Business review

The Companies Act 1985 requires the Company to set out in this report a fair review of the business of the Group during the financial year ended 31 December 2008 and the position of the Group at the end of the year (a ‘business review’).

A detailed review of the business of the Group and a description of the principal risks and uncertainties facing it, including an analysis of the development and performance of the Group during the year and the position of the Group at the year end, including analysis using key performance indicators and any other information required to fulfil the requirements of the business review can be found either in this report or in the chairman and chief executive’s statement and the business review.

All the information contained in the pages referred to above which is required for the business review or otherwise for this report is incorporated by reference in (and shall be deemed to form part of) this report. The liabilities of the directors in connection with this report shall be limited as provided by applicable English law.

Principal activities

Morgan Sindall is a construction and regeneration group with five divisions: Fit Out, Construction, Infrastructure Services, Affordable Housing and Urban Regeneration. The principal subsidiary companies operating within this divisional structure are listed in note 14 of the Company financial statements.

Results and dividends

The Group’s profit before tax for the year amounted to £62.3m (2007: £57.6m). An interim dividend of 12.0p (2007: 10.0p) per share amounting to £5.1m (2007: £4.2m) was paid on 12 September 2008. The directors are recommending a final dividend for the year of 30.0p (2007: 28.0p) per share amounting to £12.7m (2007: £12.0m) payable on 8 May 2009 to shareholders on the register at close of business on 17 April 2009.

Share capital

During the year 202,007 ordinary shares of 5p each (‘shares‘) were allotted and issued on the exercise of options under employee share option schemes. No other shares were issued during the year. Details of the Company’s share capital and capital structure, including the rights attaching to the shares, are set out in note 22 of the consolidated financial statements. Note 22 also gives details of shares held by the Morgan Sindall Employee Benefit Trust, voting rights of which are exercisable at the discretion of the trustees.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association of the Company (the ‘Articles’) and prevailing legislation. No person has any special rights of control over the Company’s share capital and the directors are not aware of any agreements between holders of shares which may result in restrictions in the transfer of shares or on voting rights.

Directors may be appointed by the Company by ordinary resolution or by the Board. The Company may by special resolution remove any director before the expiration of his period of office. The Articles provide that the business of the Company will be managed by the Board, which may exercise all the powers of the Company, whether relating to the management of the business of the Company or not, subject to the Companies Acts, the Company’s memorandum of association, the Articles, and any directions given by the Company by special resolution. The Articles may be amended by shareholders by special resolution.

At the annual general meeting on 22 April 2008, a resolution was passed giving the directors authority to make market purchases of its shares up to 4,280,184 shares at a maximum price based on the market price of a share at the relevant time, as set out in the resolution. No purchases of shares were made during the year pursuant to this authority. The authority expires on 22 April 2009 and a resolution to renew the authority will be proposed at the forthcoming annual general meeting, as explained further in the explanatory notes to the notice of annual general meeting.

There are no agreements between the Company and its directors or employees providing for compensation for loss of office or employment occurring because of a takeover bid. The Group’s banking facilities described in the business review and its facilities for surety bonding provide for early repayment of drawings upon a change of control of the Company.

Research and development

The Group undertakes some research and development activity in creating innovative construction techniques and design integral to the delivery of its projects. The direct spending incurred is not separately identifiable as the Group does not have separate research and development facilities or spending plans since the investment is usually contained within project work performed for customers.

Directors

The names of the directors at the date of this report are set out below under Directors’ interests. All of these directors held office throughout the year except for Adrian Martin, who was appointed with effect from 1 December 2008.

In accordance with the Articles, Paul Smith will be retiring by rotation at the forthcoming annual general meeting, having last been re-elected in 2006 and, being eligible, will offer himself for re-election. Adrian Martin, having been appointed by the directors during the year, will also retire and stand for election at the annual general meeting. Bernard Asher will be retiring at the annual general meeting and will not be seeking re-election.

Biographical details, including details of the roles, responsibilities and significant external commitments of the directors standing for re-election at the annual general meeting are set out here.

Directors’ interests

The interests of the directors, all of which are beneficial, in the shares of the Company are given below:

There have been no changes in the interests of the directors between 31 December 2008 and 23 February 2009.

The directors’ share options and interests in shares under long-term share incentive and other schemes are set out in the directors’ remuneration report.

Directors’ indemnities

The Articles entitle the directors of the Company to be indemnified, to the extent permitted by the Companies Act 1985 and any other applicable legislation, out of the assets of the Company in the event that they suffer any loss or incur any liability in connection with the execution of their duties as directors.

In addition, and in common with many other companies, the Company had during the year and continues to have in place directors’ and officers’ insurance in favour of its directors and other officers in respect of certain losses or liability to which they may be exposed due to their office.

Substantial shareholdings

In addition to John Morgan, as set out above, as at 23 February 2009, the Company had been notified of the following interests in voting rights attaching to the Company’s shares in accordance with the Disclosure and Transparency Rules:

Employment

The average number of employees in the Group during the year is given in note 3 of the consolidated financial statements.

Information on the Group’s employment policies and practices, including its policies on equal opportunities for disabled employees and employee involvement are included in the business review. Details of the Company’s share option schemes are set out in note 22 of the consolidated financial statements.

Supplier payment policy

The Company’s policy, which is also adopted by the Group, is to agree clearly and set down terms of payment with suppliers and subcontractors when agreeing the terms for each transaction and to make payments in accordance with its obligations, save in cases of genuine dispute.

As at 31 December 2008 the Group’s number of creditor days outstanding was equivalent to 24 days’ purchases (2007: 28 days), based on the average daily amount invoiced by suppliers during the year.

Political and charitable contributions

During the year the Group made charitable donations of £79,105 (2007: £70,444), principally to local charities serving the communities in which the Group operates. More details of the Group’s involvement in the community can be found in the 2008 project focus. No contributions were made to any political parties during the current or preceding year.

Fixed assets

There is no material difference between the book value and current market value of the Group’s interest in land and buildings.

Directors’ responsibility statement

The directors are responsible for preparing the annual report and the financial statements. The directors are required to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the EU (‘IFRS’). Company law requires the directors to prepare such financial statements in accordance with IFRS, the Companies Act 1985 and Article 4 of the IAS Regulation.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. Directors are also required to:

• properly select and apply accounting policies
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information
• provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

The directors have elected to prepare the parent company financial statements in accordance with UK Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). The parent company financial statements are required by law to give a true and fair view of the state of affairs of the Company. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently
• make judgements and estimates that are reasonable and prudent
• state whether applicable UK Accounting Standards have been followed.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the parent company financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

So far as each director is aware, there is no relevant audit information (that is, information needed by the Company’s auditors in connection with preparing their report) of which the Company’s auditors are not aware.

Each director has taken all the steps that he or she ought to have taken in his or her duty as a director in order to make himself or herself aware of any relevant audit information and to establish that the auditors are aware of that information.

Independent auditors

On 1 December 2008, Deloitte & Touche LLP changed its name to Deloitte LLP. Deloitte LLP has expressed its willingness to continue in office as independent auditors and a resolution to re-appoint it will be proposed at the forthcoming annual general meeting.

Annual general meeting

The annual general meeting of the Company will be held at the offices of RBS Hoare Govett, 250 Bishopsgate, London EC2M 4AA on 30 April 2009 at 12.00 noon. The formal notice convening the annual general meeting together with explanatory notes on the items of special business to be transacted at the meeting can be found on Notice of annual General meeting page and is available on the Company’s website at www.morgansindall.co.uk. Shareholders will also find enclosed with this document a form of proxy for use in connection with the meeting.

Approved by the Board and signed on its behalf by:

Mary Nettleship
Company Secretary
24 February 2009