services improve day-to-day life for at a Glance millions of people. Mouchel’s strength lies in managing and improving the way in which public services are delivered and in providing the many professional and technical services needed to achieve this. We operate in three distinct areas: in the provision of highway engineering and management services; in the management of other professional services for local and central government; and in the provision of services to utilities, rail companies and other industries regulated by government. Most of our work remains in the British Isles but we have a rapidly-expanding presence in the Middle East. Highways Government Services Regulated Industries “ Technology is transforming the “ Local authorities are striving to achieve “ The search is well and truly on to highways sector; making roads better services with limited resources. find more sustainable ways of coping safer, keeping traffic on the move The combination of their challenges, with society’s unrelenting demands and improving travel choices.” our passion for public service and our for energy, water and waste disposal. Keith Jackson, Managing Director capability means our role will be greater This is largely uncharted territory than ever before.” and the prize for success is high.” Steve Morriss, Managing Director, Piers Clark, Managing Director Government and Business Services “ There’s a constant need for our clients to improve the way they buy goods and services, ensure the benefits of infrastructure investment are realised and improve operational effectiveness.” Mark Campbell, Managing Director, Management Consulting Percentage of Group revenue Percentage of Group revenue Percentage of Group revenue 33% 41% 26% 1 Revenue: £221.2 million 1 Revenue: £267.1 million 1 Revenue: £168.4 million 2 Underlying operating 2 Underlying operating 2 Underlying operating profit: £16.6 million profit: £14.4 million profit: £10.7 million 3 Order book: £588 million 3 Order book: £1,218 million 3 Order book: £294 million 4 Number of staff: 3,4801 4 Number of staff: 4,8321 4 Number of staff: 2,6711 1 No. of individuals employed as at 31 July 2008. Mouchel at a Glance 2008 Annual Report and Accounts 02 Mouchel Group plc Highways partnership with our clients. This ranges from key decisions on policy Mouchel’s Highways business provides design and management and strategy to procurement, technology delivery and managing services that keep traffic flowing on the streets in our towns and cities change. Across all of these markets and services we provide project and on some of our busiest motorways. We provide a broad portfolio of and programme management to ensure improvements are secured services to support our clients at every stage in the process of planning, to the required time, quality and budget levels. design, construction, operation, maintenance and renewal. GBS was created through the integration of Mouchel’s local We are number one in our field in Britain and acknowledged experts government stream and the former HBS business, acquired by in the newer technologies that are increasingly employed to increase Mouchel in August 2007. capacity and to control the way in which the public uses the road system. We work for clients who include Transport for London (TfL), GBS is responsible for delivering a series of large-scale, multi-functional, the Scottish Executive and the Roads Service in Northern Ireland. long-term partnerships with local authorities up and down the country, including in Liverpool, Oldham, Bath, Lincolnshire, Rochdale, Milton Mouchel is responsible for managing the maintenance of around Keynes and Middlesbrough. Each involves a different balance and range 43% of the Highways Agency’s network in England and 42% of the of services, but typically includes transformation, property, ICT, corporate trunk road network in Scotland. Local and regional roads are managed services, highways, customer services and revenues and benefits. by local authorities and we have Highways-led commissions in 26 English counties and boroughs, six Scottish local authorities and GBS is also transforming teaching and learning environments through 12 local roads authorities in Ireland. our work with local government in the City Academy and Building Schools for the Future programmes. Here our combined expertise Mouchel is at the cutting edge of technology and managed service in property, educational services, ICT and programme management developments in parking and congestion management.