RNS Number : 5056A
Morgan Sindall PLC
04 August 2008
04 August 2008
MORGAN SINDALL plc
('Morgan Sindall' or 'the Group')
Interim results for the six months to 30 June 2008
Morgan Sindall plc, the construction and regeneration group, today announces record interim results.
2008 2007
Revenue �1,239m �836m +48%
Adjusted profit before tax� �33.1m �25.2m +31%
Profit before tax �28.6m �25.2m +13%
Cash balance �98m �62m +58%
Adjusted earnings per share 60.9p 41.1p +48%
�
Earnings per share 50.1p 41.1p +22%
Interim dividend per share 12.0p 10.0p +20%
� Adjusted for amortisation of intangible assets
Group highlights
* Record set of interim results
* Continued progress with strategy of developing market leading positions across all chosen sectors
* Significant growth in Construction and Infrastructure Services divisions demonstrates success of acquisition
* Group well placed to deliver long-term sustainable growth
* Confidence reflected in strength of order book and robust net cash position
Divisional highlights
Fit Out
* Strong performance in mixed market conditions
* Operating profit of �11.5m (2007: �12.4m) on revenues of �205m (2007: �225m)
* Record margin of 5.6%, demonstrating benefits of 'Perfect Delivery' quality programme
* Order book increased both year-on-year and from the start of the year to �220m (2007: �206m)
* Focus on future growth from increased geographic and sector spread, and larger value contracts
Construction
* Strong public sector demand, particularly in education, while private sector demand remains robust apart from commercial property
* Operating profit up 86% to �4.1m (2007: �2.2m), after one-off costs of �1.0m relating to the acquisition, on revenues of �418m
(2007: �199m)
* Margin, after adjusting for one-off costs, up to 1.2% (2007: 1.1%)
* Performance improvement largely driven by acquisition impact
* Order book of �828m (2007: �891m)
* Encouraging outlook with division's enhanced capabilities, project range, and market and geographic coverage following
acquisition
Infrastructure Services
* Buoyant market conditions
* Operating profit up 90% to �7.6m (2007: �4.0m), after one-off IT costs of �1.4m relating to the acquisition, on revenues of �395m
(2007: �221m)
* Underlying revenue growth of 25%, plus a significant contribution from the acquisition
* Continued margin improvement to 2.3% (2007: 1.8%), after adjusting for one-off costs
* Strengthened market position with market leadership in tunnelling, transport, water and utilities
* Positive outlook backed up by record order book of �1.8bn (2007: �1.5bn)
Affordable Housing
* Strong performance in social new build and refurbishment sectors offset by impact of mortgage availability in open market housing
sector
* Operating profit of �8.8m (2007: �11.5m) on revenues of �176m (2007: �192m)
* Margin of 5.0% (2007: 6.0%)
* Order book maintained at �1.4bn (2007: �1.5bn)
* Outlook for social housing remains positive; division increasing focus on this area and selling units designated for open market
sales to housing associations
Urban Regeneration
* Solid performance in challenging market conditions
* Operating profit of �5.6m on revenues of �45m
* Share of forward development pipeline of �1.1bn, with a further four projects valued at �1.0bn at preferred bidder stage
* Mixed use development remains a major opportunity in the long-term
John Morgan, Executive Chairman, commented:
"Despite challenging market conditions, we have delivered a record set of interim results. We remain on track to deliver record results
for this year in line with our expectations.
"We are pleased with the acquisition we made last year. It brings an increasing balance to the Group and improves our market leading
positions in construction, infrastructure and regeneration.
"Our cash position remains strong, while our order book of �4.2bn gives us confidence for the future."
ENQUIRIES:
Morgan Sindall plc Tel: 020 7307 9200
John Morgan, Executive Chairman
Paul Smith, Chief Executive
David Mulligan, Finance Director
Blythe Weigh Communications Tel: 020 7138 3204
Tim Blythe Mobile: 07816 924626
Paul Weigh Mobile: 07989 129658
Interim Report
We are pleased to announce record results for the six months to 30 June 2008. Profit before tax and amortisation of intangible assets
rose by 31% to �33.1m (2007: �25.2m) on revenue that increased by 48% to �1.24bn (2007: �0.84bn). Adjusted earnings per share before
amortisation increased by 48% to 60.9p (2007: 41.1p).
Profit before tax for the period (after amortisation of intangible assets) was �28.6m (2007: �25.2m). The Board has declared an interim
dividend of 12.0p (2007: 10.0p), an increase of 20%.
Our strategy remains the same, to develop market leading positions within our chosen sectors in the construction and regeneration
markets. The Group has made excellent progress in this strategy over the past year. Fit Out has increased its market share in the commercial
office fit out sector. Construction and Infrastructure Services have both significantly extended their capabilities and geographic coverage
as a result of the businesses acquired from Amec plc in July 2007. Affordable Housing has strengthened its position in the social housing
sector, partly compensating for the decline in affordable open market housing. And finally, the Group has added a leading mixed use
regeneration capability through its Urban Regeneration division, which was also acquired in July 2007.
The overall growth in profitability of the Group for the first six months of 2008 was driven primarily by contributions from the
businesses acquired in July 2007. These contributions are seen in improved performances from Construction and Infrastructure Services
compared with the six months to 30 June 2007, as well as in profit from Urban Regeneration. Construction and Infrastructure Services also
expanded organically, benefitting from the buoyant market conditions in their respective markets. Conversely, Fit Out and Affordable Housing
have both faced more challenging market conditions than those experienced in 2007. Consequently the underlying profitability of the Group
achieved in the first half of 2008 was broadly similar to that achieved in the corresponding period in 2007.
Net cash at 30 June 2008 was �98m (2007: �62m) with average cash during the six months to the end of June of �95m compared with �39m for
the same period last year.
The performance of each of the operating divisions for the six months to 30 June 2008 is set out below. Divisional operating profits
are stated before the amortisation of intangible assets.
Fit Out
Fit Out produced another excellent performance during the first half of 2008, generating an operating profit of �11.5m (2007: �12.4m) on
revenue of �205m (2007: �225m). The operating margin of 5.6% (2007: 5.5%) was another record for the division demonstrating the benefits of
its 'Perfect Delivery' quality programme. Overall demand in the commercial office fit out market has been reasonably robust, and the
division's performance was driven by a strengthening of its market share and its broad sector spread, which helped it offset some softening
of demand from the financial services sector.
The division continues to focus on growth from increased geographic spread; expansion into the retail, leisure, entertainment and
education sectors; and larger value contracts. Notable projects undertaken or secured during the period include new open plan offices,
restaurant and meeting rooms for Guardian Media Group valued at �16m, the �19m fit out of two buildings for London Borough of Newham
comprising offices and a new business centre, and a �9m fit out to create new headquarters for the Intercontinental Hotel Group in
Buckinghamshire.
The order book has increased both year-on-year and since the start of the year from �179m to �220m (2007: �206m) and revenue for the
second half of the year is therefore expected to be ahead of that for the first half. As previously announced, we continue to expect some
softening of demand in 2009 albeit current signs are very encouraging with the order book for 2009 ahead of where the 2008 order book was at
this time last year.
Construction
The Construction division delivered an operating profit of �4.1m (2007: �2.2m) on revenue of �418m (2007: �199m). This revenue level
reflects year-on-year growth of around 5% in the underlying business complemented by growth from last year's acquisition. The operating
profit is stated after one-off costs of �1.0m relating to the acquisition. Adjusting the operating profit for these costs gives an operating
margin for the period of 1.2% (2007: 1.1%).
As has been well documented, demand in commercial property has weakened. However, demand from the rest of the private sector is
reasonably robust while demand from the public sector, which now accounts for approximately 70% of the division's revenue, is strong,
particularly in education where we have recently won some major new contracts. The division significantly expanded its capabilities, project
range, market coverage and geographic coverage through last year's acquisition and this is reflected in many of the new contracts secured
during the period. These include the division's appointment as a construction partner in the delivery of a seven year, �200m building
programme for Cambridgeshire County Council and as prime contractor on the �44m Bideford College for Devon County Council a School
Pathfinder Project under the Government's Building Schools for the Future ('BSF') programme.
The order book at the end of June was �828m (2007: �891m) with the overall outlook for the construction market remaining encouraging.
Infrastructure Services
Infrastructure Services enjoyed buoyant market conditions during the first half of 2008, driven in particular by investment in the
transport and utilities sectors. We expect these favourable conditions to continue for the foreseeable future. The division achieved an
operating profit of �7.6m (2007: �4.0m) on revenue of �395m (2007: �221m). This increase in revenue of 79% reflects growth in the underlying
business of approximately 25%, with the remainder from last year's acquisition. The operating profit is also stated after one-off IT costs
relating to the acquisition of �1.4m. Adjusting the operating profit for these costs gives an improved operating margin of 2.3% (2007:
1.8%).
Infrastructure Services also strengthened its market position through last year's acquisition and it is now a market leader in the
water, tunnelling, transport and utilities sectors. This leadership has contributed to its success in securing, as part of the Interlink
joint venture, a share of the �445m M74 completion project, Scotland's largest ever road construction scheme, and delivering the BAA
infrastructure and pavement works at Heathrow in the first half of 2008.
The order book at the end of June was �1.8bn (2007: �1.5bn) with the outlook for the infrastructure market remaining positive.
Affordable Housing
The refurbishment and new build social housing sectors, which now account for 90% of the division's revenue for the first half of this
year, remain healthy underpinned by the Government's Decent Homes programme and funding to the Housing Corporation. The division
strengthened its position in these sectors in the first half of the year, in particular securing Decent Homes contracts at Dudley, West
Midlands valued at �11m, and in North Warwickshire valued at �12m as well as being appointed development partner by Hounslow Homes for a
�53m contract to build 350 new homes for rent and shared ownership.
In recent months, however, the division's open market house sales have been increasingly impacted by the availability of mortgages.
Therefore, despite the growth of its revenue from social housing, overall the division delivered a reduced operating profit of �8.8m (2007:
�11.5m) on revenue of �176m (2007: �192m) achieving an operating margin of 5.0% (2007: 6.0%).
The order book at the end of June was �1.4bn (2007: �1.5bn). The outlook for social housing in the UK remains positive albeit, as
previously announced, we expect the division to continue to be impacted during the remainder of 2008 and in 2009 by the downturn in open
market house sales. To mitigate the effects of this downturn the division is successfully increasing its focus on refurbishment and new
build social housing, reducing production costs and selling units designated for open market sale to housing associations.
Urban Regeneration
Urban Regeneration performed in line with management's expectations over the first six months of 2008 delivering operating profit,
including share of joint ventures, of �5.6m on revenue of �45m. The division, which was acquired last year, gives the Group a leading mixed
use property development and urban regeneration business with interests in 30 long-term regeneration projects. Its share of the project
pipeline is valued at �1.1bn and it has a share in four further projects currently at preferred bidder stage, valued at an additional
�1.0bn.
The division is responding to the recent slowdown of the commercial property market by revisiting existing plans and rephasing
developments to ensure it is best placed to take full advantage when the market improves. Although the recent softening of the commercial
and residential property sectors means the short-term outlook for the division is subdued, the Group remains of the view that mixed use
development is central to the regeneration of urban communities in areas of social and economic deprivation and will be a major opportunity
in the long-term.
Financial review and principal risks
Revenue for the six months to 30 June 2008 increased by 48% to �1.24bn (2007: �0.84bn). This increase is due to the impact of the
acquisition in July 2007 as well as organic growth at Infrastructure Services and Construction offset by a fall in revenue from Fit Out and
Affordable Housing. Overall underlying revenue increased by 4% with the remaining growth contributed by the businesses acquired.
Group profit from operations prior to the amortisation of intangible assets increased by 30% to �30.8m (2007: �23.7m). The operating
margin was 2.5% (2007: 2.8%) reflecting the change in the mix of the business with a shift in revenue away from our higher margin divisions.
The increase in the profit from operations was driven by the acquisition with underlying profitability being broadly flat year-on-year;
increased profit as a result of organic growth at Construction and Infrastructure Services being offset by a decline in profit from Fit Out
and Affordable Housing. The cost of Group Activities was broadly similar to that for the same period last year.
Net finance income was �2.3m (2007: �1.5m) reflecting the higher level of average cash over the period of �95m (2007: �39m). Profit
before tax and amortisation of intangible assets of �33.1m was 31% ahead of last year's �25.2m. The income tax expense was �7.5m (2007:
�7.9m), lower than the same period last year, reflecting the lower headline rate and an increase in the operating profit derived from joint
ventures, which is stated after tax. Profit after tax was �21.1m (2007: �17.3m). Shareholders' equity increased to �176.8m (2007: �154.1m).
The average cash for the period was �95m (2007: �39m) and the cash at 30 June 2008 was �98m (2007: �62m). This reflects operating
profitability and corresponding strength in operating cash flow over the past twelve months. During the period the Group renewed the �25m,
364-day revolving facility for a further twelve months to June 2009. In addition to its cash resources the Group has in total �75m of
committed bank facilities and a �10m overdraft facility.
Related party transactions for the period are disclosed in note 11 to the financial statements following this report.
The directors consider that the key risks which may have a material impact on the Group's performance in the remaining six months of the
financial year are unchanged from those detailed in the 2007 annual report and accounts. these include but are not limited to; the ability
to attract, develop and retain talented employess, safe operation as a construction business, market related risks, contract related risks
and acquisition related risks.
Outlook
As previously announced, for the remainder of 2008 and 2009 we expect the strength in the infrastructure sector and the weakness in the
commercial property and open market housing sectors to continue.
Against this market backdrop, the Group remains firmly on course to achieve its targets for 2008 and beyond. Strategically it is better
placed than ever, with all of its businesses having further developed their market positions and with the addition of a leading mixed use
regeneration business during the past year. Our confidence is reflected in our forward order book, which now stands at �4.2bn (2007: �4.1bn)
and in our strong net cash position of �98m (2007: �62m).
Forward-looking statements
This interim report has been prepared solely to assist shareholders to assess the Board's strategies and their potential to succeed. It
should not be relied on by any other party for other purposes. Forward-looking statements have been made by the directors in good faith
using information available up until the date on which they approved the interim report. Forward-looking statements should be regarded
with caution because of the inherent uncertainties in economic trends and business risks.
Morgan Sindall plc
Interim financial statements for the six months to 30 June 2008
Consolidated income statement
for the six months to 30 June 2008 (unaudited)
Unaudited Unaudited Year ended
six six 31
months to months to December
30 June 2007
2008 30 June �m
�m 2007
�m
Continuing operations
Revenue (note 4) 1,238.5 836.1 2,114.6
Cost of sales (1,115.3) (744.1) (1,892.9)
Gross profit 123.2 92.0 221.7
Other administrative expenses (95.9) (67.9) (168.4)
Amortisation of intangible assets (4.5) - (4.5)
Total administrative expenses (100.4) (67.9) (172.9)
Share of net profit/(loss) of equity 3.5 (0.4) 4.7
accounted joint ventures
Profit from operations 26.3 23.7 53.5
Finance income 4.5 3.0 8.5
Finance expense (2.2) (1.5) (4.4)
Net finance income 2.3 1.5 4.1
Profit before income tax expense 28.6 25.2 57.6
Income tax expense (note 5) (7.5) (7.9) (18.2)
Profit for the period attributable to equity 21.1 17.3 39.4
holders of the parent company
There are no discontinued activities in either the current or comparative periods.
Earnings per share
From continuing operations
Basic (note 7) 50.1p 41.1p 93.8p
Diluted (note 7) 49.4p 40.1p 91.7p
Morgan Sindall plc
Interim financial statements for the six months to 30 June 2008
Consolidated balance sheet
at 30 June 2008 (unaudited)
Unaudited Unaudited Restated
30 June 30 June 31
2008 2007 December
�m �m 2007
�m
Non current assets
Property, plant and equipment 26.4 18.8 23.8
Goodwill 183.3 72.7 183.3
Other intangible assets 28.0 - 32.5
Investments in equity accounted joint ventures 46.7 10.8 38.1
Investments 0.1 0.1 0.1
Deferred tax assets 5.5 3.6 5.0
290.0 106.0 282.8
Current assets
Inventories 176.4 92.5 128.8
Amounts recoverable on construction contracts 277.3 210.8 209.1
Trade and other receivables 267.2 150.1 238.3
Cash and cash equivalents 98.3 62.4 218.9
819.2 515.8 795.1
Total assets 1,109.2 621.8 1,077.9
Current liabilities
Trade and other payables (839.8) (417.4) (814.1)
Amounts received in advance on (66.7) (36.3) (67.4)
construction contracts
Current tax liabilities (7.4) (6.6) (10.6)
Finance lease liabilities (3.6) (1.5) (1.4)
(917.5) (461.8) (893.5)
Net current (liabilities)/assets (98.3) 54.0 (98.4)
Non current liabilities
Trade and other payables (10.9) - (12.2)
Retirement benefit obligation (2.6) (2.8) (3.3)
Finance lease liabilities (1.4) (3.1) (3.2)
(14.9) (5.9) (18.7)
Total liabilities (932.4) (467.7) (912.2)
Net assets 176.8 154.1 165.7
Equity
Share capital 2.2 2.1 2.1
Share premium account 26.5 26.2 26.3
Capital redemption reserve 0.6 0.6 0.6
Own shares (7.2) (4.7) (5.5)
Hedging reserve 0.1 2.9 (2.2)
Retained earnings 154.6 127.0 144.4
Total equity 176.8 154.1 165.7
Morgan Sindall plc
Interim financial statements for the six months to 30 June 2008
Consolidated cash flow statement
for the six months to 30 June 2008 (unaudited)
Unaudited Unaudited Year ended
six six months to 30 31
months to June 2007 December
30 June �m 2007
2008 �m
�m
Net cash (outflow)/inflow from (103.3) (19.2) 158.1
operating activities (note 9)
Cash flows from investing activities
Interest received 4.6 2.9 8.4
Proceeds on disposal of property, 0.2 0.1 0.6
plant and equipment
Purchases of property, plant and (4.1) (3.6) (8.0)
equipment
Payments to acquire interests in (2.8) (2.4) (5.0)
joint ventures
Payments for the acquisition of a - - (25.5)
subsidiary
Net cash acquired on acquisition of a - - 14.2
subsidiary
Net cash outflow from investing (2.1) (3.0) (15.3)
activities
Cash flows from financing activities
Payments to acquire own shares (1.7) (1.3) (2.1)
Dividends paid (11.9) (8.4) (12.6)
Repayment of obligations under (1.9) (1.1) (4.7)
finance leases
Proceeds on issue of share capital 0.3 - 0.1
Net cash outflow from financing (15.2) (10.8) (19.3)
activities
Net (decrease)/increase in cash and (120.6) (33.0) 123.5
cash equivalents during the period
Cash and cash equivalents at 218.9 95.4 95.4
beginning of period
Cash and cash equivalents at end of 98.3 62.4 218.9
period
Morgan Sindall plc
Interim financial statements for the six months to 30 June 2008
Consolidated statement of recognised income and expense
for the six months to 30 June 2008 (unaudited)
Unaudited Unaudited Year ended
six six 31
months to months to December
30 June 2007
2008 30 June �m
�m 2007
�m
Actuarial gains/(losses) arising on defined 0.5 (0.3) (0.9)
benefit plan
Deferred tax on defined benefit plan (0.1) - 0.3
liabilities recognised directly in equity
Movement in cash flow hedges in equity 2.3 3.7 (1.4)
accounted joint ventures
Net income/(expense) recognised directly in 2.7 3.4 (2.0)
equity
Profit for the period 21.1 17.3 39.4
Total recognised income and expense 23.8 20.7 37.4
attributable to equity holders of the parent
company
Morgan Sindall plc
Interim financial statements for the six months to 30 June 2008
Notes to the interim financial statements (unaudited)
1 Basis of preparation and significant accounting policies
General information
The results for the half years ended 30 June 2008 and 2007 and the balance sheets as at those dates have not been audited and do not
constitute statutory accounts. The financial information for the year ended 31 December 2007 does not constitute statutory accounts as
defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditor*s report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
Statement of compliance
The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting
Standard 34 *Interim Financial Reporting*, as adopted by the European Union and the Disclosure and Transparency Rules of the Financial
Services Authority.
Accounting policies
The same accounting policies and methods of computation are followed in these condensed set of financial statements as applied in the
Group*s latest annual report and accounts for the year ended 31 December 2007.
At the date of authorisation of these financial statements, IFRS 8 *Operating Segments* was in issue but not yet effective and has not been
applied in these interim financial statements. The directors anticipate that the adoption of this standard in future periods will have no
material impact on the financial statements of the Group except for additional disclosures in relation to IFRS 8.
2 Restatement of comparative balances
As was stated in note 23 on page 76 of the 2007 annual Rreport and accounts, the fair value adjustments arising on the acquisition of Amec
Developments Limited and certain assets and business carried on by Amec Investments Limited and the assets, liabilities and contracts
relating to the Design and Project Services division of Amec plc were provisional and subject to finalisation in accordance with IFRS 3
*Business Combinations*.
The fair value exercise has now been completed and the final acquisition balance sheet and related fair value adjustments are disclosed in
note 10 of these interim financial statements.
In accordance with IFRS 3 *Business Combinations* the affected financial statement balances have been restated. None of the restatements
have had an impact on gross profit, profit from operations or net assets. There was no impact on recognised income or expense as stated.
3 Seasonality
The Group*s Fit Out, Construction, Infrastructure Services, Affordable Housing and Urban Regeneration activities are generally not subject
to significant seasonal variation.
4 Analysis of revenue and profit from business segments
For management purposes, the Group is organised into five operating divisions: Fit Out, Construction, Infrastructure Services, Affordable
Housing and Urban Regeneration. The divisions are the basis on which the Group reports its primary segment information. Segment information
about the Group*s continuing operations is presented below:
Unaudited for the six months to 30 June
2008
Fit Out Construction Infrastructure Affordable Housing Urban Regeneration Group Activities
Total
�m �m Services �m �m �m
�m
�m
Revenue 204.5 417.7 394.8 175.8 45.1 0.6
1,238.5
Operating profit before 11.5 4.1 7.6 8.8 2.7 (7.4)
27.3
amortisation
Share of results of associates - - - - 2.9 0.6
3.5
and joint ventures after tax
Profit from operations 11.5 4.1 7.6 8.8 5.6 (6.8)
30.8
before amortisation
Amortisation of intangible - (1.0) (0.4) - (3.1) -
(4.5)
assets
Profit from operations 11.5 3.1 7.2 8.8 2.5 (6.8)
26.3
Net finance income
2.3
Profit before tax
28.6
Unaudited for the six months to 30 June 2007
Fit Out Construction Infrastructure Affordable Housing Urban Regeneration Group Activities
Total
�m �m Services �m �m �m
�m
�m
Revenue 225.0 199.0 220.5 191.6 - -
836.1
Operating profit 12.4 2.2 4.0 11.5 - (6.0)
24.1
before amortisation
Share of results of associates - - - - - (0.4)
(0.4)
and joint ventures after tax
Profit from operations 12.4 2.2 4.0 11.5 - (6.4)
23.7
before amortisation
Amortisation of intangible - - - - - -
-
assets
Profit from operations 12.4 2.2 4.0 11.5 - (6.4)
23.7
Net finance income
1.5
Profit before tax
25.2
4 Analysis of revenue and profit from business segments (continued)
Year ended 31 December
2007
Fit Out Construction Infrastructure Affordable Housing Urban Regeneration Group Activities
Total
�m �m Services �m �m �m
�m
�m
Revenue 491.7 621.4 575.4 398.0 25.9 2.2
2,114.6
Operating profit 25.9 4.9 10.6 25.5 0.9 (14.5)
53.3
before amortisation
Share of results of associates - - - - 3.3 1.4
4.7
and joint ventures after tax
Profit from operations 25.9 4.9 10.6 25.5 4.2 (13.1)
58.0
before amortisation
Amortisation of intangible - (1.0) (0.3) - (3.2) -
(4.5)
assets
Profit from operations 25.9 3.9 10.3 25.5 1.0 (13.1)
53.5
Net finance income
4.1
Profit before tax
57.6
5 Income tax expense
Unaudited Year ended
six months
to 30 June
2008 2007 31 December 2007
�m �m �m
Current tax expense
UKcorporation tax 7.6 7.8 19.7
Adjustment in respect of prior years 0.2 - 0.3
7.8 7.8 20.0
Deferred tax expense
Current year (0.3) 0.1 (0.1)
Adjustment in respect of prior years - - (1.7)
(0.3) 0.1 (1.8)
Total income tax expense 7.5 7.9 18.2
Income tax for the six month period is charged at 30% (2007: 31%), being the estimated annual effective tax rate expected for the full
financial year, applied to the profit before income tax expense excluding the share of net profit/loss of equity accounted joint ventures
for the six month period (which are stated net of income tax).
6 Dividends
Unaudited Year ended
Six months
to 30 June
2008 2007 31 December 2007
�m �m �m
Final dividend for the year ended 31 December 11.9 8.4 8.4
2007 of 28.0p (2006: 20.0p) per share
Proposed interim dividend for the period to 5.2 4.2 4.2
30 June 2008
of 12.0p (2007: 10.0p) per share
The interim dividend was approved by the Board on 4 August 2008 and has not been included as a liability at 30 June 2008.
The interim dividend of 12.0p (2007: 10.0p) per share will be paid on 12 September 2008 to shareholders on the register at 15 August 2008.
The ex-dividend date will be 13 August 2008.
7 Earnings per share
There are no discontinued operations in either the current or comparative periods.
The calculation of the basic and diluted earnings per share is based on the following data:
Unaudited Year ended
six months
to 30 June
Earnings 2008 2007 31 December 2007
�m �m �m
Earnings before taxation 28.6 25.2 57.6
Deduct: taxation expense per income statement (7.5) (7.9) (18.2)
Earnings for the purpose of basic and 21.1 17.3 39.4
dilutive earnings per share being net profit
attributable to equity holders of the parent
company
Add back: amortisation expense 4.5 - 4.5
Earnings for the purposes of basic and 25.6 17.3 43.9
dilutive earnings per share adjusted for
amortisation expense
Unaudited Year ended
six months to 30
June
Number of shares 2008 2007 31 December 2007
No.* No. No. *000s
000s *000s
Weighted average number of ordinary 42,095 42,003 41,989
shares for the purposes of basic earnings
per share
Effect of dilutive potential ordinary
shares:
Share options 355 867 720
Conditional shares not vested 196 179 239
Weighted average number of ordinary 42,646 43,049 42,948
shares for the purposes of diluted
earnings per share
Unaudited Year ended
six months
to 30 June
2008 2007 31 December 2007
pence pence pence
Basic and diluted earnings per share
Basic earnings per share 50.1p 41.1p 93.8p
Diluted earnings per share 49.4p 40.1p 91.7p
Basic and diluted earnings per share adjusted
for amortisation
Basic earnings per share 60.9p 41.1p 104.5p
Diluted earnings per share 60.1p 40.1p 102.2p
8 Statement of changes in total equity
Unaudited Year ended
six months to
30 June
2008 2007 31 December 2007
�m �m �m
Balance at beginning of the period 165.7 141.9 141.9
Total recognised income and expense 23.8 20.7 37.4
Final dividend for 2007 (11.9) (8.4) (8.4)
Interim dividend - - (4.2)
Share-based payments 1.1 1.2 1.7
Issue of shares at a premium 0.3 - 0.1
Exercise of share options 0.4 - -
Deferred tax on share based payments 0.3 - (0.7)
Own shares acquired (1.7) (1.3) (2.1)
Share award under long term incentive plan (1.2) - -
Balance at end of the period 176.8 154.1 165.7
9 Reconciliation of profit from operations to net cash from operating activities
Unaudited Year ended
six months to
30 June
2008 2007 31 December 2007
�m �m �m
Cash flows from operating activities
Profit from operations for the period 26.3 23.7 53.5
Adjusted for:
Amortisation of intangible assets 4.5 - 4.5
Share of results of joint ventures (3.5) 0.4 (4.7)
Depreciation of property, plant and 3.5 2.8 6.3
equipment
Expense in respect of share options 0.3 1.2 1.7
Defined benefit pension payment (0.3) (0.1) (0.2)
Defined benefit pension charge 0.1 0.1 0.1
(Gain)/loss on disposal of property, plant (0.1) 0.4 1.2
and equipment
Operating cash flows before movements in 30.8 28.5 62.4
working capital
Increase in inventories (47.6) (5.7) (10.4)
Increase in receivables (97.2) (79.8) (33.3)
Increase in payables 23.7 46.8 159.2
Cash (absorbed by)/generated by operations (90.3) (10.2) 177.9
Income taxes paid (11.0) (7.6) (15.8)
Interest paid (2.0) (1.4) (4.0)
Net cash (outflow)/inflow from operating (103.3) (19.2) 158.1
activities
During the period, the Group acquired property, plant and equipment with an aggregate cost of �5.3m of which �1.2m was acquired by means of
finance leases. Cash payments of �4.1m were made to purchase property, plant and equipment.
Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other
short-term highly liquid investments with a maturity of three months or less.
10 Final acquisition balance sheet
On 27 July 2007 the Group acquired Amec Developments Limited and certain assets and business carried on by Amec Investments Limited and the
assets, liabilities and contracts relating to the Design and Project Services (*DPS*) division of Amec plc, save for certain excluded assets
and liabilities.
On page 76 of the 2007 annual report and accounts, the provisional fair values of the net assets and goodwill acquired were reported. The
Group has since completed the fair value exercise as announced on 1 July 2008. This has lead to further adjustments of �60.5m. The final
fair values are as follows:
�m
Purchase consideration:
Cash paid 23.7
Costs directly attributable to the acquisition 1.8
Total purchase consideration 25.5
Net liabilities acquired (85.1)
Goodwill 110.6
Acquiree's carrying Provisional fair Final fair value Fair value
amount value adjustments adjustments made 30 30 June
�m made 31 December June 2008 2008
2007�m �m �m
Cash and cash equivalents 14.2 - - 14.2
Intangible fixed assets:
Secured customer contracts - 3.1 1.1 4.2
Other contracts and related - 30.7 (3.8) 26.9
relationships
Software - 0.9 - 0.9
Non-compete agreement - 5.0 - 5.0
Tangible fixed assets 2.0 0.2 (0.2) 2.0
Investments in joint ventures 28.7 (4.2) - 24.5
and associates
Working capital (68.2) (37.0) (57.6) (162.8)
Net liabilities acquired (23.3) (1.3) (60.5) (85.1)
Purchase consideration settled 23.7
in cash
Directly attributable 1.8
acquisition costs
Cash and cash equivalents (14.2)
acquired
Cash outflow on acquisition 11.3
11 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its joint ventures are disclosed below and are unsecured and will be paid in
cash. Other than construction related performance guarantees given in the ordinary course of business, no guarantees have been given or
received and there is no provision for impairment in respect of the amounts owed by related parties.
Trading transactions
During the period, Group companies entered into the following significant transactions with related parties. Transactions and amounts owed
in the period are as follows:
Six months to 30 June 2008 Provision of goods Amounts owed by/(owing to) related
and services parties
�m �m
Community Solutions for 26.3 5.4
Primary Care (Holdings)
Limited
Lingley Mere Business Park 13.6 (4.5)
Development Company Limited
Ician Developments Limited 13.2 -
PFF Dorset Limited 12.3 1.4
Six months to 30 June 2007 Provision of goods Amounts owed by/(owing to) related
and services parties
�m �m
Community Solutions for 5.0 0.5
Primary Care (Holdings)
Limited
Morgan Sindall Investments 1.7 0.1
(3PD) Limited
Year ended 31 December 2007 Provision of goods Amounts owed by/(owing to) related
and services parties
�m �m
Community Solutions for 7.7 0.8
Primary Care (Holdings)
Limited
The Compendium Group Limited 2.2 -
Eurocentral Partnership 11.3 -
Limited
Lingley Mere Business Park 2.6 (6.5)
Development Company Limited
Bromley Park Limited 8.2 (5.9)
PFF Dorset Limited 9.5 2.4
12 Contingent liabilities
Group banking facilities and surety bond facilities are supported by cross guarantees given by the Company and participating companies in
the Group. There are contingent liabilities in respect of bonds, guarantees and claims under contracting and other arrangements, including
joint arrangements and joint ventures entered into in the normal course of business.
On 17 April 2008 the Office of Fair Trading (OFT) issued a Statement of Objections to the Company together with a number of construction
companies in England in connection with its investigation into alleged infringements of UK Competition law in the sector. The Company has
co-operated with the OFT's investigation under the OFT's leniency policy and, as a result, has been provisionally granted a reduction in any
penalty which the OFT might ultimately impose, however, the directors remain unable to estimate the size of any potential liability and as a
result no provision has been made in these interim financial statements.
Responsibility statement
The directors confirm that the interim report includes a fair review of the information required by FSA Disclosure and Transparency Rules
4.2.7 and 4.2.8.
The directors also confirm that the condensed set of financial statements for the six months to 30 June 2008 have been prepared in
accordance with IAS 34 *Interim Financial Reporting* as adopted by the European Union.
By order of the Board
Paul Smith
David Mulligan
Chief Executive
Finance Director
4 August 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ZGGGRKMVGRZM
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