Norwest Holst Group PLC Report and Accounts 2000 1234 Cover Pictures - 1 Vasco da Gama Bridge, Lisbon. 2 Cambridge Business Park. 3 Bute Avenue, Cardiff. 4 ProLogis Park, Hounslow. Norwest Holst Group PLC Contents page Company Information 1 Financial Highlights 3 Chief Executive’s Report 4 Directors’ Report 14 Auditors’ Report 17 Consolidated Profit and Loss Account 19 Consolidated Statement of Total Recognised Gains and Losses 20 Consolidated Balance Sheet 21 Company Balance Sheet 22 Consolidated Cash Flow Statement 23 Notes to the Cash Flow Statement 24 Accounting Policies 26 Notes to the Accounts 29 Principal Subsidiary Undertakings 44 Principal Offices 45 Norwest Holst Group PLC Synopsis 46 Cambridge Business Park Cambridge Business Park ProLogis Park, Hounslow Six contracts have been successfully negotiated to build office accommodation at A high specification warehouse and office development in Hounslow forms part of an Cambridge Business Park. ongoing construction programme across the country for ProLogis Developments Limited. Norwest Holst Group PLC Company Information DIRECTORS J O M Stanion (Chairman & Chief Executive) A M Comba E M M Zeller J C Banon (Non-executive) P J G Billon (Non-executive) X M P Huillard (Non-executive) A Zacharias (Non-executive) SECRETARY D W Bowler REGISTERED OFFICE Astral House Imperial Way Watford Hertfordshire WD24 4WW REGISTERED NUMBER 737204 AUDITORS RSM Robson Rhodes Colwyn Chambers 19 York Street Manchester M2 3BA BANKERS National Westminster Bank Plc 1 Bute Avenue, Cardiff - A £120 million privately financed boulevard scheme including a new business quarter and some 300 new homes which links Cardiff City Centre with its waterfront. Norwest Holst Group PLC Financial Highlights 2000 1999 Turnover £381.8m £376.1m Gross Profit £34.9m £32.6m Profit after tax £15.2m £9.2m Shareholders’ funds £47.6m £47.6m Dividends per share 80.2p 48.3p Turnover Profit after tax Dividends per share 400 16 90 350 80 300 12 70 250 60 200 8 50 Value £m Value £m Value Pence / share 150 40 100 4 30 50 20 0 0 0 96 97 98 99 00 96 97 98 99 00 96 97 98 99 00 Year Year Year 3 Norwest Holst Group PLC Chief Executive’s Report Norwest Holst Group PLC The last year has been one of exceptional importance in the evolution of the Norwest Holst Group. The financial performance of the business exceeded expectations with record overall results and a strong performance in all sectors. A matter of equal significance was the rapid development within the parent group, VINCI (formerly SGE). Parent Group Changes The last year witnessed a period of unprecedented development and change. In February 2000 the ultimate parent company, Vivendi, reduced its shareholding in SGE from approximately 50% to 17% through a private placement of shares with institutional investors. Vivendi subsequently further reduced its holding and SGE became a wholly independent company during the year. On 25th May 2000, to reinforce its vision and ambition as an independent international construction and associated services group, SGE adopted the new name VINCI. On 5th October 2000, VINCI successfully completed a VINCI is organised into four business lines: friendly all share take-over bid for its rival GTM, creating the world’s leading company in concessions, construction VINCI Concessions - As the world’s leading concessions and associated services. company, VINCI has interests in 1,200 km of toll roads, bridges, tunnels, the Stade de France, 25 airports Operating through its 2,500 local business units, VINCI servicing 40 million passengers a year and is Europe’s has a workforce of 115,000. Sales in 2000 were £11 leading car park operator with over 750,000 spaces under billion. management. VINCI Energy and Information - The foremost contractor in electrical engineering in the French market and one of Europe’s leaders in information, communication technology and support services. VINCI Routes - European market leader in roadwork and urban redevelopment and the largest producer of road construction materials. VINCI Construction - Europe’s leading construction company, operating in the fields of building, civil engineering, hydraulic works, specialised civil engineering, services, maintenance and facilities management with sales in excess of £4 billion per year. Norwest Holst, with a number of other group subsidiaries in Germany and the USA, forms one of the two international divisions of VINCI Construction. 4 Vasco da Gama Bridge, Lisbon. Stade de France, Paris. Norwest Holst Group PLC Chief Executive’s Report (continued) Financial Performance Following the Norwest Holst Group’s (“the Group”) Shareholders’ funds of over £47 million are already more record performance in 1999, profit before tax increased than adequate for the size of the business and, by over 50% to £15.9 million (1999 £10.5 million). Due to accordingly, a dividend of £15.2 million is proposed. a favourable tax charge the profit after tax increased to £15.2 million (1999 - £9.2 million). Turnover increased marginally to £382 million (1999 - £376 million). As I have stated in the past, we are not Operating profit from continuing operations more than volume driven and maintain a policy of strict selectivity in doubled to £10.7 million (1999 - £4.7 million). Interest terms of the type and quantity of work we undertake. received increased to £4.6 million (1999 - £3.8 million). Our principal objective is to employ our resources Cash flow remained strongly positive at the operating efficiently and effectively to provide our clients with the level but cash in hand decreased to £98 million (1999 - best possible service. This was achieved with a further £109 million) following increased investment in increase in the amount of repeat and negotiated business acquisitions and PFI projects. undertaken. Underlying this excellent performance, the balance sheet strengthened with WIP balances falling to their lowest levels in more than a decade. Guinness Headquarters, part of the FIRSTCENTRAL business park at Park Royal in West London. 6 Norwest Holst Group PLC Chief Executive’s Report (continued) Market Conditions Whilst the private commercial sector remained buoyant The infrastructure market remained flat and investment during the year and was the principal business generator, by the utility companies appeared to decline. Rail activity the industrial market slipped further with a distinct lack of was surprisingly low given the level of investment new investment in capital works and a further reduction promulgated. in long term maintenance expenditure. Given the experience of the UK construction industry in The public sector building market benefited from the the recent past, it is disappointing to note that the level of development of the PFI but it remains the case that competition remains extreme and that predatory pricing project lead times are extended and the costs of is still evident in some areas. involvement are stubbornly resistant to economies of scale. Our experience of PFI projects under construction clearly demonstrates that there are real improvements in efficiency to be gained in the design and construction process but that these are offset at least in part by the high up-front costs involved in achieving financial closure. Dorset Police Authority PFI. 7 Norwest Holst Group PLC Chief Executive’s Report (continued) Review of Operations Construction Turnover in the combined construction subsidiaries Norwest Holst Soil Engineering Limited (NHSEL) had increased to just over £300 million in the year (1999 - another exceptionally strong year with growth in soil £294 million) on which a profit before tax of £11.8 million investigation, testing, grouting, piling and compaction. was achieved (1999 - £5.9 million). This was an The company was particularly active in the Irish Republic, exceptionally good performance with the pre-tax margin benefiting from the major investment in that country’s exceeding 3%. However Norwest Holst Construction’s infrastructure programme. Turnover increased by over performance was boosted by the settlement of certain 50% to £22 million. long-term contracts which tend to make year on year comparisons difficult. During the year a piling business, Simplex, was acquired from Britannia Group PLC. This new acquisition The Building Division turnover fell slightly to £135 million significantly increases the range, type and coverage of following the completion of a number of projects our piling activities and it is now established, together including the new Ondaatje Wing of the National Portrait with our existing piling and compaction business, in a Gallery, which was opened on time and to widespread new trading division entitled Simplex Foundations. acclaim. The division continued to develop the amount of repeat and negotiated business, which now exceeds 60% Since the year-end NHSEL completed the acquisition of a of the total. Almost all work is now of a design and second chemical and environmental testing business construction format. The division entered 2001 with an based in the south-east (Environmental Analysis Limited). increased order book. It subsequently secured a major It will be grouped with the existing northern-based contract for the construction of the new Guinness operations in an expanded geo-environmental division. Headquarters as part of the FIRSTCENTRAL business park at Park Royal in West London. The Civil Engineering Division turnover increased significantly and exceeded £100 million for the first time. This reflected the high volume of output achieved on the CTRL Mid Kent Contract 420 and the fact that the construction of Bute Avenue under the PFI contract went exceptionally well. A major new civil engineering contract was commenced on the A40 in West London to provide access to the FIRSTCENTRAL development of Park Royal. The contract to construct new pedestrian footbridges over the Thames in joint venture with Costain was delayed for technical reasons but is now progressing well. John Jones (Excavation) Limited increased its turnover The volume of work completed by the Utilities Division and recorded excellent profits once again.