annual report and accounts 2011
constructing
and 
regenerating construction regeneration
constructing  
and regenerating
morgan sindall group is a leading uk construction and regeneration  
group employing around 7 000 people the construction infrastructure  
and design services of the group provide clients with innovative and  
costeffective solutions throughout the property and infrastructure  
lifecycle working in longterm trusted partnerships the group’s  
expertise in mixeduse and housingled regeneration is creating  
largescale economic and social renewal throughout the country
construction and 
infrastructure
offers national design 
construction and 
infrastructure services  
to private and public  
sector customers the 
division works on projects 
of all sizes across a broad 
range of sectors including 
commercial defence 
education energy 
healthcare industrial 
leisure retail transport 
waste and water 
fit out
specialises in ﬁt out and 
refurbishment projects  
in the office education 
retail technology and  
leisure sectors through 
overbury as a national  
ﬁt out company operating 
through multiple 
procurement routes and 
morgan lovell specialising  
in the design and build  
of offices in london and  
the south
affordable housing
specialises in the design  
and build refurbishment 
maintenance regeneration 
and repair of homes and 
communities across the uk 
the division operates a full 
mixedtenure model 
creating homes for rent 
shared ownership and  
open market sale
urban regeneration
works with landowners  
and public sector partners 
to unlock value from 
underdeveloped assets  
to bring about sustainable 
regeneration and urban 
renewal through the  
delivery of mixeduse 
projects typically creating 
commercial retail 
residential leisure  
and public realm facilities
investments
facilitates project 
development primarily  
in the public sector by 
providing ﬂexible ﬁnancing 
solutions and development 
expertise covering a wide 
range of markets including 
urban regeneration 
education healthcare 
housing emergency 
services defence and 
infrastructure 01
08 
chairman’s  
statement
34 
urban regeneration
22 
construction  
and infrastructure
contents
directors’ report business review
all about morgan sindall and how we performed in 2011
02 group highlights
04 the group’s markets
06 business model
08 chairman’s statement
10 chief executive’s review
14 finance review
18 risk review
divisions
22 construction and infrastructure
26 fit out
30 affordable housing
34 urban regeneration
38 investments
42 sustainability review
directors’ report governance
information about our board of directors  
and corporate governance
46 board of directors
48 corporate governance statement
53 remuneration report
62 other statutory and regulatory information
66 directors’ responsibilities statement
financial statements
for the ﬁnancial year ended 31 december 2011
 consolidated
68 independent auditor’s report
69 income statement
69 statement of comprehensive income
70 balance sheet
71 cash ﬂow statement
72 statement of changes in equity
73 signiﬁcant accounting policies
81 notes to the ﬁnancial statements
 company
110  independent auditor’s report
111  balance sheet
112  combined statement of movement  
in reserves and shareholders’ funds
113  signiﬁcant accounting policies
116  notes to the ﬁnancial statements
123  shareholder information
morgan sindall group plc annual report and accounts 2011
contents
26 
fit out
38 
investments
10 
chief  
executive’s  
review
30 
affordable housing
02 
group highlights
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 2011 420
2010 420
2009 420
held for the fourth consecutive 
year the total dividend is 20x 
covered by adjusted earnings 
per share
dividend pence
420p
02
morgan sindall group plc annual report and accounts 2011
group highlights
revenue £m
£2227m
revenue slightly increased by 
6 driven by growth across  
the group
2011 2227
2010 2102
2009 2214
group highlights
construction highlights
the group has delivered a resilient 
performance in line with expectations  
against a backdrop of demanding  
market conditions the group’s results  
are testament to its straightforward 
approach and are underpinned by  
its relentless focus on quality and the  
creative and innovative approach it  
brings to projects
the group is enhancing its market position in 
construction having secured key opportunities 
in growing infrastructure sectors the group’s 
breadth of skills will enable it to provide 
integrated approaches to its clients’ most 
complex projects 
     secured key projects in 
growth infrastructure sectors 
of roads rail aviation and 
energy distribution
    reducing public sector 
exposure although 
opportunities remain  
in education and 
infrastructure
     grown fit out market  
share to more than 25  
in a ﬁercely competitive 
market
    seeing slow and steady 
recovery of london 
commercial sector
    increased level of joined  
up working and integrated 
approaches to clients’ 
projects
    stable forward order  
book at £34bn 03
morgan sindall group plc annual report and accounts 2011
group highlights
adjusted eps pence
825p
the fall in adjusted eps  
reﬂects the fall in absolute 
adjusted proﬁt before tax 
offset by a decrease in the 
effective tax rate
 adjusted eps is basic earnings per share 
before amortisation of intangible assets 
nonrecurring items and oneoff tax 
beneﬁt note 8
2011 825
2010 929
2009 939
forward order book £bn
£34bn
stable forward order book 
underpins conﬁdence in the 
group’s outlook
2011 34
2010 36
2009 32 
proﬁt before tax amortisation 
and nonrecurring items £m
£453m
proﬁt has fallen reﬂecting the 
challenging market conditions 
and their impact on margin
2011 453
2010 513
2009 515
proﬁt before tax £m
£400m
2011 400
2010 407
2009 447
basic eps pence
77 5p
2011 775
2010 705
2009 779
regeneration pipeline £bn
£18bn
with ﬁve new major projects 
secured in the year the 
growing regeneration pipeline 
is supplemented by £06bn 
of opportunities at preferred 
developer stage
2011 18
2010 14
2009 14
regeneration highlights
the release of land from the public  
sector will drive mixeduse and  
housingled regeneration the group  
is investing in its regeneration business
    secured ﬁve new major 
schemes together valued  
at £08bn
   £20m investment in 
regeneration to underpin 
mediumterm growth
     affordable housing 
expansion driven by  
full year impact of 
broadened offering
    targeting 15 average 
roce on regeneration 
projects through the cycle
   investments focus on 
landswap opportunities as 
public sector grants reduce
   regeneration pipeline 
expanded signiﬁcantly  
to £18bn with £06bn  
at preferred developer
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 04
morgan sindall group plc annual report and accounts 2011
the group’s markets
04
the group’s markets
construction
the total construction market was forecast to be around £106bn  
in 2011 the market can be subdivided into three submarkets  
public regulated and private within each submarket are key  
sectors and the group’s revenues in those sectors are as follows
market dynamics
     overall market challenging due to 
macroeconomic backdrop of faltering  
growth for the economy and the resulting 
impact on conﬁdence
    public sector spending will impact from 2012 
onwards leading to reduced construction 
opportunities in the sector
    investment in infrastructure is forecast to rise 
driven by the government’s £250bn national 
infrastructure plan
    investment by water companies is peaking  
in the middle of the current investment cycle
    private commercial sector is slowly 
recovering led by improving conditions  
in london and the south east
    housing margin improving albeit market 
remains constrained by lack of mortgage 
availability for ﬁrsttime buyers
key sectors
public
education £100bn
health £35bn
roads £38bn
housing £180bn
regulated
energy £35bn
water £33bn
transport £50bn
private
commercial £62bn
retail £54bn
industrial £38bn
group’s revenue by sector
public £1075m
48
 social housing £418m
 education £373m
 health £98m
  community defence   
roads other £186m
regulated £453m
20
 water £151m
 energy £137m
 rail air transport £165m
private £730m
32
 commercial £455m
 open market housing £79m
 leisure £47m
 other £149m
source construction products association 2011 winter forecast ons and experian 05
morgan sindall group plc annual report and accounts 2011
the group’s markets
05
regeneration
working in longterm partnerships with clients to use their land 
assets to achieve largescale social and economic renewal
the group’s approach
    regeneration is driven by the release of  
public sector land to enable economic  
and social renewal
    schemes are usually complex and seek  
to transform suboptimised land to  
improved uses
    the improved uses include commercial 
offices residential retail leisure and  
light industrial
    schemes whether mixeduse or housingled 
are delivered over a long time frame usually 
10–15 years
    group invests and recycles working capital  
on a phasebyphase basis
    affordable housing focuses on housing
led regeneration particularly mixedtenure 
schemes
    urban regeneration and investments  
focus on mixeduse regeneration in  
major urban areas 
factors driving regeneration
    clients seek partners with a track record  
of successful delivery ﬁnancial strength  
and the ability to source private ﬁnancing  
to fund regeneration
    201115 affordable homes programme
 – 45m people on national housing lists
 –  £45bn investment to deliver 150000  
new social houses
  hca development and land disposal strategy
 –  land key to promoting economic growth 
housing delivery and community activity
 –  land disposed to support local plans
  –  deferred payment model build now  
pay later
  housing strategy for england
 –  release land with capacity to  
build up to 100000 homes
  –  40 land suitable for development  
sits within public sector land banks
  21 enterprise zones to be established
 –  business rates discount and retention  
of rates by local area
  –   simpliﬁed planning approaches
  –  tax increment ﬁnance and other  
 tax incentives
  £21bn mixeduse regeneration pipeline
 –  34m sq ft commercial
 –  2800 residential units
 –  1m sq ft retail
 –  3m sq ft light industrial
the group’s regeneration pipeline £bn
01
2012
01
2017
01
2018
01
2019
03
2020
03
2021
02
2013
02
2014
02
2015
02
2016
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 06
morgan sindall group plc annual report and accounts 2011
business model
01
the group’s markets 
the group’s overall market is over  
£100bn per annum and includes repairs 
and maintenance ‘rm’ expenditure
 2011 
market sectors £bn trend
infrastructure 134 
private industrial  commercial 267 
public nonresidential 129 
private housing 137 
public housing inc rm 104  
private housing rm 104 
public nonresidential rm 67 
private nonresidential rm 122 
total construction market 1064 
divisions
the divisions align themselves to  
particular chosen market sectors
06
proﬁt return 
by managing risks for clients  
the group earns a proﬁt which 
enables it to
  pay dividends to shareholders and
  invest in the business and fund 
acquisitions 
05
project risk 
some risks are retained or  
shared with clients such as  
land value in longterm  
development agreements
  construction risks are primarily passed  
to and managed by the group
  many risks are passed through to the 
group’s suppliers and subcontractors
  the group takes construction risk from  
its clients and ensures it is passed to those 
best placed to manage it
construction and  
infrastructure
urban regeneration
investments
affordable housing
fit out  
£18bn potential market
06
business model
morgan sindall group is known as the construction and regeneration group construction is 
offered through a network of local offices to deliver projects of all sizes with skills to provide 
clients with a complete design construction refurbishment and maintenance service for their 
property and infrastructure assets regeneration is working in partnerships with clients to use 
their land assets to achieve largescale economic renewal 07
morgan sindall group plc annual report and accounts 2011
business model
04
project delivery 
the group engages with  
its clients using different  
forms of contract
  direct contract either negotiated 
or competitively tendered
  term frameworks
  longterm development agreements
  structured vehicles such as joint 
ventures special purpose vehicles  
pfi and ppp arrangements
07
02
strategy
the group’s strategic  
focus is to enhance its market 
position across its construction 
activities and to use the cash 
generated to invest in and grow  
its regenerationrelated divisions
03
capabilities 
the group has strength in its 
breadth of capabilities and ability 
to integrate different skills to 
provide an excellent service to  
its clients and partners and to 
reduce complexity
construction
  design
  construction and project refurbishment 
worth £05m to £100m
  infrastructure – energy water transport
  utility services
  fit out for new and refurbished projects
regeneration
     housingled regeneration  
and new build social housing
    planned and response  
maintenance for social housing
    investments provide project  
ﬁnancing skills and manage  
the group’s equity investment  
in pfippp
    mixeduse regeneration
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 08
2011 has seen a resilient performance 
from the group delivering results in  
line with our expectations consistently 
over the past 12 months despite 
demanding market conditions
the group’s results are testament  
to our straightforward approach  
to construction and regeneration  
this is underpinned by our relentless 
focus on quality through the rigorous 
application of our own perfect delivery 
programme and the creative and 
innovative approach we bring  
to projects
strategy for success
for a number of years the group’s goal has been 
to create leading positions in our chosen sectors 
and we continue to make signiﬁcant progress 
towards that goal we measure our performance 
by the quality of our margin not necessarily by 
the size of a project and we achieve a premium 
margin by providing our clients with an 
exceptional service
achieving success in today’s market means 
staying focused on what we do best within the 
sectors we know well we deﬁne success in a 
number of ways from achieving quality margin 
and growing the business proﬁtably through to 
being nominated the partner of choice selected 
as the preferred employer and considered a 
responsible and forwardthinking group 
we have achieved success this year through 
winning key construction opportunities in 
growth areas of the market namely energy 
transport and commercial as well as growing  
our regeneration pipeline of work by securing 
ﬁve major schemes together valued at £08bn
“our strategy to maintain 
our construction market 
position and grow our 
regeneration pipeline 
will allow us to capitalise 
on the signiﬁcant 
opportunities that 
undoubtedly exist in  
the uk we enter the 
new ﬁnancial year in  
a strong position to 
deliver sustained  
longterm value for  
our shareholders  
and clients”
looking ahead our strategic focus is to develop 
our market position across our construction 
activities and to use the cash generated from 
those operations to invest in and grow our 
regenerationrelated businesses we continue  
to broaden our capability and service to our 
clients through the group’s ability to deliver 
largescale complex projects and believe our 
chosen markets offer the best prospects for 
quality margin in our industry and the greatest 
potential for revenue growth
enabling growth
the breadth of our skills extends across a wide 
range of sectors where we have built leading 
reputations and this enables us to be ﬂexible in 
our approach and to target those sectors that 
offer the most growth potential
our extensive capability in construction  
and infrastructure fit out affordable housing 
and urban regeneration underpinned by 
investments’ ability to offer ﬁnancing solutions 
allows us to reduce project complexities  
and optimise opportunities for our clients  
and partners
working in partnership to deliver regeneration
there is an acute need to promote economic 
improvement and social inclusion alongside 
regenerating the physical fabric of many of  
our towns and cities and the group remains 
conﬁdent in the prospects offered by this 
market driven by the release of land by the 
public sector regeneration is all about working 
in longterm partnerships with our clients using 
their land assets to achieve largescale social  
and economic renewal
the public sector owns an estimated £17bn 
portfolio of surplus land and property assets  
in a market with diminishing inhouse expertise 
and an increasing reliance on private sector 
funding to progress critical regeneration 
chairman’s statement
john morgan
executive chairman
morgan sindall group plc annual report and accounts 2011
chairman’s statement 09
schemes our ability to provide creative  
funding solutions along with our development 
and construction expertise positions us as an 
attractive regeneration partner and provides  
us with signiﬁcant investment opportunities in 
the medium and long term
our people
i spend much of my time visiting our offices  
and projects and i am always impressed with  
the calibre and integrity of our people across  
all levels their talent commitment and positive 
approach are integral to the success of the 
group we remain committed to their wellbeing 
at all times and will continue to invest in their 
personal and professional development and to 
motivate and incentivise them appropriately
the board
i am also grateful to the members of the board 
whose stewardship and guidance contribute 
greatly to the performance of the group gill 
barr one of our independent nonexecutive 
directors is standing down at the forthcoming 
agm in 2012 i would like to take this opportunity 
to thank gill for her substantial contribution to 
the group over the past seven years
dividend statement
the board recommends a ﬁnal dividend  
of 300p payable on 18 may 2012 giving  
an unchanged total dividend for the fourth 
consecutive year of 420p for 2011
looking forward
we recognise that market challenges and risks 
remain and will continue to impact the year 
ahead and we believe that the mediumterm 
outlook is more promising we have positioned 
the group to maximise opportunities in those 
sectors we believe will offer the most growth 
and reward we continue to closely monitor our 
cost base shape the divisions and tailor the way 
we work to respond to changes in the market 
our decentralised business model and lack  
of bureaucracy enable us to respond swiftly  
to shifts in economic and operating conditions 
ensuring we remain alive to opportunities
we entered the new year clear in our vision  
and our strategic direction with a stable 
forward order book of £34bn and importantly 
a growing regeneration pipeline of £18bn we 
are conﬁdent that we are in a strong position to 
capitalise on future opportunities and to deliver 
sustained longterm value for our shareholders 
and clients
john morgan
executive chairman 
21 february 2012
dividend pence
420p
2011 420
2010 420
2009 420
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
chairman’s statement 10
the group delivered in 2011 in the face 
of challenging economic conditions 
and ongoing constraints in public 
spending we remain in a strong 
ﬁnancial position and have strategically 
positioned the group to take advantage 
of the signiﬁcant opportunities that 
exist in the uk
revenue was up by 6 to £2227m 2010 
£2102m with proﬁt before tax amortisation  
and nonrecurring items of £453m 2010 
£513m reﬂecting the challenging market 
conditions £14m 2010 £32m of nonrecurring 
items arose as expected relating to it costs 
following the merger of the construction and 
infrastructure services divisions in 2010 proﬁt 
before tax was £400m 2010 £407m an 
analysis of other prior year nonrecurring items  
is included in note 2 adjusted earnings per  
share before amortisation of intangible assets 
nonrecurring items and oneoff tax beneﬁt 
were 825p 2010 929p the group’s 
continuing investment in regeneration increase 
in investment properties and use of shared 
equity to support open market house sales has 
been reﬂected in our average cash† for 2011 
being lower than in 2010 at £23m 2010 £63m
success across the board
each division has achieved wideranging success 
throughout the year demonstrating not only its 
specialist skills but also the strength and the 
value of the group’s integrated capability 2011 
saw higher levels of collaboration between the 
group’s divisions than ever before projects that 
demonstrate the success and value of divisions 
working together include the completion on 
time and on budget of the basildon sporting 
village working within a 25year agreement 
with basildon borough council our investments 
division provided a funding solution and 
development expertise whilst design and 
construction services were provided by our 
construction and infrastructure division another 
example of our integrated approach is urban 
regeneration’s 56acre £300m northshore 
development in stocktonontees which will 
“we have strategically 
positioned the group to 
adapt to the challenging 
business environment 
we are conﬁdent that 
our increased investment 
in regeneration and our 
focus on growth sectors 
of the market will lead to 
higher quality medium
term returns”
transform stockton’s riverside by delivering 
18m sq ft of offices leisure and retail 
accommodation in addition to high quality 
housing the ﬁrst phase is currently on site with 
our affordable housing division working with 
colleagues in urban regeneration to build 50 
energyefficient affordable houses
construction and infrastructure has performed 
in line with our expectations despite operating 
within a very competitive and challenging 
market place with revenue slightly increased  
at £1268m 2010 £1250m and operating 
proﬁt of £211m 2010 £269m it has further 
reinforced its marketleading positions in 
tunnelling and aviation and substantially 
strengthened its leading reputation in the  
rail highways and energy markets notable 
achievements include securing major contracts 
in each of these growth infrastructure sectors as 
well as considerable success in being awarded 
new and renewed positions on some of the  
uk’s major construction frameworks an 
example of which is the division’s appointment 
as preferred bidder in joint venture for an 
electricity transmission overhead line partnership 
worth up to £500m to deliver national grid’s 
overhead line construction programme for the 
next ﬁve years it entered the new ﬁnancial year 
with a healthy pipeline of opportunities in key 
sectors of the infrastructure market
fit out has delivered another consistent 
performance for the group the division has 
grown market share in tough trading conditions 
with revenue increasing to £438m 2010 £415m 
with work secured via frameworks doubling 
operating proﬁt was £124m 2010 £148m  
it has responded to market constraints by 
launching a new technology division to capitalise 
on existing skill sets and to respond to the needs 
of clients who are actively seeking an extended 
service to deliver infrastructure data centre  
and technologyled projects growth markets 
identiﬁed for the new ﬁnancial year include retail 
banking technology and the education sector 
where the division continues to work with 
universities under pressure to improve facilities 
to attract students
chief executive’s review
paul smith
chief executive
morgan sindall group plc annual report and accounts 2011
chief executive’s review 11
affordable housing has swiftly capitalised on 
the wider business opportunities resulting from 
the successful integration of the connaught 
business it has exploited its full service capability 
with revenue increasing signiﬁcantly to £462m 
2010 £387m and secured growth in operating 
proﬁt to £185m 2010 £161m its strengthened 
service offering has led to an agreement with 
barnet homes worth approximately £103m over 
10 years to deliver planned refurbishment and 
electrical work across the london borough of 
barnet’s 15000home portfolio its increased 
capability to provide nationwide reactive 
maintenance services alongside its planned 
maintenance and design and build of mixed
tenure affordable housing has provided a strong 
platform for continuing success in 2012
urban regeneration has increased its 
contribution to the group this year with 
operating proﬁt almost doubling to £39m 
2010 £20m underpinning our conﬁdence in 
the regeneration market it has secured ﬁve 
major new schemes substantially increased its 
regeneration pipeline to £16bn 2010 £14bn 
with a further £06bn at preferred developer 
stage and has increased its level of on site 
activity the division is successfully positioning 
schemes to capitalise on opportunities as market 
conditions improve
investments has achieved notable success in 
2011 facilitating project development primarily  
in the public sector by providing ﬂexible ﬁnancial 
solutions and development expertise despite 
limited opportunities the division has been 
successful in securing a £500m 20year 
development agreement with bournemouth 
borough council and commenced the second 
tranche of schools within hull city council’s 
building schools for the future programme the 
directors’ valuation of its investment portfolio 
has increased signiﬁcantly to £49m 2010 £41m 
providing sustained longterm value for the 
group we will recycle capital from maturing 
investments from time to time and recently sold 
our interest in the dorset fire  rescue pfi for 
£38m which was above our directors’ valuation
an increased focus on regeneration
we are already leading a number of complex 
regeneration programmes across the country 
through our investments urban regeneration 
and affordable housing divisions they are all 
working in longterm partnerships with the 
private and public sectors unlocking land values 
for our clients and helping to regenerate 
deprived neighbourhoods across the country
the ability of the group to maximise 
regeneration opportunities today was 
strengthened by the acquisition of the amec 
construction business and developments 
division in 2007 at the time we stated that the 
acquisition would open up signiﬁcant growth 
opportunities having strategically shaped the 
group since then and with signiﬁcant growth 
achieved in our regeneration pipeline currently 
standing at £18bn we are now in a strong 
position to capitalise on future opportunities  
and secure organic growth in this market
we intend to build on successes achieved to 
date and increase our focus on this market 
allowing the group to beneﬁt from the quality of 
returns available through medium to longterm 
urban and residential regeneration programmes 
the continuing reluctance of banks to lend has 
led to the forced withdrawal of many players 
from the marketplace resulting in a less 
competitive environment barriers to entry are 
high and the skill sets required are a perfect ﬁt 
with the group’s specialist expertise
the decision to invest more signiﬁcantly in 
regeneration will create opportunities for all 
group divisions it will have an impact on our 
level of cash reserves but we are conﬁdent that 
our business model which limits open market 
site acquisition and uses working capital more 
efficiently in phased developments will ensure 
that the group and its shareholders will beneﬁt 
from the opportunity to secure healthy long
term and sustainable proﬁt streams

proﬁt before tax amortisation 
and nonrecurring items £m
£453m
2011 453
2010 513
2009 515
proﬁt before tax £m
£400m
2011 400
2010 407
2009 447
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
chief executive’s review
revenue £m
£2227m
2011 2227
2010 2102
2009 2214 12
chief executive’s review
continued
how we differentiate ourselves
today’s challenging environment requires 
organisations to be insightful and agile  
two distinctive values of the group are its 
decentralised structure and its culture of 
empowerment which permeates each division 
this culture is a real strength it stimulates 
innovation and creativity minimises bureaucracy 
and provides each division with a signiﬁcant 
competitive advantage it requires divisions to 
acquire a deep understanding of their markets 
to develop specialist skills to provide an exact ﬁt 
with market requirements and allows swift 
decision making this means our clients work 
with empowered local teams who offer a 
richness of local knowledge an awareness of 
client needs and are able to provide a highly 
responsive service using local supply chains
we aim to deliver an exceptional and consistent 
quality service to our construction clients and 
regeneration partners throughout the group 
we continue to differentiate our service offering 
through our relentless pursuit of perfect delivery 
across all construction activity and through the 
provision of marketleading client experiences 
clients have demonstrated the value of this 
investment in quality through longterm 
relationships and the award of new and  
renewed framework positions
clients are demanding a wider range of skills 
increasingly aggregated into larger and more 
complex contracts and a more sophisticated 
service we have continued to broaden and 
deepen our range of services to meet these 
requirements to ensure that we are able to take 
on the most challenging schemes and reduce 
complexity for our clients
committed to providing a safe working 
environment
providing a safe working environment for 
everyone remains our number one priority  
this commitment stretches from the workplace 
through to construction sites and beyond  
into the communities where we operate  
we endeavour to ensure that through proper 
training and education our staff are fully 
engaged and involved in improving safety and 
that everyone understands the part they play  
in their own safety and that of their coworkers 
our supply chains and the wider community 
we are disappointed to report that the total 
number of incidents being reported under the 
reporting of injuries diseases and dangerous 
occurrences regulations ‘riddor’ has risen 
to 96 from 82 in 2010 these are incidents over 
three days which is measured by the time that  
an injury prevents a person performing their 
normal work duties ten of these incidents 
related to former connaught employees  
in the past we have experienced similar trends 
following an acquisition we expect health and 
safety to improve as we have made a signiﬁcant 
investment in health and safety training for all 
staff that joined us from connaught we have 
introduced an additional health and safety  
key performance indicator ‘kpi’ within our 
roadmap for sustainability which is all incidents 
over one day 2011 has been the ﬁrst year we 
have collected this data and there were 81 
onetothree day incidents and we will use  
this ﬁgure as our baseline for future reporting  
of this kpi
deﬁning our business through sustainability 
as a leading construction and regeneration 
group we play a signiﬁcant role in creating and 
improving the built environment that we live in 
with this role comes responsibility for the 
people who work with us the communities  
we operate within and the impact we have  
on the environment
for many years our divisions have entrenched 
sustainability into their individual operations  
2011 has been marked by the group further 
reinforcing our pledge to provide positive and 
lasting economic environmental and social  
gain through the launch of our roadmap  
for sustainability
the roadmap outlines key areas of strategic 
improvement where we believe we can make  
a real difference and equally importantly 
identiﬁes targets milestones and longterm 
objectives together with key performance 
indicators the board and each of the  
group’s ﬁve divisions are fully committed  
to the roadmap 
riddor incidents no
96
2011 96
2010 82
2009 113
perfect delivery scores 
84
2011 84
2010 83
2009 84
morgan sindall group plc annual report and accounts 2011
chief executive’s review 13
the roadmap has given us a clear sense of 
direction and will drive improvement across  
the group with the built environment 
responsible for over half of the uk’s carbon 
emissions construction has a unique role to  
play in combating climate change our more 
strategic approach to sustainability will further 
strengthen our ability to contribute and innovate 
in today’s fastchanging environment
our ﬁrst dedicated sustainability report can be 
viewed at wwwmorgansindallcomsustainability 
and we look forward to sharing our progress 
over time
key risks to success 
the group’s ability to successfully implement  
its strategy and achieve its goals can be  
affected by a number of key risks rigorous  
risk management processes are in place to 
continuously identify new risks to understand 
their impacts and to implement effective 
mitigating actions in particular we are 
addressing the following
an intelligent approach
the market sectors in which the group  
operates are affected by general 
macroeconomic conditions and changes in 
government spending policy we are particularly 
focused on managing the impact on the group 
of the current economic environment and are 
proactively investing in the long term to ensure 
the group is in a position of strength today and 
for when market conditions improve with 
increased competition in many sectors it is vital 
in today’s market to be selective in the contracts 
we bid for and to be intelligent in our bidding 
process avoidance of competing on price alone 
and differentiating the group’s offering on 
service and quality through our perfect delivery 
standard will help secure higher margins 
a responsible attitude
the group’s health safety and environmental 
performance affects our staff subcontractors 
and the public as well as our reputation and 
commercial performance this area of our 
business continues to be a priority for the group 
and stringent policy frameworks and systems 
are embedded within each division and are 
regularly reviewed to minimise risk
a greater level of scrutiny
we are applying even higher levels of  
scrutiny to the management of working capital 
to implement our strategy of investing cash 
generated from construction activities into 
regeneration and to ensure the longterm 
success of the group regular monitoring of 
cash levels stress testing longerterm forecasts 
and closely monitoring overdue work in 
progress debtors and retentions are all 
meticulously undertaken to ensure we  
continue to grow proﬁtably 
rigorous credit checks and due diligence are 
undertaken to assess the ﬁnancial health of 
clients to avoid ﬁnancial loss through bad debt 
and equal rigour is applied to subcontractors 
and suppliers our approach to supply chain 
management is based on working with suppliers 
and subcontractors to build longterm 
relationships so that together we provide our 
clients with a superior quality service
outlook
our outlook is sound with a strong balance 
sheet a steady forward order book of £34bn 
2010 £36bn and a signiﬁcant and growing 
regeneration pipeline of £18bn 2010 £14bn 
with a further £06bn at preferred developer  
all providing a level of resilience to economic 
ﬂuctuations whilst we acknowledge the 
challenges that lie ahead we are conﬁdent that 
the investment in regeneration and focus on 
opportunities in growing sectors of the market 
will lead to higher quality and sustained  
mediumterm returns
paul smith 
chief executive 
21 february 2012
forward order book £bn
£34bn
2011 34
2010 36
2009 32 
regeneration pipeline £bn
£18bn
2011 18
2010 14
2009 14
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
chief executive’s review
  operating proﬁt is proﬁt from operations before amortisation  
of intangible assets and nonrecurring items
 † average cash is the average of the daily treasury balances for 
the year resilient 2011 performance  2011 2010
revenue  £2227m £2102m
operating proﬁt  £461m £524m
proﬁt before tax amortisation and nonrecurring items  £453m £513m
proﬁt before tax  £400m £407m
year end cash balance  £109m £149m
where stated operating proﬁt is proﬁt from operations before amortisation of intangible assets and nonrecurring items
14
overview
the difficult macroeconomic environment  
has persisted throughout 2011 and looks set  
to continue through 2012 nevertheless the 
group has delivered resilient results and has  
also delivered improved returns from 
regeneration activities the group continues  
to shape its businesses to address changing 
markets and while there have been no material 
acquisitions in the year the connaught and 
powerminster acquisitions in 2010 have been 
fully integrated and the merged construction 
and infrastructure businesses are now operating 
as one division the group continues to address 
its cost base and further action will continue  
to be taken as necessary
revenue of £2227m and operating proﬁt  
of £461m
revenue has risen by 6 to £2227m 2010 
£2102m with revenue rises across both 
construction and regeneration activities of  
£18m in construction and infrastructure  
£75m in affordable housing £23m in  
fit out and £11m in urban regeneration
operating proﬁt has fallen by £63m to £461m 
2010 £524m with decreases in construction 
and infrastructure £58m and fit out £24m 
due to market pressure on margin offset by 
increases in affordable housing £24m and 
urban regeneration £19m the investments 
division incurred an operating loss of £39m 
2010 £33m and the cost of group activities 
rose by £18m to £59m due to increased 
investment in it and 2010 beneﬁting from the 
release of some historic cost accruals that were 
no longer required
margin across our construction activities fell 
reﬂecting continuing strong competition for 
work and lower returns available in these 
markets margin fell to 17 2010 22 in 
construction and infrastructure to 40 2010 
42 in affordable housing and to 28 2010 
36 in fit out
net ﬁnance expense of £08m
the net ﬁnance expense of £08m 2010 £11m 
has reduced due to the release of an unutilised 
provision for interest payable to hmrc following 
the resolution of discussions with hmrc over 
corporation tax matters arising following the 
amec acquisition in 2007 this is offset by lower 
ﬁnance income due principally to lower average 
cash balances in the year of £23m 2010 £63m
overall proﬁt before tax amortisation and 
nonrecurring items fell by £60m to £453m 
2010 £513m amortisation of intangible assets 
in the year was £39m 2010 £55m and 
nonrecurring costs of it integration following 
the 2010 merger of the construction and 
infrastructure services divisions were £14m 
2010 £51m
tax
the group’s tax charge of £72m 2010 £109m 
represents an effective tax rate of 180 2010 
268 signiﬁcantly lower than the standard rate 
of corporation tax the low effective tax rate 
arises primarily as a result of nonrecurring prior 
year adjustments of £28m 70 reﬂecting the 
resolution of discussions with hmrc over 
corporation tax matters following the amec 
acquisition in 2007 as set out in note 6 to the 
accounts adjusting for this effect and other 
finance review
david mulligan
finance director
morgan sindall group plc annual report and accounts 2011
finance review year end cash £m
£109m
2011 109
2010 149
2009 118
adjusted eps pence
825p
basic eps pence
77 5p
15
oneoff prior year adjustments gives an 
underlying effective tax rate of 263  
2010 290
earnings per share
adjusted basic earnings per share before 
amortisation and nonrecurring items have fallen 
by 11 from 929p to 825p reﬂecting the fall in 
adjusted proﬁt before tax offset by the decrease 
in the effective tax rate basic earnings per share 
have risen by 10 from 705p to 775p
group has substantial year end cash balances
the cash position of the group at the year end 
was robust at £109m 2010 £149m average 
cash during 2010 decreased to £23m 2010 
£63m reﬂecting increased investment in our 
regeneration activities and increases in shared 
equity and investment property balances
the net cash outﬂow from operating activities 
was £118m 2010 inﬂow of £906m this is 
primarily the result of the working capital 
outﬂow of £516m 2010 inﬂow of £537m  
this mainly reﬂects the particularly strong cash 
performance at the 2010 year end which was 
expected to unwind in 2011 additionally the 
group has £176m 2010 £139m of shared 
equity receivables relating to open market sales 
in the affordable housing and urban 
regeneration divisions and £70m 2010 £25m 
of investment properties rented in order to 
maintain momentum on a small number of 
regeneration schemes there were small net 
payments of £04m 2010 £352m for 
acquisitions capital expenditure was £54m 
2010 £28m and payments to increase 
interests in joint ventures were £60m 2010 
£43m all of which reﬂect ongoing investment 
in the business cash dividends of £03m  
2010 £08m were received from joint ventures 
after tax payments dividends and servicing  
of ﬁnance the net decrease in cash and cash 
equivalents was £397m 2010 £309m increase
it is anticipated that these cash resources will be 
available for the development of the group’s 
businesses either to fund acquisitions or invest 
in working capital as required
capital management
the board intends to maintain a strong capital 
base so as to maintain investor creditor and 
market conﬁdence and to sustain the future 
development of the group there were no 
changes in the group’s approach to capital 
management during the year and the group is 
not subject to any capital requirements imposed 
by regulatory authorities
 31 december 2011 31 december 2010
  
  revenue proﬁt margin revenue proﬁt margin 
 £m £m  £m £m 
construction and infrastructure 1268 211 17 1250 269 22 
fit out 438 124 28 415 148 36 
affordable housing 462 185 40 387 161 42 
urban regeneration 57 39 – 46 20 – 
investments 2 39 – 4 33 –
total revenue 2227 520  2102 565 
group activities  59   41  
operating proﬁt  461    524 
interest  08   11 
normalised proﬁt before tax  
amortisation and nonrecurring items  453   513 
nonrecurring items  14   51 
proﬁt before tax and amortisation  439   462
2011 825
2010 929
2009 939
2011 775
2010 705
2009 779
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
finance review 16
the group is ﬁnanced by equity with committed 
banking facilities available to draw on to fund 
shorterterm movements in working capital the 
group is not particularly capital intensive hence 
investment in ﬁxed assets is relatively low and 
has reduced in the year as have assets ﬁnanced 
by ﬁnance leases the group is seeking 
increasingly to invest cash generated by its 
construction activities in longterm regeneration 
projects that themselves can lead to construction 
opportunities for the group some of these 
regeneration projects will be carried out in joint 
venture and will be funded in part by group 
resources but will largely draw on nonrecourse 
debt ﬁnance the group has a very small deﬁned 
beneﬁt pension plan £13m deﬁcit on £94m of 
gross liabilities that is closed to new members  
or further accruals
banking facilities committed until 2015
in the period the group reﬁnanced its banking 
facilities and now has £100m of committed 
banking facilities through to september 2015 
with a further £25m in place to june 2012  
the banking facilities are subject to ﬁnancial 
covenants all of which have been met 
throughout the year these committed facilities 
supplement the cash balances in providing 
ﬁnancial security to the group 
dividend
the board recommends a ﬁnal dividend of 
300p payable on 18 may 2012 to shareholders 
on the register at the close of business on 27 
april 2012 this will give a total dividend for the 
year maintained at 420p 2010 420p this is 
covered by adjusted earnings per share 20 
times 2010 22 times the group’s longterm 
policy remains one of increasing the dividend 
broadly in line with the growth in earnings 
aiming to cover the dividend by earnings 
between twoandahalf and three times
although the cover has reduced to 20 times the 
board is comfortable with this as the dividend is 
covered by current proﬁts and can be met from 
existing ﬁnancial resources the group will seek 
to reestablish the longerterm level of cover as 
and when proﬁts increase
continuing balance sheet strength
t otal equity increased to £2356m 2010 £2217m 
the number of shares in issue at 31 december 
2011 was 432m 2010 432m a small increase 
of 27019 shares resulted from the exercise of 
options under employee share option schemes
in the course of the year fair values relating to 
the 2010 acquisition of the business obligations 
and certain assets from the administrators of 
connaught partnerships limited were ﬁnalised 
this led to further adjustments of £11m with 
goodwill recognised on acquisition increasing by 
an equivalent amount additionally the group 
acquired the investment of its partner in a joint 
venture for a consideration of £04m leading to 
a decrease in goodwill of £02m and an increase 
to intangible assets of £02m during the year 
the group signed strategic supply agreements 
with its general plant and site accommodation 
suppliers that led to the transfer of existing plant 
and equipment to them as part of the agreement 
this largely contributed to a fall in the overall 
ﬁxed assets deployed in the business of £68m
consistent approach to treasury risk 
management 
the group has clear treasury policies which set 
out approved counterparties and determine the 
maximum period of borrowings and deposits 
deposits are restricted to periods of no longer 
than three months the group has very limited 
exposure to foreign exchange risk because its 
operations are based almost entirely in the uk 
but committed foreign exchange exposures are 
hedged as and when they arise
finance review  
continued
effective tax rate 
180
2011 180
2010 268
2009 264
morgan sindall group plc annual report and accounts 2011
finance review 2011 236
2010 222
2009 209
17
some of the group’s joint venture businesses  
use interest rate swaps to hedge ﬂoating interest 
rate exposures and retail prices index swaps  
to hedge inﬂation exposure in the course of  
the year a construction joint venture in which 
the group participates entered into foreign 
exchange contracts in order to hedge foreign 
exchange exposures on the provision of 
construction services the group considers  
that its exposure to interest rate foreign 
exchange and inﬂation movements is 
appropriately managed
in the normal course of its business the group 
arranges for ﬁnancial institutions to provide 
customers guarantees ‘bonds’ to provide some 
ﬁnancial protection in the event a contractor fails 
to meet its commitments under the terms of a 
contract the group pays a fee and provides a 
counterindemnity to the ﬁnancial institutions  
for issuing the bonds as at 31 december 2011 
contract bonds in issue under uncommitted 
facilities covered £2041m 2010 £1718m of 
contract commitments of the group
further information on the group’s use of 
ﬁnancial instruments is explained in note 29  
to the consolidated ﬁnancial statements
going concern
the group’s business activities together with  
the factors likely to affect its future development 
performance and position are set out in this 
business review the ﬁnancial position of the 
group its capital management policy its cash 
ﬂows liquidity position and borrowing facilities 
are also described above
in addition note 29 to the consolidated ﬁnancial 
statements includes the group’s ﬁnancial risk 
management objectives details of its ﬁnancial 
instruments and hedging activities and its 
exposure to credit risk and liquidity risk
as at 31 december 2011 the group had cash  
of £109m and committed banking facilities of 
£100m extending to september 2015 with a 
further £25m in place to june 2012
the group’s forecasts and projections taking 
account of reasonably possible changes in 
trading performance show that the group 
should be able to operate within the level  
of its available banking facilities
the directors have a reasonable expectation  
that the company and the group have adequate 
resources to continue in operational existence 
for the foreseeable future thus they continue  
to adopt the going concern basis in preparing 
the annual ﬁnancial statements
net assets £m
£236m
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
finance review 18
risk review
the group’s strategy is to develop  
the market position of its construction 
activities and to use the cash generated 
from those activities to invest in 
housingled and mixeduse regeneration 
to generate higher levels of return
the group has put in place a risk 
management framework to identify 
risks to the business achieving its goals 
and to document controls to manage 
and mitigate these risks risk registers 
document these risks and controls at 
different levels within the organisation 
group division business unit and 
project these risk registers are 
reviewed at least every six months to 
ensure that risks are properly evaluated 
and that controls remain appropriate 
the internal audit function audits the 
control environment to ensure that the 
risks and controls identiﬁed are tested 
at least every two years which cover a 
blend of project and corporate level risks
it is the role of the group’s audit committee to 
monitor and approve the work undertaken by 
the internal audit function and to ensure that  
the internal audit process remains efficient  
and effective this monitoring process has  
been strengthened by audit committees being 
established separately for the construction and 
infrastructure and affordable housing divisions 
which have larger and more complex operations 
than the other divisions
the control environment is underpinned  
by a clear set of delegated authorities that  
deﬁne processes and procedures for approving 
key decisions particularly with regard to  
project prequaliﬁcations tender pricing and  
bid submission this ensures that projects  
are approved at the appropriate level of 
management with the largest and most 
complex projects being approved at  
board level 
the following key risks to the group achieving its 
strategic goals have been identiﬁed by the board
morgan sindall group plc annual report and accounts 2011
risk review risk description
market and economic
environment
the market sectors in which 
the group operates are 
affected to varying degrees 
by general macroeconomic 
conditions and changes in 
government spending 
priorities the group is 
particularly focused at 
present on managing the 
impact of the challenging 
economic conditions 
changes in government 
spending and the increasing 
emphasis on infrastructure 
investment
sustainability 
the group’s health safety 
and environmental ‘hse’ 
performance and business 
conduct affects employees 
subcontractors and the 
public and in turn can 
affect its reputation and 
commercial performance
impacts
new opportunities
shortage of opportunities caused by 
macroeconomic factors and 
reduction in government spending
fall in construction activities may 
result in less cash being generated 
which will reduce the capital available 
to invest in regeneration
overcapacity in market
this leads to pricing competition and 
more onerous terms and conditions 
being sought by customers
increased price competition leads to 
downward pressure on margins and 
an increased risk proﬁle if onerous 
terms and conditions are accepted 
ultimately overheads may not be 
covered by gross margins if project 
losses are incurred 
mitigation
sector spread and diversiﬁcation offer some 
protection against decline in individual sectors
scale also gives some protection by enabling 
us to compete and work in areas with higher 
barriers to entry
regular monitoring and reporting of ﬁnancial 
performance work won prospects and pipeline 
of opportunities
delegated authorities in place require approval 
of tenders by appropriate level of management 
covering both price and terms and conditions
seek to differentiate the group through the 
quality of the service and consistency of delivery
regular review of resource levels against 
anticipated workload
environmental or safety incident
an accident or incident causes harm 
to individuals or a community and 
leads to a major loss of corporate 
reputation
consequently the group fails to 
prequalify for contracts due to poor 
hse track record
business conduct
failure by employees to observe the 
appropriate standards of integrity and 
conduct in dealing with customers 
suppliers and other stakeholders
could expose the group to signiﬁcant 
potential liability and reputational 
damage that results in it failing to 
prequalify for contracts
key executives with speciﬁc responsibility for hse 
are identiﬁed in each division and on the board
hse policy frameworks are communicated and 
senior managers appointed in each division
established safety systems site visits monitoring 
and reporting including near miss and potential 
hazard reporting are in place across the group
investigation and root cause analysis of accidents 
or incidents and near misses
regular hse training and updates including 
behavioural training
independent raising concerns phone line available 
for all employees
audit committee reviews incidents log from the 
raising concerns phone line which includes the 
outcome of investigations into such incidents 
and any follow up actions
ethics policy communicated to all employees
reviews and risk assessments undertaken by group 
to ensure adequate procedures are in place and 
followed to ensure compliance with competition 
and antibribery legislation
19
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
risk review risk description
contractual risks
the group undertakes 
several hundred contracts 
each year and it is important 
that contractual terms 
reﬂect risks arising from 
the nature and complexity 
of the works and the 
duration of the contract
impacts
misprice contract
when pricing a contract the planned 
works are not costed correctly or risk 
is not properly evaluated leading to 
a contract being mispriced
leads to loss of proﬁtability on 
a contract and reduces overall 
gross margin
managing changes to contracts 
and contract disputes
as contracts progress there are 
inevitably changes to the works 
being delivered and a risk exists 
that the group does not get properly 
reimbursed for the cost of the 
changes as a result of disagreement 
poor commercial controls or disputes
leads to costs being incurred 
that are not recovered and loss of 
proﬁtability on a contract ultimately 
we may need to resort to legal 
action to resolve disputes which 
can prove costly and the outcomes 
can be uncertain
poor project delivery
the quality of workmanship or poor 
commercial and operational delivery 
of a contract does not meet clients’ 
expectations
interim cash payments may be 
withheld impacting working capital 
and issues may also impact contract 
proﬁtability and corporate reputation
poor contract selection
risk that the group accepts a contract 
outside of its core competencies
this may lead to poor understanding 
of project risks poor project delivery 
and ultimately result in contract losses 
and reputational damage
mitigation
system of delegated authorities governs tenders 
and the acceptance of work
a contract tender is reviewed at three key stages 
prequaliﬁcation pretender and ﬁnal tender 
submission
contract tender approved by appropriate level of 
management
work carried out under standard terms 
wherever possible
well established systems of measuring and 
reporting project progress and estimated outturns
contract terms reviewed at tender stage and 
any variations approved by the appropriate 
level of management
decision to take legal action based on appropriate 
legal advice
suitable provision made for legal costs
strategic trading arrangements in place with key 
suppliers and subcontractors to help ensure 
consistent quality
for very signiﬁcant purchases on large projects 
forward orders can be placed on a longer timescale
collation and review of client feedback
lessons learned exercises carried out on projects
sta incentivised on basis of contract performance
crossregional peer reviews 
business planning identiﬁes sectors and clients 
that the group will target
system of delegated authorities governs tenders 
and the acceptance of work
plans for speciﬁc types of work and contract size 
agreed by individual business unit
risk description
counterparty and 
liquidity risk
the terms on which 
the group trades with 
counterparties aect its 
liquidity without sucient 
liquidity the group’s ability 
to meet its liabilities as 
they fall due would be 
compromised which could 
ultimately lead to its failure 
to continue as a going 
concern further disclosure 
on liquidity risks and 
liquidity risk management 
is contained in note 29 to 
the consolidated ﬁnancial 
statements
acquisitions
the group regularly 
identiﬁes and evaluates 
potential acquisitions 
and it is important that 
acquisitions deliver the 
planned beneﬁts
impacts
insolvency of key client 
subcontractor or supplier
risk that insucient credit checks 
and due diligence is not undertaken 
and that a key client subcontractor 
or supplier becomes insolvent
insolvency of a client may result in 
signiﬁcant ﬁnancial loss due to bad 
debt insolvency of a subcontractor 
or supplier may disrupt a contract’s 
programme of work and lead to 
increased costs in ﬁnding 
replacements for their services
management of working capital
risk that poor management of 
working capital leads to inadequate 
liquidity and funding problems
the lack of liquidity impacts the 
group’s ability to continue to trade 
or restricts its ability to invest in 
regeneration schemes
mitigation
work only carried out for ﬁnancially sound clients 
established through credit checks
speciﬁc commercial terms including payment terms 
with escrow accounts used as appropriate
seek and obtain ﬁnancial security where appropriate
work with approved suppliers wherever possible
contracts with clients subcontractors or suppliers 
only entered into after review at appropriate level of 
delegated authority
regular monitoring of cash levels and forecasting 
of cash balances
regular stress testing of longerterm cash forecasts
regular assessment of the level of banking facilities 
available to the group
overdue work in progress debtors and retentions 
monitored and actioned as appropriate
integration of acquisition
group fails to deliver beneﬁts sought 
at time of the acquisition through 
issues with due diligence strategic 
assessment alignment of cultures or 
other reasons unknown liabilities are 
uncovered subsequent to completion
the impact is potential loss of 
proﬁtability and reputation and that 
excessive resources are required to 
be directed towards the acquisition
all acquisitions approved at board level
commercial and ﬁnancial due diligence led by 
senior teams with clear roles and responsibilities
post acquisition integration plans prepared 
and monitored
kpis established and monitored post acquisition
risk review 
continued
20
morgan sindall group plc annual report and accounts 2011
risk review risk description
counterparty and 
liquidity risk
the terms on which 
the group trades with 
counterparties affect its 
liquidity without sufficient 
liquidity the group’s ability 
to meet its liabilities as 
they fall due would be 
compromised which could 
ultimately lead to its failure 
to continue as a going 
concern further disclosure 
on liquidity risks and 
liquidity risk management 
is contained in note 29 to 
the consolidated ﬁnancial 
statements
acquisitions
the group regularly 
identiﬁes and evaluates 
potential acquisitions 
and it is important that 
acquisitions deliver the 
planned beneﬁts
impacts
insolvency of key client 
subcontractor or supplier
risk that insufficient credit checks 
and due diligence is not undertaken 
and that a key client subcontractor 
or supplier becomes insolvent
insolvency of a client may result in 
signiﬁcant ﬁnancial loss due to bad 
debt insolvency of a subcontractor 
or supplier may disrupt a contract’s 
programme of work and lead to 
increased costs in ﬁnding 
replacements for their services
management of working capital
risk that poor management of 
working capital leads to inadequate 
liquidity and funding problems
the lack of liquidity impacts the 
group’s ability to continue to trade 
or restricts its ability to invest in 
regeneration schemes
mitigation
work only carried out for ﬁnancially sound clients 
established through credit checks
speciﬁc commercial terms including payment terms 
with escrow accounts used as appropriate
seek and obtain ﬁnancial security where appropriate
work with approved suppliers wherever possible
contracts with clients subcontractors or suppliers 
only entered into after review at appropriate level of 
delegated authority
regular monitoring of cash levels and forecasting 
of cash balances
regular stress testing of longerterm cash forecasts
regular assessment of the level of banking facilities 
available to the group
overdue work in progress debtors and retentions 
monitored and actioned as appropriate
integration of acquisition
group fails to deliver beneﬁts sought 
at time of the acquisition through 
issues with due diligence strategic 
assessment alignment of cultures or 
other reasons unknown liabilities are 
uncovered subsequent to completion
the impact is potential loss of 
proﬁtability and reputation and that 
excessive resources are required to 
be directed towards the acquisition
all acquisitions approved at board level
commercial and ﬁnancial due diligence led by 
senior teams with clear roles and responsibilities
post acquisition integration plans prepared 
and monitored
kpis established and monitored post acquisition
21
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
risk review 22
the group’s construction and 
infrastructure division comprises 
principally morgan sindall and the 
design activities of morgan sindall 
professional services the division 
employs around 4000 people 
delivering public and private sector 
projects of all sizes the division has 
been appointed on some of the uk’s 
most complex construction and 
engineering projects where it provides 
specialist tunnelling utilities building 
civil engineering and mechanical and 
electrical services the division is 
equally adept at smaller projects and 
repair and maintenance works its 
differentiating design business also 
operates within its own right providing 
expertise in complex environments 
including the regulated pharmaceutical 
nuclear and rail industries
“we are conﬁdent that we 
enter 2012 in a position of 
strength we believe the 
combination of our track 
record strong local presence 
and relentless focus on 
exceptional customer 
experience will continue to 
create a compelling offer the 
depth and breadth of our skills 
and our ability to offer a fully 
integrated service on complex 
projects will allow us to 
capitalise on our strong 
pipeline of opportunities 
throughout the year”
the division’s breadth of expertise has been  
built up through operating across a broad range 
of sectors including commercial defence 
education energy healthcare industrial leisure 
retail transport waste and water either working 
as sole contractor or in joint venture it has 
continued to make a signiﬁcant contribution to 
the group’s strategy and ﬁnancial performance
division delivers in testing market
revenue was slightly increased at £1268m 
2010 £1250m with reduced operating proﬁt 
and margin of £211m and 17 respectively 
2010 £269m 22 reﬂecting extremely 
challenging and competitive trading conditions 
this performance was in line with our 
expectations the division has delivered major 
projects won awards of national signiﬁcance 
and secured and retained longterm framework 
agreements enabling the division to enter 2012 
with a healthy forward order book 2011 saw the 
division appointed to eight new frameworks 
renewed four others bringing its total number of 
frameworks to 57 its recently integrated offering 
has opened up new opportunities especially 
graham shennan
managing director
  for more information visit  
wwwconstructionmorgansindallcom
divisions
construction and infrastructure
revenue £m
£1268m
2011 1268
2010 1250
2009 1513
margin 
17
2011 17
2010 22
2009 20
operating proﬁt £m
£211m
2011 211
2010 269
2009 301
order book £bn
£16bn
2011 16
2010 20
2009 16
morgan sindall group plc annual report and accounts 2011
construction and infrastructure 23
project paddington station
client network rail
in september 2011 morgan sindall 
successfully completed to an 
agreed time and budget the  
£43m renewal of the grade 1 
listed paddington station span  
4 roof the project included 
demolition structural steel 
repairs structural strengthening 
cladding glazing platform tiling 
painting and mechanical and 
electrical installation the project 
was undertaken for customer 
network rail and key stakeholder 
english heritage and was carried 
out above a live public area  
and railway line 
“as a station development  
it’s an achievement that 
everyone in the morgan 
sindall team can celebrate 
and be immensely proud of 
the morgan sindall team 
members that interfaced  
with the shift station manager 
team on a shift basis were 
brilliant the very ﬁrst 
morning when the last 
section of crash deck and 
scaffolding had been 
removed i emerged from  
the bakerloo line exit near 
platform 11 and looked along 
the new roofline and simply 
stopped walking as did a few 
other passengers”
terry baker  
station interface manager 
network rail
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
construction and infrastructure 24
within the road rail and airport sectors where 
major clients attach signiﬁcant value to the 
broader service 
operating within a testing market it has focused 
on driving efficiencies across the business 
protecting margins and setting new standards in 
customer service delivering in line with ﬁnancial 
expectations in the current economic climate is a 
notable achievement and the division has been 
especially successful in securing opportunities in 
the growing infrastructure sectors of roads rail 
aviation and energy distribution
growing reputation in infrastructure 
a year ago the division identiﬁed a number of 
growing sectors of the market and set out to 
secure key opportunities in each it has been 
successful in achieving this goal through a mix  
of securing high proﬁle projects and major 
framework appointments and renewals
within the rail sector crossrail continues to be a 
valued client the largest construction project in 
europe crossrail will deliver a 118km rail line 
linking maidenhead and heathrow in the west 
with shenﬁeld and abbey wood in the east 
new awards in 2011 gained through the division 
working on its own or in joint venture totalled 
over £415m and include construction of a new 
station at pudding mill lane the whitechapel 
and liverpool street station tunnels and 
whitechapel main station works also in the rail 
sector the colas rail morgan sindall joint venture 
has been selected to carry out works over three 
years on the £750m enhancements multi asset 
framework agreement delivering a range of 
civils track and signalling projects for network 
rail 
in the energy sector the division has been 
appointed preferred bidder in joint venture  
for an electricity transmission overhead line 
partnership worth up to £500m to deliver 
national grid’s overhead line construction 
programme for the next ﬁve years in addition  
a morgan sindall consortium has been awarded 
a ﬁveyear contract extension by national grid’s 
electricity alliance central to deliver major 
enhancements to the uk’s electric transmission 
infrastructure
within aviation the division has reinforced its 
marketleading position and is currently working 
at nine of the uk’s 15 major airports highlights 
include the delivery of gatwick airport’s £50m 
north terminal extension for owners global 
infrastructure partners the award of a place on 
gatwick’s construction framework for its £12bn 
programme of upgrades and improvements  
the construction of the £10m air traffic  
control tower at birmingham airport and the 
securing of the £7m air traffic control tower 
construction project at manchester airport the 
division’s full service offering is being utilised by 
baa in the design and build of a new £30m 
energy centre at heathrow airport 
on the uk’s highways the division completed 
the £440m m74 project in scotland working  
in joint venture and has also been awarded a 
£136m joint venture construction contract  
to upgrade the m62 as part of the highways 
agency’s fouryear up to £2bn national major 
projects framework
divisions
construction  
and infrastructure 
continued
project heathrow airport 
client baa
at heathrow airport the division is working as part 
of the baa value in partnership agreement and for 
48 months to date january 2012 the contract has 
gone 14m hours without an incident being reported 
under riddor
morgan sindall group plc annual report and accounts 2011
construction and infrastructure project c350 pudding mill lane 
client crossrail
the c350 pudding mill project involves the 
construction of a tunnel portal and a new elevated 
docklands ‘dlr’ station at pudding mill lane as 
the crossrail route runs through the existing station 
following the opening of the new station in 2013 
the existing station will be demolished to enable  
the construction of a cut and cover tunnel and 
covered ramp to connect the planned crossrail 
tunnel to the existing network rail infrastructure  
a range of associated works will be required 
including the construction of bridges a six span 
viaduct new retaining walls and also mechanical 
and electrical ﬁt out 
25
water remains an important sector with the 
division supporting some of the uk’s leading 
water authorities work continues on the 
fourmile lee tunnel london’s deepest ever 
tunnel helping to create a cleaner healthier river 
thames undertaken for thames water the 
£417m project is set for completion in 2015 in 
joint venture the division has been appointed to 
build a pioneering biogas plant with a contract 
value of £25m as part of yorkshire water’s amp5 
large projects framework to which the joint 
venture was appointed in 2010
education continues to be a successful sector  
for the division despite cuts in public spending 
south lanarkshire council appointed the  
division to a fouryear £150m primary school 
modernisation programme – the latest phase  
of the council’s new build and refurbishment 
framework for its primary estate
integrated approach
opportunities were also secured in conjunction 
with the investments division they include 
working on the 20year bournemouth town 
centre vision securing contracts to the value  
of £65m as part of hull city council’s building 
schools for the future programme and 
continuing to deliver the design and build 
contract for the £95m tayside acute adult 
mental health developments project in scotland 
joint appointment with the affordable housing 
division lovell on the £3bn constructing west 
midlands framework demonstrates the value  
of divisions working together as does working  
on a number of projects as part of the division’s 
reappointment on the £1bn improvement and 
efficiency south east ‘iese’ framework with 
the group’s specialist fit out business overbury 
focus on growth sectors
with an encouraging forward order book of 
£16bn 2010 £20bn together with projects  
at preferred bidder stage valued at £03bn the 
division’s strategy for 2012 focuses on building  
its market position and continuing to broaden its 
market offering at the core of the strategy lies 
seeking opportunities where the division can 
add real value through working in open and 
transparent collaboration identifying innovative 
solutions and delivering exceptional customer 
experience the focus remains on growth 
sectors where superior expertise is demanded 
where a track record is a requisite and where 
margins are less constrained sectors include 
road rail aviation and energy distribution which 
are all areas where the division has an enviable 
reputation through its delivery record and 
trusted approach the commercial sector in 
london is another market where the integrated 
offering of construction and ﬁt out being 
delivered together is considered of value
the division will continue to respond to its 
challenging environment through selective 
bidding for opportunities that best suit its 
strengths identifying innovative best value 
solutions for clients remains a priority alongside 
the development and careful management of 
supply chains
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
construction and infrastructure 2011 216
2010 180
2009 171
26
overbury and morgan lovell provide 
the group’s specialist ﬁt out and 
refurbishment services both 
companies offer a high quality national 
capability supporting clients wishing to 
relocate or refurbish premises through 
different approaches overbury 
provides ﬁt out and refurbishment 
services working in close collaboration 
with clients as a member of their 
professional team morgan lovell 
specialises in design and build working 
for clients who want to enjoy the 
beneﬁts of a single source supplier of 
office design refurbishment ﬁt out and 
relocation services 
projects of varying sizes and complexity are 
undertaken by over 600 staff in nine offices 
offering a real understanding of local markets 
combined with national awardwinning  
best practice the division’s client proﬁle 
demonstrates the breadth of its skills with 
“whilst the market has been 
undoubtedly constrained in 
2011 we have demonstrated 
the value our clients attach  
 to our exceptional standards 
in project delivery and 
customer experience our 
efforts to reach the 100 
recommendation target will 
continue and we are in no 
doubt that this focus will 
differentiate us within the 
current competitive 
environment and secure 
signiﬁcant high quality 
opportunities in 2012” 
projects spanning office retail technology 
education and leisure sectors with 65 of its 
revenue derived from ﬁnancial and business 
services public and energy sectors over 80  
of projects are within the sub £1m range yet  
its depth of skills enables the delivery of  
projects up to a value of £100m 
the division has achieved its position as market 
leader through its unwavering resolve to deliver 
on excellent client service through the rigorous 
application of the group’s perfect delivery 
standard it consistently raises the industry  
bar in terms of achieving perfection in delivery 
and customer experience making the most 
challenging projects as straightforward as 
possible through clear and consistent 
engagement at all times and at every level
2011 robust performance in competitive market
revenue increased to £438m 2010 £415m  
with operating proﬁt reduced to £124m 2010 
£148m and margin percentage reduced as 
expected to 28 2010 36 2011 saw activity 
remain robust despite the competitive 
environment and reduced pipeline of major 
  for more information visit  
wwwoverburycom 
wwwmorganlovellcouk
divisions
fit out
steve elliott
managing director
revenue £m
£438m
2011 438
2010 415
2009 291
margin 
28
2011 28
2010 36
2009 47
operating proﬁt £m
£124m
2011 124
2010 148
2009 138
order book £m
£216m
morgan sindall group plc annual report and accounts 2011
fit out 27
project bbc headquarters mediacityuk salford quays
client bbc
the new bbc hq office concept embraces collaboration 
and communication – values that are true to the bbc the 
380000 sq ft project comprises three buildings home to 
37 departments over 20 ﬂoors with two live studio spaces
“overbury worked as a team with the client and 
professionals to achieve a successful delivery  
on time on budget and managing a signiﬁcant 
contribution from uk suppliers craftsmen and 
manufacturers”
alan bainbridge
portfolio director  
bbc workplace
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
fit out project  third ﬂoor  30 old broad street london ec2 
client  f5 networks
morgan lovell completed a 6368 sq ft ﬁt out for  
f5 networks the global leader in application  
delivery networking most businesses want their 
communications room tucked away out of sight  
not f5 networks when it came to designing and 
refurbishing its central london office morgan lovell 
put the product on show
28
projects and we believe that the division has 
taken further market share now standing at  
over 25 
despite continuing tight margins and price 
sensitivity clients have demonstrated that the 
division’s brand reputation exceptional 
standards in delivery and marketleading 
customer experience are valued at a premium 
work secured via frameworks has doubled with 
a mix of new awards and renewals the division’s 
considerable investment in quality has been 
rewarded with exceptional levels of loyalty from 
its framework clients including royal bank of 
scotland the bbc threadneedle and liverpool 
victoria amongst others 
its track record in successfully delivering 
complex projects within demanding time scales 
whether buildings are vacant or occupied has 
positioned the division as the partner of choice  
in the eyes of owners occupiers and consultants
growth in new sectors
2011 saw the division deliver another consistent 
performance for the group a new technology 
division was launched in direct response to the 
needs of clients who seek an extended service  
to deliver infrastructure data centre and 
technologyled projects the formation of this 
new business has allowed the division to further 
develop existing relationships and it has secured 
opportunities with northern trust and has a 
healthy list of ongoing opportunities in this 
dynamic market the division’s decentralised 
structure has allowed the creation of specialised 
teams with sector speciﬁc skills operating on a 
wide range of projects from dedicated regional 
offices with a new office opening in leeds
the division has increased its share of retail 
banking frameworks and is a partner for three  
of the ﬁve major uk banks it can now offer an 
integrated service to meet the banks’ office 
retail and data centre needs with appointment 
to the hsbc framework and a widened remit 
with the royal bank of scotland retail banking 
remains a priority growth sector
major project wins during the year include the 
appointment by the industrial and commercial 
bank of china to ﬁt out its uk headquarters in 
london this is the second of china’s prominent 
‘big four’ banks to appoint fit out following the 
successful delivery of the largescale ﬁt out for 
bank of china’s london headquarters
an exemplar project for the division has been 
the completion of the ﬁt out of prestigious new 
offices for macquarie bank in london under  
a pioneering best practice alliance contract 
encouraging close collaboration between the 
client and the project team 
at mediacity uk in salford quays manchester 
the division has completed two major projects 
the £18m ﬁt out of the university of salford’s 
new 100000 sq ft facility converting office 
space into a digital learning teaching and 
research centre and the major ﬁt out of the 
bbc’s high proﬁle facilities delivering one of the 
uk’s ﬁrst ‘activitybased working’ concept 
designs
divisions
fit out  
continued
morgan sindall group plc annual report and accounts 2011
fit out 29
stable outlook
the london office market is not expected to 
grow in the short term constrained by lack of 
grade a space developers unable to access 
ﬁnance and subdued occupier sentiment 
current conditions will be mitigated in part by 
the division’s growth in technology and retail 
banking projects and its continuing successful 
focus on the resilient sub £1m market however 
the economic environment is resulting in 
increasing levels of mergers demergers and 
acquisitions which inevitably lead to space 
rationalisation generating opportunities for  
ﬁt out and refurbishment the market is 
expected to improve from 2013 due to a 
substantial increase in lease expiries across  
the country and preparations are already 
underway to enable the division to capitalise 
from this expected wave of new opportunities
the division’s order book currently stands at 
£216m 2010 £180m which underpins a stable 
outlook for 2012 it will continue to focus on  
the growing technology and retail banking 
sectors and anticipates expanding its track 
record within the education sector working  
with universities under pressure to improve their 
facilities to attract students another area of 
anticipated growth is through collaboration with 
construction and infrastructure to offer a fully 
integrated ﬁt out and construction service
project  pwc more london
client  pricewaterhousecoopers
pwc’s more london office has achieved the  
ﬁrst breeam ‘outstanding’ accreditation for  
a ﬁt out project of this scale social responsibility 
was the key driver in pwc’s sustainability  
ambitions and the project included the ﬁt out  
of the brigade restaurant on tooley street in 
london which aims to give work experience 
catering skills and the opportunity to gain 
qualiﬁcations to people who are at risk of or  
have experienced homelessness 
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
fit out revenue £m
£462m
2011 462
2010 387
2009 374
margin 
40
2011 40
2010 42
2009 40
operating proﬁt £m
£185m
2011 185
2010 161
2009 149
order book £bn
£15bn
2011 15
2010 15
2009 13
30
the group’s affordable housing 
division operates under the lovell 
brand name and functions through 
seven regional businesses across  
the uk and a national responsive 
repairs service it is the uk’s complete 
affordable housing solutions specialist 
with marketleading expertise in 
designing and building new homes 
refurbishing existing accommodation 
and providing a wide range of 
maintenance services lovell has  
the technical expertise to take on 
regeneration projects with a high 
degree of complexity and having 
adopted the group’s decentralised 
approach and spirit of empowerment  
it allows its regional businesses to 
operate with signiﬁcant autonomy 
offering clients a blend of crucial local 
understanding and national award
winning expertise
“lovell is well placed to 
continue its successful 
performance in 2012 through 
our marketleading position 
ﬂexible partnering approach 
and our ability to play a 
pivotal role to help clients 
overcome funding constraints 
and meet the national need 
for quality mixedtenure 
affordable housing” 
since the connaught acquisition in 2010 lovell 
has continued throughout 2011 to consolidate  
its marketleading position the increased scope 
and scale of its response maintenance activities 
now enables the division to provide local 
authorities and housing associations with a 
nationwide service offering alongside planned 
maintenance and the design and build of 
affordable and open market housing
identifying and implementing creative solutions 
with local authority landowners and working in 
trusted collaboration with housing associations 
lovell helps clients meet their objectives through 
the provision of its expert skills whether 
injecting new vitality and pride into worndown 
neighbourhoods or creating sustainable new 
communities lovell leaves a lasting legacy 
wherever it operates throughout the country 
2011 growth reﬂects broader offering
revenue was signiﬁcantly increased at £462m 
2010 £387m which reﬂects a full year of the 
enlarged business following the connaught 
acquisition operating proﬁt increased to 
£185m 2010 £161m with the margin ﬁrm  
at 40 2010 42
  for more information visit  
wwwlovellcouk
divisions
affordable housing
stewart davenport
managing director
morgan sindall group plc annual report and accounts 2011
affordable housing project northshore stocktonon t ees
partner muse developments
work underway on phase one of northshore a £300m 
housing and regeneration scheme in stocktonontees 
where lovell is building 50 energyefficient affordable 
houses the 56acre mixeduse regeneration scheme is 
set to transform stockton’s riverside by delivering over 
18m sq ft of offices leisure and retail accommodation in 
addition to high quality housing
31
“in lovell we have a partner with the expertise and experience  
to deliver the contemporary cuttingedge homes that are key  
to turning our vision for northshore into reality the company  
has a proven track record in creating stylish energyefficient 
homes that help form communities where people really want to 
live its commitment to the highest standards of customer service 
is fully borne out by our experience of working with the team  
on site at northshore lovell has become a respected member  
of the community through its support for a wide range of local 
initiatives and we value its dedication to delivering a longterm 
legacy for the area”
richard poundford
head of regeneration and economic development  
stockton council
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
affordable housing 32
house sales are continuing to be constrained  
by the lack of mortgage availability and the 
division’s shared equity offering is continuing to 
support sales in particular to ﬁrsttime buyers 
on a small number of sites lovell has retained 
some completed properties for rental in order  
to maintain momentum and contribute to the 
success of the overall regeneration project with 
the public sector experiencing the impact of the 
government’s comprehensive spending review 
lovell has honed its business to adapt to market 
conditions and to respond to opportunities
the division has achieved an improved result  
in 2011 further reinforcing its marketleading 
position working under development 
agreements with local authority landowners 
enables the division to access land avoiding the 
risk associated with acquiring land on the open 
market and in the majority of cases allowing 
lovell to draw down plots of land at optimum 
times the division’s strategy of working in 
partnership with housing associations enables  
it to build affordable housing under contract 
alongside units for open market sale providing 
the business with a stream of income and 
reducing its reliance on private sales lovell’s 
service first ethos is providing clients with a 
quality product and a way of working which is 
setting new standards and achieving high levels 
of customer satisfaction
the full year impact of the division’s enhanced 
capability to provide response maintenance 
services has resulted in signiﬁcant revenue 
growth it has added an extra layer of resilience 
to the business and provided a substantial 
revenue stream less directly dependent on 
government funding decisions and with 
considerable growth potential
major new projects secured
a real highlight for lovell has been the successful 
integration of the acquired connaught business 
investment has been made in a wide range of 
technical and health and safety training initiatives 
and installation of new business systems allowing 
the division to swiftly convert opportunities  
from its strengthened service offering such 
opportunities include an agreement with barnet 
homes worth approximately £103m over ten 
years to deliver planned refurbishment and 
electrical work across the london borough  
of barnet’s portfolio of 15000 homes
at miles platting manchester lovell is 
successfully completing the transformation of 
264 acres of an inner city housing estate into a 
sustainable mixedtenure urban environment 
delivered through a private finance initiative 
over 1500 homes have been refurbished and 
over 1000 new homes are to be built over the 
next ten years 
divisions
affordable housing  
continued
project pershore road balsall heath 
client  birmingham municipal housing t rust 
‘bmht’ with additional funding from  
the homes and communities agency
lovell has built the ﬁrst council houses in 
birmingham for 30 years working with newly 
created birmingham municipal housing trust  
lovell built 33 homes at pershore road balsall 
heath as part of the bmht’s 553home new build 
programme the programme also recently won  
a national regeneration award 
morgan sindall group plc annual report and accounts 2011
affordable housing 33
compendium living the joint venture between 
lovell and one of the uk’s largest registered 
providers the riverside group has recently 
entered into a £100m agreement with derby 
city council to regenerate a 30acre brownﬁeld 
site with 800 new homes a new school and 
community facilities
the division has been appointed by birmingham 
city council to the £3bn constructing west 
midlands framework working alongside the 
construction and infrastructure division under 
the name community solutions west midlands 
demonstrating the synergy and value produced 
by the group’s divisions working together an 
additional framework win has been the selection 
of lovell by efficiency north on its £975m 
framework for 15 social housing providers to 
improve the homes and communities across 
yorkshire and the humber region
housingled regeneration
the division is also working alongside its  
urban regeneration colleagues on the £300m 
northshore project in stocktonontees and in 
the ﬁrst phase of the project lovell is delivering 
50 energyefficient affordable houses for open 
market sale
in london 63 high quality homes have been 
delivered by the division as part of a £17m 
mixeduse regeneration development in 
clapham working with morgan sindall for 
cathedral group and notting hill housing 
group lovell has also won repeat business with 
the london borough of hackney with the award 
of a £25m contract to build two new sustainable 
housing schemes through a groundbreaking 
land swap scheme this award follows extensive 
work on the borough’s housing modernisation 
programme over the past six years
public sector land driving mixedtenure 
opportunities
lovell’s forward order book is steady at £15bn 
2010 £15bn despite the ongoing economic 
uncertainty there is still strong market demand 
for the services that lovell offers the 
requirement for new mixedtenure affordable 
housing an extensive ageing local authority  
and housing association stock in need of 
refurbishment and a requirement for responsive 
and emergency maintenance of public sector
owned homes all lie within the division’s proven 
areas of expertise in addition the release of 
public sector land for housing will help drive 
mixedtenure regeneration opportunities
the tendering market is expected to remain 
competitive but it expects its full service offering 
will continue to give the business a distinct 
competitive advantage with the increasing 
number of packaged work tenders which  
require the full service capability
the nationwide lovell apprenticeship scheme sees 
an average of 60 craftsmen and women graduate 
each year with recognised trade qualiﬁcations and 
recently took on its 500th apprentice
morgan sindall group plc annual report and accounts 2011
affordable housing
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 revenue £m
£57m
2011 57
2010 46
2009 32
operating proﬁt £m
£39m
2011 39
2010 20
2009 07
pipeline £bn
£16bn
2011 16
2010 14
2009 14
the group’s urban regeneration 
division muse developments is one  
of the country’s most trusted names  
in commercial development and urban 
regeneration acquired in 2007 the 
division has been working in long 
term collaborative partnerships  
to successfully deliver complex  
mixeduse regeneration schemes  
for over 25 years 
operating out of four regional offices across  
the country and with approximately 50 staff 
muse specialises in working with landowners  
and public sector partners to unlock value  
from underdeveloped assets to bring about 
sustainable regeneration and urban renewal  
its project portfolio currently comprising  
over 30 development projects at various stages 
of development stretches across ﬁve major 
sectors offices residential retail leisure and 
industrialdistribution
“our objective for 2012 will be 
to further grow the business 
and become a greater 
contributor to the group  
our innovative and successful 
approach to unlocking land 
values and the group’s 
commitment to regeneration 
will place us in a strong 
position to further increase 
our regeneration pipeline and 
make a major contribution to 
urban renewal throughout  
the country” 
over the years the division has developed  
a resilient business model it creates and 
implements innovative development 
agreements in partnership with landowners  
who require the division’s complete 
understanding of the regeneration process  
and its full service skill set to realise the potential 
of complex projects this business model allows 
for clients to retain land which is drawn down  
in phases when construction commences  
this reduces the amount of working capital 
required by the division
in addition to schemespeciﬁc partnerships 
muse is also an integral partner in two strategic 
partnerships isis waterside regeneration  
a partnership with british waterways and  
aviva created to unlock the development 
potential of british waterways nonoperational 
waterside portfolio and english cities fund  
a governmentbacked development vehicle  
with legal and general and the homes and 
communities agency created to deliver 
sustainable regeneration in inner city locations 
  for more information visit  
wwwmusedevelopmentscom
divisions
urban regeneration
matt crompton 
nigel franklin
joint managing directors
34
morgan sindall group plc annual report and accounts 2011
urban regeneration 35
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
urban regeneration
project  t albot gateway – blackpool central business district
partner  blackpool council 
work has commenced on this new 11m sq ft £220m 
mixeduse development a detailed planning application  
has been submitted for a new office building and the 
refurbishment of a 650 space multistorey car park both 
presold to the council a presale agreement has been 
exchanged with sainsbury’s for a large format store  
this ﬁrst phase will involve signiﬁcant highway works  
and high quality public realm 
computer generated image shown
“since being appointed our development partner muse has been 
very professional and has demonstrated how an innovative 
approach and determination can overcome barriers to success 
the loss of regional funding for the talbot gateway scheme could 
have been a fatal blow but it did not discourage muse and its 
team has shown great tenacity in progressing the project one  
of our major regeneration programmes we are delighted that 
sainsbury’s shares our conﬁdence in the scheme and we  
are now looking forward to a longterm and productive 
partnership with muse”
neil jack
chief executive  
blackpool council 36
2011 proﬁt almost doubles
despite tough market conditions muse had a 
successful year with a growing operating proﬁt 
and marked increase in on site activity new 
construction contracts with a value of £36m 
were let during 2011 and by the end of the year 
construction contracts with a total value of £97m 
were on site the division has contributed 
signiﬁcantly to the group’s results delivering an 
increased operating proﬁt of £39m 2010 
£20m on revenue of £57m 2010 £46m it has 
also grown its regeneration pipeline substantially 
with its share standing at £16bn with a further 
£06bn of opportunities currently at preferred 
developer status
muse’s proﬁt comes from a range of sources 
including active development valueenhancing 
land trading and development management 
fees spread across the country this mix avoids 
reliance on one particular source of income and 
provides a level of resilience to shifting market 
and economic conditions
£08bn of major new schemes secured
current market conditions have enabled muse  
to work to its strengths namely its strong 
partnership record proven expertise and its 
determination to identify solutions to overcome 
barriers to success this reputation is further 
enhanced by the strong ﬁnancial backing of the 
group and its commitment to regeneration 
with many competitors less active in the market 
the division has capitalised on opportunities 
throughout 2011 signiﬁcant achievements 
include being appointed by rolls royce as its 
development partner for a mixeduse 
development worth up to £250m on 150 acres 
of surplus land adjacent to one of its production 
facilities in the midlands in chester a new 
development agreement was concluded  
with lloyds banking group and muse achieved 
preferred developer status on three schemes  
in warrington basingstoke and stockport 
development agreements are expected to be 
reached on these schemes within the ﬁrst half  
of 2012 other critical project milestones have 
been reached including securing outline and 
detailed planning approvals on phases within 
eight major schemes throughout the country
warrington borough council selected muse as 
preferred developer for the £130m bridge street 
quarter regeneration scheme one of the largest 
regeneration projects in the region the scheme 
is the ﬁrst phase of the council’s 25year 
strategic masterplan for the town centre and 
waterfront area and will provide retail leisure  
and new offices for the council
stockport metropolitan borough council has 
chosen the division as its preferred development 
partner for grand central a £140m key gateway 
site the project will deliver a high quality office 
quarter with quality public realm and easy 
access to the town centre supported by a hotel 
and improved car parking
divisions
urban regeneration 
continued
project  no 4 st paul’s square liverpool
partner  english cities fund
as primary investor and development manager of 
english cities fund muse has recently completed 
the ﬁnal phase of its £150m officeled mixeduse 
quarter the breeamrated ‘excellent’ building 
comprises 109000 sq ft of high quality grade a 
office space and is the focal point for liverpool’s 
central business district no 4 st paul’s square is 
already attracting prestigious occupiers
morgan sindall group plc annual report and accounts 2011
urban regeneration 37
muse has also been named as basingstoke and 
deane borough council’s partner for a £200m 
regeneration project working with the council  
to develop in excess of 700000 sq ft on council
owned sites the scheme will include a mix  
of office space a hotel and other supporting 
facilities 
in chester the division acquired a 35 acre site 
from lloyds banking group in order to unlock 
the plans for a new business quarter scheme 
providing 500000 sq ft of prime office space  
in the city centre
progressing existing schemes
despite withdrawal of regional development 
agency funding muse is taking forward the 
£220m talbot gateway scheme in blackpool 
the scheme will create 11m sq ft of new retail 
commercial community and residential space  
as well as parking and a new transport 
interchange a detailed planning application  
has been submitted for the ﬁrst phase and a 
presale agreement has been exchanged with 
sainsbury’s for a large format store
in doncaster work is progressing on the £300m 
civil and cultural quarter set to breathe new  
life into the town centre working within an 
innovative asset backed vehicle with doncaster 
council the latest phase of construction has 
commenced to deliver a £20m theatre
the english cities fund a muse joint venture 
celebrated the completion of the ﬁnal phase of 
the st paul’s square scheme in liverpool with 
the opening of no 4 st paul’s square the £32m 
building provides a total of 109000 sq ft of high 
quality grade a office space over eight ﬂoors 
and is the focal point for liverpool’s central 
business district
in scotland at the 650acre eurocentral 
business park development the division took 
advantage of positive investor demand to 
forward sell over 200000 sq ft of speculative 
distribution units for £33m 
muse continues to provide opportunities for 
other group divisions working with construction 
and infrastructure in doncaster and wakeﬁeld 
at its northshore development in stocktonon
tees the ﬁrst phase of the £300m housing and 
regeneration scheme is underway with lovell 
providing 50 energyefficient affordable houses 
for open market sale 
further progress expected in 2012
despite the regeneration market’s ongoing 
challenges muse’s signiﬁcant development 
pipeline and its successful track record allows 
the division to be conﬁdent that it has good 
visibility of where it will be able to extend its  
level of contribution to the group’s  
ﬁnancial results
muse is conﬁdent that its business model  
will continue to allow it to capitalise on its 
regeneration expertise working within 
development agreements partnering with 
landowners and its existing strategic vehicles 
and to maximise public sector residential  
retail and leisure opportunities 
project  doncaster commercial and cultural quarter 
partner  doncaster metropolitan borough council
phase one of this longterm development 
partnership has created a new 190000 sq ft 
breeamrated ‘excellent’ office for the council  
a new performance venue and refurbished  
multistorey car park fronting onto a major new 
public square muse is now master planning further 
phases of residential leisure retail and offices for 
future development
computer generated image shown
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
urban regeneration 38
the group’s investments division 
operating as morgan sindall 
investments facilitates project 
development primarily in the public 
sector by providing ﬂexible ﬁnancing 
solutions and development expertise 
its scope of business covers a wide 
range of markets including urban 
regeneration education healthcare 
housing emergency services defence 
and infrastructure 
its strategy is to unlock prime public sector 
construction opportunities that require the  
skill of other group divisions successful 
implementation of this strategy creates revenue 
for the group provides a portfolio that delivers a 
sustainable return on capital investment delivers 
proﬁts in the longer term when investments are 
realised and contributes to the group’s mission 
to build leading positions in all its markets 
“our track record in identifying 
barriers to success and 
responding with bespoke 
ﬁnancing solutions places  
us in a strong position  
to maximise market 
opportunities in 2012” 
the division is involved in a wide range of joint 
ventures working with private and public sector 
partners it specialises in private finance 
initiatives and property partnerships particularly 
local asset backed vehicles ‘labvs’ and its 
expertise includes complex land swap 
arrangements an labv is a longterm joint 
venture between the public and private sectors 
covering several sites within a geographic area 
the public sector signs up to an exclusive 
arrangement with the private sector to develop  
a series of sites in line with their development 
vision contributing the land as equity in the 
partnership against the private sector’s cash  
and expertise with proﬁts shared equally 
committed to optimising opportunities through 
partnerships the investments division shapes 
and regenerates communities through the 
delivery of affordable housing schools health 
and leisure facilities emergency services and 
infrastructure
divisions
investments
directors’ portfolio  
valuation £m
£49m
2011 49
2010 41
2009 31
investments carrying value £m
£232m
2011 232
2010 177
2009 149
ernie battey
managing director
morgan sindall group plc annual report and accounts 2011
investments
  for more information visit  
wwwmsinvestmentscouk 39
project   basildon sporting  
village essex
partner  basildon borough council
the largest sports project  
in the thames gateway  
the £38m basildon sporting 
village was delivered on time  
and on budget through a 25year 
agreement between community 
solutions for leisure a morgan 
sindall investments consortium 
and basildon borough council 
the world class facilities  
will act as a community hub  
a county and regional sporting 
venue and an international 
training venue for the 2012 
olympics and paralympics
“community solutions for 
leisure has proved to be a 
very successful partnership  
of highly experienced 
companies that were able 
to get things done fully 
understanding the needs  
of the client morgan sindall 
investments the construction 
and infrastructure division 
sport and leisure 
management ltd and sp 
architects have delivered 
something very special  
in basildon the basildon 
sporting village is testament 
to what the private sector 
and the public sector can  
do when they work together 
excellent project management 
and communication 
throughout the project 
enabled the centre to be 
delivered without any surprises 
and more importantly 
without any signiﬁcant 
additional costs”
paul brace
manager of leisure services 
basildon borough council
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
investments project   hull building schools for the future
partner  hull city council
2011 not only marked the opening of the ﬁrst three 
brand new schools including the archbishop 
semantu academy pictured delivered by hull 
esteem consortium which includes the group’s 
investments division it also saw the launch of the 
exchange a hub designed to help young people 
with employability and skills issues
the exchange will create a lasting legacy in terms of 
assisting various agencies that support local young 
people whether that is through work experience 
enterprise opportunities gaining life skills or 
supporting a route into education employment  
or training
40
2011 growth in portfolio value
the directors’ valuation of the investment 
portfolio has increased to £49m 2010 £41m 
the valuation is derived from the group’s latest 
detailed ﬁnancial models discounted using rates 
appropriate to the particular scheme’s nature 
and stage of development these vary from 7 
to 9 post tax the valuation of this portfolio is 
based on discounting expected future cash 
ﬂows but does not include potential reﬁnancing 
gains or projects at preferred bidder stage or 
proﬁt made by investments from providing 
services or proﬁt made by other parts of the 
group that perform the construction 
maintenance or facilities management work
against the backdrop of a challenging economic 
environment 2011 has seen investments achieve 
considerable success the operating result was 
a net cost after joint venture income of £39m 
2010 £33m which reﬂects the costs 
associated with public sector procurement 
managing the portfolio and also the creation of 
vehicles required for funding initiatives this is 
mitigated by the division’s success in creating 
value for the group through enabling other 
divisions to access a broad range of work and 
through its investment portfolio which increased 
in value signiﬁcantly during the year
major schemes progress
highlights include reaching agreement on 
signiﬁcant urban regeneration schemes 
securing ﬁnancial closure and delivering 
landmark community projects formal contracts 
have been signed on the bournemouth town 
centre vision labv scheme a 20year project 
with a development value in excess of £500m 
the scheme is a 5050 joint venture public 
private partnership between bournemouth 
borough council and investments the scheme 
is a prime example of public sector land being 
released to drive regeneration it will deliver a 
range of residential and mixeduse development 
and the regeneration of underutilised council 
assets will enable signiﬁcant investment in the 
public realm the group’s construction and 
infrastructure and affordable housing divisions 
will provide construction services once planning 
is secured and work commences on the ﬁrst site 
in early 2012
three additional contracts totalling £65m were 
awarded to construction and infrastructure as 
part of hull city council’s building schools for 
the future ‘bsf’ programme the contracts 
were awarded following ﬁnancial closure by an 
investments’ consortium that has formed a local 
education partnership with hull city council  
and partnerships for schools to deliver the  
bsf programme 
divisions
investments  
continued
morgan sindall group plc annual report and accounts 2011
investments 41
the opening of the £38m basildon sporting 
village demonstrates the group’s integrated 
expertise in funding designing and building 
community leisure facilities through public 
private partnerships the largest sports project 
in the thames gateway was delivered on time 
and on budget through a 25year agreement 
between investments and basildon borough 
council the world class facilities will act as a 
community hub a county and regional sporting 
venue and an international training venue for  
the 2012 olympics and paralympics
wigan life centre a £50m national award
winning leisure health learning and information 
complex was completed and is fully operational 
delivered via a 25year public private agreement 
between wigan metropolitan borough council 
community solutions for leisure and hochtief 
ppp solutions uk construction and 
infrastructure provided a wide range of 
construction services
community solutions the health and social care 
joint venture with barclays infrastructure funds 
further strengthened its presence in the nhs 
local improvement finance trust ‘lift’ market 
this year through the acquisition of primary  
plus limited this acquisition in addition to its 
investment activity makes community solutions 
one of the largest management services 
providers in the lift market it creates new 
partnerships with nhs and public sector 
organisations and will help secure new activity 
across the health and social care markets
partnership with the public sector
2012 will see investments maintaining its strategy 
of identifying projects that offer the most 
potential to the group and increase the value  
of its investment portfolio with ongoing 
constraints on the public purse local authorities 
will continue to seek viable publicprivate 
vehicles that facilitate development secure 
efficiencies and boost economic growth 
investment options are also being explored 
around the infrastructure needs of the renewable 
energy industry where the group’s integrated 
offering and experience can add signiﬁcant 
value 
subsequent to the year end the division sold  
its investment in dorset fire  rescue pfi for 
£38m which was above the directors’ valuation 
at 31 december 2011 this represents a discount 
rate on the directors’ valuation cashﬂows of 7 
this is consistent with the policy to realise 
investments from time to time in order to  
recycle capital into new opportunities
project   bournemouth t own centre vision
partner  bournemouth borough council
bournemouth town centre vision a local asset 
backed vehicle 20year project with a development 
value in excess of £500m the scheme is a 5050 
joint venture public private partnership between 
bournemouth borough council and investments  
it will deliver a range of residential and mixeduse 
development and the regeneration of underutilised 
council assets will enable signiﬁcant investment  
in the public realm
computer generated image shown
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
investments 42
morgan sindall group plc annual report and accounts 2011
sustainability review
42
the roadmap for sustainability that 
the board and each of the group’s ﬁve 
divisions committed to in 2011 includes 
a detailed action plan for 22 priority 
sustainability objectives six commitments 
critical to drive sustainability into the 
group’s culture have been agreed and 
these commitments are based on the  
people planet proﬁt model 
    total commitment to  
a safe workplace
    total commitment to developing 
talented employees
    total commitment to reducing 
energy consumption and carbon 
emissions
    total commitment to reducing waste
    total commitment to improving 
sustainable procurement
    total commitment to supporting 
local employment
the sustainability report
an important part of the group’s renewed 
pledge to sustainability is the morgan sindall 
group’s ﬁrst dedicated sustainability report 
which will be released online at the same time as 
the group’s annual report and accounts it 
explains how the roadmap for sustainability is 
being implemented and provides a review of the 
group’s performance over the past 12 months 
key performance indicators ‘kpis’ are reported 
for each of the six total commitments there are 
also reports on many of the other initiatives 
undertaken across all 22 priority objectives 2011 
is the base year for reporting data within the 
roadmap and therefore no prior data is included 
in the ﬁrst sustainability report as new systems 
and processes have been installed during the 
year to capture key information the group’s 
commitment to sustainability can be seen in the 
projects performance ﬁgures and case studies 
highlighted in the report and a dedicated 
sustainability website has also been created to 
ensure that all stakeholders employees 
suppliers and customers are kept up to date 
throughout the year 
sustainability review
“i have a target of ska gold  
for each major project we 
start this project achieved 
the highest scoring ska ever 
and i’m really proud of the 
whole team”
dave horton 
property sustainability and 
capital investment manager 
rwe npower
client rwe npower
location  130 w ood street 
london ec2
in 2011 fit out achieved the 
highest gold ska rating in the 
uk within the client’s budget 
with its design and build of 
energy company rwe npower’s 
new 8000 sq ft london office 
the ska rating method is an 
assessment tool for sustainable 
office ﬁt out and is applied from 
the design stage through to the 
construction of a project the 
scheme recognises best 
practice across energy and  
co
2
 waste water pollution 
transport materials and 
wellbeing
visitors to wwwmorgansindallcomsustainability 
can view the 2011 sustainability report the latest 
case studies and news items updated kpi data 
and information on our 2011 performance on 
each total commitment as well as the 
challenges identiﬁed for 2012 
management of the roadmap
senior personnel play a vital part in delivering 
the group’s roadmap a group sustainability 
forum has been established and meets four 
times a year to review progress and agree future 
actions the forum includes representatives 
from the board the head of each division’s own 
sustainability forum and the chairperson from 
each of the following group forums health and 
safety environment human resources and 
procurement where appropriate the group also 
engages external advisors these divisional and 
taskspeciﬁc forums all meet regularly to 
manage relevant business issues and report 
progress to the group sustainability forum  
the group sustainability forum is ultimately 
responsible for the implementation and delivery 
of the roadmap
the total commitments
1 total commitment to a safe workplace
to ensure through proper training and 
education that staff are fully engaged and 
involved in improving safety in the workplace  
at home and on their journeys to and from  
work the group will ensure that everyone 
understands the part they play in their own 
safety and that of their coworkers as well as  
the wider community providing a safe working 
environment for employees subcontractors and 
suppliers is vital to the continued success of the 
group and is a number one priority
objective no lost time incidents
kpi   2011
 
riddor incidents no 96
the construction and infrastructure division 
launched its 100 safe programme in april 
2011 a new approach to safe working that is 
centred on ﬁve pillars of safe places safe by 
choice safe relationships safe by design and 
safe lives it has enabled the division to pull 
together the strongest elements of its historical 
behavioural programmes to ensure that a 
consistent message about 100 safe is 
communicated to all its stakeholders
  for more information visit  
morgansindallcom
sustainability 43
morgan sindall group plc annual report and accounts 2011
sustainability review
43
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
2 total commitment to developing  
talented employees
to help develop talent the group undertakes  
to provide all new staff with clear induction 
appraisal and appropriate development 
programmes 
recruiting empowering and training talented 
individuals are central to the group’s business 
activities staff are encouraged to develop and 
use innovative means of delivering projects and 
be proactive in their dealings with clients and 
the group is committed to training and 
developing them to achieve this
objective to attract and retain talented people
kpi   2011
average number of training
days per employee 58
all professional staff in the urban regeneration 
division have undertaken and passed the 
college of estate management’s accredited 
programme on introduction to sustainability  
in the built environment as part of its 
commitment to offering professional 
development opportunities to employees  
this qualiﬁcation is considered to be of high 
value in the increasing number of european 
union ojeu contract opportunities in  
which the division is now involved
3 total commitment to reducing energy 
consumption and carbon emissions
to play a part in reducing emissions by 
achieving as a minimum a 5 yearonyear 
reduction in energy consumption by building 
more efficiently more resource and energy
efficient workplaces housing schools and 
offices will be created helping clients at the 
same time to reduce their own emissions 
climate change and the prospect of peak oil are 
potentially two of the biggest challenges facing 
society in the twenty ﬁrst century the built 
environment accounts for over half of energy 
use and greenhouse gas emissions in the uk  
as a leader in construction and regeneration  
the group recognises the important role it has  
to play in designing and delivering buildings and 
infrastructure that are more energyefficient and 
incorporate new energy technologies 
objective to demonstrate net reduction in 
carbon emissions across the group
kpi   2011
group carbon
emissions tonnes 70800
this ﬁgure is a provisional result and may change subject  
to the group’s cemars certiﬁed emissions management  
and reduction scheme audit which will be undertaken in  
may 2012 the ﬁnal result will be published on the group’s 
website following the completion of the audit
during 2011 the group achieved certiﬁcation 
under cemars this internationallyrecognised 
scheme recognises the actions of businesses 
and organisations that measure their 
greenhouse gas emissions understand their 
liabilities and put in place strategies to reduce 
emissions in their organisation and more widely 
through their supply chain
4 total commitment to reducing waste
to improve resource efficiency reduce the total 
amount of waste sent to landﬁll by 10 yearon
year and undertake to commit to recognised 
waste reduction schemes as well as 
encouraging individual initiatives 
the uk construction industry is responsible for 
over 100m tonnes of construction demolition 
and excavation waste every year which 
accounts for around one third of all waste arising 
in the uk with recognition that the uk is 
running out of landﬁll capacity improved 
understanding of negative environmental 
impacts associated with land ﬁlled waste and 
increasing awareness of the need to use raw 
materials more efficiently the group believes 
that reducing the volume of construction waste 
is a priority 44
sustainability review  
continued
morgan sindall group plc annual report and accounts 2011
sustainability review
objective to minimise waste generated 
throughout the group
kpi   2011
group waste production and recycling rates
total waste
produced tonnes 1311800
percentage of waste
diverted from landﬁll  86
please note the data shown above does not include ﬁgures 
for the affordable housing division’s response maintenance 
business following its acquisition at the end of 2010 during 
2011 systems have been put in place to enable this data to be 
collected and reported in the 2012 report and accounts
on a fit out contract in london 100 of waste 
was reused recycled or recovered diverting 
1145 tonnes of waste from landﬁll this required 
effective planning and communication with the 
client and supply chain to explore alternative 
management of waste material product 
recovery was a critical element in fit out 
achieving its targets working with the client 
the division reused existing material wherever 
possible either on this or other projects 
5 total commitment to improving sustainable 
procurement
to ensure the group’s supply chain plays its  
role in helping the group meet its sustainability 
objectives the divisions will actively support the 
construction industry research and information 
association ‘ciria’ guidance on sustainable 
procurement in construction and expect 
suppliers to source and provide sustainable 
materials the performance of suppliers origin  
of key materials and compliance with recognised 
certiﬁed schemes will be monitored and 
reported as part of the group’s sustainable 
procurement policy 
the group requires a high level of quality 
competitiveness and sustainability from its 
suppliers and subcontractors to ensure that  
it can continue to bid projects competitively  
and secure longterm revenue 
objective to ensure that the group supply  
chain conforms to its minimum standards  
for sustainability
kpi   2011
percentage of total spend that
is covered by groupwide agreements 85
currently over 94 by value of timber the 
group purchases is certiﬁed or declared as 
from a sustainable source compared to 88  
in 2010 and directly purchased timber with  
full chain of custody stands at almost 50  
by value the group has been measuring the 
average number of road miles travelled by 
bricks used in its projects for the past six years 
by 2011 it was down to 805 miles per 1000 
bricks compared to 830 miles in 2010 and 
over 120 miles in 2005
6 total commitment to supporting  
local employment
to aim to provide sustainable employment 
opportunities based on local communities 
schemes to recruit and train people locally  
will be monitored and measured
construction is a major contributor to the  
uk economy and historically a driver of gdp 
growth training and fulltime jobs offered 
during group projects have the potential to 
make a real difference to the local communities 
the group always endeavours to leave a positive 
legacy following completion of a project
objective to be the employer of choice in the 
construction industry
kpi   
distance travelled by workforce which  
will be reported for the ﬁrst time in 
our 2012 sustainability report  
the group’s affordable housing division is 
committed to apprenticeships as an important 
way of bringing a diverse range of talented 
people into the division and the construction 
industry as a whole the division established its 
national apprenticeship programme in 2003 
which sees an average of 60 men and women 
graduate each year and has taken on its  
500th apprentice  
morgan sindall group plc annual report and accounts 2011
directors’ report governance
45
directors’ report governance
information about our board of directors  
and corporate governance
46 board of directors
48 corporate governance statement
53 remuneration report
62 other statutory and regulatory information
66 directors’ responsibilities statement
constructing  
and 
regenerating
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
board of directors
46
john morgan
executive chairman 
appointed april 2000
john is the executive chairman 
taking overall responsibility for 
the group’s strategy and 
ensuring that the board 
functions effectively he 
cofounded morgan lovell in 
1977 which then reversed into 
william sindall plc in 1994 to 
form morgan sindall group plc 
he was chief executive from 
1994 to 2000 and has been 
executive chairman since 
2000
paul smith
chief executive 
appointed march 2003
paul is the group’s chief 
executive and takes 
responsibility for developing 
and implementing the group’s 
strategy and for managing the 
business appointed chief 
executive in march 2003 his 
previous positions include 
managing director of accord 
plc managing director of 
cleanaway limited and 
manager at mckinsey  co inc
david mulligan
finance director 
appointed april 2004
david as the group’s ﬁnance 
director has board 
responsibility for the group’s 
ﬁnancing ﬁnancial reporting 
and information systems 
appointed ﬁnance director in 
april 2004 having been with 
the group in ﬁnance roles since 
1997 he had previously worked 
at smiths group plc and ernst 
 young where he qualiﬁed as 
a chartered accountant
paul whitmore
commercial director 
appointed april 2000
paul as commercial director is 
the group’s senior executive for 
commercial operations in 
addition he has board 
responsibility for health safety 
and sustainability appointed a 
director in april 2000 he is a 
chartered surveyor and had 
previously held the position of 
chief executive of laing 
construction plc during his 27 
years with john laing plc
governance
board of directors morgan sindall group plc annual report and accounts 2011
board of directors
47
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
adrian martin
senior independent 
nonexecutive director 
appointed december 2008
adrian assumed the role of 
senior independent director in 
may 2010 after two years with 
the group his career includes 
30 years audit and corporate 
ﬁnance experience with bdo 
stoy hayward the last eight as 
managing partner before 
becoming chief executive and 
then consultant at reynolds 
porter chamberlain llp until 
2009 adrian holds non
executive directorships with h 
r owen plc mc saatchi plc 
and safestore holdings plc and 
is nonexecutive chairman of 
rsm tenon group plc
geraldine gallacher
independent  
nonexecutive director 
appointed august 2007
geraldine is managing director 
of the executive coaching 
consultancy which she 
founded in 1994 to provide 
specialist coaching to 
executives and boards 
previously she was head of 
group management 
development for the burton 
group plc now arcadia plc 
and with the ford motor 
company
patrick de smedt
independent  
nonexecutive director 
appointed december 2009
patrick’s career includes 23 
years with microsoft 
culminating in the role of 
chairman for europe middle 
east and africa from 2003 
since leaving microsoft in 
2006 he has served on the 
boards of a number of 
european public and private 
companies he is currently a 
nonexecutive director of 
victrex plc cpp group plc and 
a number of private companies 
as well as serving on the 
advisory board to a division of 
ing bank nv
simon gulliford
independent  
nonexecutive director 
appointed march 2010
simon is chief executive officer 
of gulliford consulting the 
marketing consultancy which 
he founded in 1992 and which 
is now part of chime 
communications before 
setting up his own consultancy 
he was head of the marketing 
faculty at ashridge college and 
he has previously held 
marketing roles at companies 
including sears plc emap plc 
and barclays plc he recently 
stepped down as chief 
marketing officer at standard 
life remaining as a consultant 
to the executive team morgan sindall group plc annual report and accounts 2011
corporate governance statement
48
corporate governance statement
the board recognises the importance of maintaining a high 
standard of corporate governance in its management of the 
group’s affairs and its dealings with all its stakeholders at morgan 
sindall good governance involves establishing appropriate 
policies procedures and guidelines to ensure that the company’s 
core values and standards are embedded within the group  
whilst allowing each division to operate within a decentralised 
empowering environment the board’s stewardship of these 
matters and its role in providing guidance is critical the group’s 
internal standards are established having regard to external 
governance codes the applicable code being the uk corporate 
governance code ‘the code’
statement of compliance
the code introduced by the financial reporting council in 2010 
has applied to the company since 1 january 2011 the company  
is committed to managing its affairs in compliance with the 
principles and provisions of the code including those provisions 
only applicable to ftse 350 companies and is reporting here  
on this basis a copy of the code is available from the financial 
reporting council’s website wwwfrcorguk
the board has complied with the provisions of the code 
throughout the year ended 31 december 2011 and up to the date 
of this report a summary of how the company has applied the 
main principles of the code is set out below
strategy and risk management
during the continued challenging economic and market 
conditions in which the group has been operating the board has 
reviewed and challenged its strategy to ensure that the group is 
positioned to take advantage of opportunities in those sectors of 
the construction and regeneration markets offering the greatest 
potential for growth and reward at the same time the board has 
devoted considerable time to assessing the nature and extent of 
the risks it is willing to take to achieve its strategy and to ensuring 
that an appropriate risk management structure is in place
despite the challenges facing the construction and regeneration 
markets the board remains committed to delivering strong 
performance and shareholder value
john morgan
executive chairman
directors
changes to the board
the board currently comprises an executive chairman three 
further executive directors and ﬁve nonexecutive directors  
gill barr has indicated her intention not to seek reelection when 
she retires at the forthcoming annual general meeting ‘agm’  
to be held on 3 may 2012 and this will leave four nonexecutive 
directors all of the nonexecutive directors are considered by  
the board to be independent and the board’s structure therefore 
meets the requirements of the code 
roles of the chairman chief executive and senior independent 
director
the division of responsibility between the executive chairman  
and the chief executive is clearly deﬁned in a written schedule 
agreed by the board john morgan as executive chairman takes 
responsibility for the overall strategy of the group and for leading 
the board and ensuring that it functions effectively he sets the 
agenda for board meetings and ensures that adequate time is 
devoted to discussion of all agenda items facilitating the effective 
contribution of all directors paul smith as chief executive is 
responsible for critically assessing the group’s strategy and for  
the day to day management of the operational activities of the 
group in accordance with the strategy and policies determined  
by the board
adrian martin as the senior independent director is available to 
shareholders if they have concerns which have not been resolved 
through the chairman or chief executive or for which contact 
through those channels is not appropriate he also has speciﬁc 
responsibility for evaluating the performance of the executive 
chairman and meets with the other nonexecutive directors 
without the chairman being present at least once a year
the board considers that the composition of the board and  
the balance between executive and nonexecutive directors is 
appropriate to the size of the group and the need to maintain  
cost control it also believes that the balance of relevant 
experience amongst its members having regard in particular  
to the diverse backgrounds of the nonexecutive directors 
enables it to exercise effective leadership and control of the 
group it also ensures that the decision making process cannot  
be dominated by any individual or small group of individuals
procedures for managing conﬂicts of interest operating 
satisfactorily
the directors are aware of their duties under the companies  
act 2006 provisions relating to the management of conﬂicts of 
interest the company’s articles of association ‘the articles’ were 
amended in 2008 to give the board a general power to authorise 
potential conﬂicts of interest in addition to the directors’ duty to 
seek board approval for any new potentially conﬂicting situations 
or changes to existing interests the register of potential conﬂicts 
is circulated for review by the board on an annual basis this 
process was carried out satisfactorily during the year
all directors to stand for election
the articles require each director to submit himself or herself for 
election by shareholders at the ﬁrst annual general meeting after 
his or her appointment and for reelection at every third annual 
general meeting thereafter the board has agreed however that 
in accordance with the code all of its continuing directors should 
submit themselves for reelection on an annual basis their 
biographies are set out on pages 46 and 47 the board has  morgan sindall group plc annual report and accounts 2011
corporate governance statement
49
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
considered the recommendation of the nominations committee 
on the composition of the board it has also considered the  
formal performance evaluation described below of the board’s 
performance and that of individual directors following such 
performance evaluation the board believes in particular that the 
performance of all of the nonexecutive directors continues to be 
effective and that they continue to show commitment to their 
respective roles
description of board activities
the role of the board is to set the strategic direction of the group 
to review all signiﬁcant aspects of the group’s activities to 
supervise the executive management and to review the overall 
system of internal control and risk management there is a formal 
schedule of matters that are speciﬁcally reserved to the board 
which includes the approval of the group’s strategic plans the 
annual budget signiﬁcant capital expenditure and investment 
proposals major projects acquisitions and disposals internal 
control arrangements and the annual and half year results other 
speciﬁc responsibilities are delegated to the board committees 
described below and under the group’s delegated authorities 
a formal agenda for each scheduled meeting is agreed with the 
chairman and is circulated in advance of the meeting to allow time 
for proper consideration together with relevant papers including 
key strategic operational and ﬁnancial information
attendance of individual directors during 2011 at scheduled  
board meetings and meetings of the remuneration audit and 
nominations committees are set out below
  remuneration audit nominations 
 board committee committee committee
total number of meetings 10 2 3 1
john morgan 10 – – 1 
paul smith 10 – – – 
david mulligan 10 – – – 
paul whitmore 10 – – – 
gill barr 10 2 3 1 
patrick de smedt 10 1 2 1 
geraldine gallacher 10 2 – 1 
adrian martin 10 2 3 1 
simon gulliford 10 – – 1
nonattendance by directors at committee meetings was due  
to conﬂicting commitments where possible papers were read  
in advance and comments passed to the chairman prior to  
the meeting 
in addition to the formal meetings the board met on several 
occasions to consider and debate speciﬁc strategic issues 
affecting the group and potential investment proposals with 
input where relevant from senior management the board 
meeting at which the annual group budget was approved  
was preceded by meetings with divisional management
training development and advice is provided
newly appointed directors receive a full induction including a 
detailed information pack visits to the group’s operations and 
meetings with senior divisional management training on the role 
and responsibilities of directors is offered on appointment and 
subsequently as necessary other training needs for the directors 
are kept under review during the year with brieﬁngs on new 
legislation affecting them such as the bribery act 2010 being 
provided by the general counsel and company secretary 
the nonexecutive directors update their knowledge of and 
familiarity with the group by regular visits to its operations  
there are agreed procedures by which directors are able to take 
independent professional advice at the expense of the company 
on matters relating to their duties the directors also have access 
to the advice and services of the general counsel and company 
secretary who attends all board and committee meetings
board evaluated its performance
the board has noted the code requirement for external 
facilitation of evaluations for ftse 350 companies at least every 
three years it decided this year however to continue to adopt  
an internal process to evaluate the board’s performance and that 
of the committees and individual directors during the year this 
process took the form of an assessment form requiring each 
director to provide a rating against a series of statements 
designed to provoke consideration of the effectiveness of the 
board in terms of its behaviours both those of the board as a 
whole and the individual contribution of directors and the 
outcomes of its behaviours on the group’s performance
following receipt of each director’s response to the assessment 
form one to one meetings were held between the chairman  
and each director and in the case of the chairman’s evaluation 
between himself and the senior independent director the 
responses to the assessment form were collated by the general 
counsel and company secretary and presented at a subsequent 
board meeting for discussion leading to a number of agreed 
actions for the forthcoming year 
board committees
the board has established three committees the audit 
remuneration and nominations committees each committee  
has terms of reference approved by the board setting out its 
authorities and responsibilities copies of the terms of reference 
are available on the company’s website
audit committee 
members
adrian martin chair 
gill barr 
patrick de smedt 
all committee members are independent nonexecutive directors 
in accordance with the code biographical details of each 
member of the committee are set out on page 47 the board is 
satisﬁed that the chair of the committee adrian martin who is a 
fellow of the institute of chartered accountants in england and 
wales and formerly a partner in bdo stoy hayward has the 
recent and relevant ﬁnancial experience required to fulﬁl the role 
simon gulliford will take gill barr’s place on the committee after 
the forthcoming agm
responsibilities 
  to ensure that the interests of shareholders are properly 
protected in relation to ﬁnancial reporting and internal control
  to monitor the integrity of the ﬁnancial statements and  
related information of the company and where practicable 
any formal announcements relating to the company’s  
ﬁnancial performance reviewing signiﬁcant ﬁnancial reporting 
judgments contained in them morgan sindall group plc annual report and accounts 2011
corporate governance statement
50
corporate governance statement
continued
  to review the company’s internal ﬁnancial controls
  to approve the appointment and replacement of the group 
head of audit and assurance and to monitor and review the 
effectiveness of the company’s internal audit function
  to make recommendations to the board regarding the 
appointment reappointment and removal of the external 
auditors and to approve their remuneration and terms of 
engagement
  to review and monitor the external auditors’ independence and 
objectivity and the effectiveness of the audit process
  to apply the board’s policy on the engagement of the external 
auditors to supply nonaudit services with the objective of 
ensuring that the provision of such services does not impair 
their independence or objectivity
  to review the company’s procedures for detecting fraud and 
the adequacy of its systems and controls for the prevention  
of bribery
  to review the company’s procedures for raising concerns
activities 
the committee held three scheduled meetings during the  
year the ﬁrst took place prior to the announcement of the 
company’s results for 2010 and approval of the annual report  
the second prior to the announcement of its half year results  
and the third before commencement of the audit for 2011 senior 
representatives from the external auditors the ﬁnance director 
and the group head of audit and assurance were invited to attend 
each of these meetings the committee also met privately with  
the external auditors and the group head of audit and assurance 
the main purpose of the meetings was to review the scope and 
results of the audit and the effectiveness of the external audit 
process to monitor the integrity of the annual and half year 
ﬁnancial statements and to discuss with the external auditors their 
overall work plan for the forthcoming audit at each meeting the 
committee reviewed reports from the group head of audit and 
assurance on the results of reviews carried out by the internal 
audit team further details of the internal audit function are set  
out under internal controls below
in addition during the year the committee considered the impact 
of the bribery act 2010 and monitored the risk assessments 
carried out by the group and the adequacy of procedures in  
place to ensure compliance
at each meeting the committee also reviewed a summary of  
calls received by the external call line introduced in 2010 for raising 
concerns together with the results of investigations into such calls 
and any follow up actions any signiﬁcant matter arising from a 
call would be brought to the attention of the committee without 
delay however no signiﬁcant matters arose during the year 
the chairman of the audit committee reports to the full board on 
matters of signiﬁcance arising at meetings of the committee 
external auditors
monitoring the independence and objectivity of the  
external auditors
to fulﬁl its obligations the committee reviewed the external 
auditors’ presentation of their policies and safeguards to ensure 
their continued independence within the meaning of all regulatory 
and professional requirements and to ensure that the objectivity 
of the audit engagement partner and audit staff had not been 
impaired this included details of changes in external audit 
partners in the audit plan in accordance with the external auditors’ 
policy on rotating audit executives in particular the appointment 
of a new lead audit engagement partner to take effect in 2012 
those policies and safeguards together with the company’s own 
policy on engaging the external auditors for nonaudit work 
enabled the committee to conﬁrm that it was satisﬁed with 
deloitte llp’s continued independence and objectivity 
assessing the effectiveness of the external auditors
as part of its responsibility for assessing the effectiveness of the 
external audit the committee discussed the external audit plan at 
the audit committee meeting held in november at the meeting 
prior to the announcement of the preliminary results it reviewed 
the external auditors’ fulﬁlment of the agreed audit plan and any 
major issues highlighted as part of the external audit
reviewing the use of the external auditors for nonaudit work
the company’s policy on the engagement of the external auditors 
for nonaudit related services provides that where the fees for 
such services would exceed either an absolute limit or a speciﬁed 
proportion of the audit fee they should be referred to the 
committee for approval where fees fall below the threshold  
they have to be approved by the ﬁnance director no nonaudit 
services to the company provided by deloitte llp in 2011 required 
the approval of the committee the fees for nonaudit services 
during the year are set out in note 2 to the consolidated ﬁnancial 
statements on page 83 these represented approximately 14  
of the audit fee and comprised advice to one of the divisions  
on its ﬁnance and reporting function the committee has 
reviewed the nature of the work and level of fees for these 
services and concluded that this has not affected deloitte  
llp’s objectivity or independence
reappointment of external auditors
the committee considers the reappointment of the external 
auditors each year and makes a recommendation to the board 
the committee has satisﬁed itself that deloitte llp the external 
auditors remains independent and effective the committee has 
recommended to the board that deloitte llp be reappointed 
there are no contractual obligations which restrict the 
committee’s choice of external auditors morgan sindall group plc annual report and accounts 2011
corporate governance statement
51
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
remuneration committee
members
gill barr chair 
patrick de smedt  
geraldine gallacher  
adrian martin 
responsibilities 
  to set all elements of remuneration and any compensation 
payments for executive directors and the executive chairman
  to monitor the structure and level of remuneration for divisional 
managing directors
  to ensure that the requirements for disclosure of directors’ 
remuneration are fulﬁlled
  to select remuneration consultants to advise the committee
activities 
the activities of the committee during the year are set out in the 
separate remuneration report on pages 53 to 61 
nominations committee
members
john morgan chair 
gill barr 
patrick de smedt  
geraldine gallacher  
adrian martin  
simon gulliford
responsibilities 
  to review the structure size and composition of the board
  to make recommendations to the board for any changes 
considered necessary
  to approve the description of the role and capabilities required 
for a particular appointment
  to ensure suitable candidates are identiﬁed having due regard 
for the beneﬁts of diversity on the board including gender and 
recommended for appointment to the board 
activities
the nominations committee met formally during the year to 
review the structure size and composition of the board having 
regard to gill barr’s decision to step down from the board at the 
2012 agm its recommendation to the board was that no further 
changes were required at this time however the matter would be 
kept under review
company welcomes regular dialogue with all its shareholders 
the executive directors undertake a programme of regular 
communication with institutional shareholders and with analysts 
covering the company’s activities in particular presentations are 
made to institutional investors and analysts following the 
announcements of the preliminary and half year results written 
feedback from these meetings and presentations is distributed  
to all members of the board the senior independent director 
meets from time to time with major shareholders and the other 
nonexecutive directors are also available to meet with them to 
listen to their views
the company encourages all shareholders to use the agm as an 
opportunity for effective communication with the company all of 
the directors attended the agm held in 2011 details of proxy votes 
submitted for each resolution at general meetings including proxy 
directions to withhold votes are published on the company’s 
website 
internal controls 
the board acknowledges that it has overall responsibility for  
the group’s system of internal control and for reviewing its 
effectiveness the internal control system is designed to  
manage rather than eliminate the risk of failure to achieve  
certain business objectives due to circumstances which may 
reasonably be foreseen it can only provide reasonable but not 
absolute assurance against material misstatement or loss the 
system of internal control which includes ﬁnancial operational 
and compliance controls is based on a process of identifying 
evaluating and managing risks it accords with the guidance  
in the turnbull report and was in place for the year under  
review and up to the date of approval of this report
the key features of the group’s system of internal control  
are as follows
group structure
the group’s operating structure comprises ﬁve operating 
divisions each with its own management board which is given 
authority and responsibility for managing its division within a 
framework of overarching group policies reporting lines and 
detailed delegated authorities which ensure that decisions and 
approvals are made at the appropriate level whilst responsibility 
for managing each division is delegated to the individual divisional 
management board as far as practicable responsibility for certain 
of the group’s key functions including treasury internal audit 
pensions and insurance is retained at the company level 
robust ﬁnancial reporting system
the board recognises that an essential part of the responsibility 
for running a business is the effective safeguarding of assets  
the proper recognition of liabilities and the accurate reporting  
of proﬁts the company has in place internal control and risk 
management systems in relation to the company’s ﬁnancial 
reporting process and the group’s process for preparation of 
consolidated accounts the group has a comprehensive 
budgeting and forecasting system which is regularly reviewed  
and updated together with a management reporting system 
established in each division for monthly reporting to the board  
in addition the internal audit plan for the year includes speciﬁc 
ﬁnancial reviews to validate the integrity of the divisions’ 
management accounts morgan sindall group plc annual report and accounts 2011
corporate governance statement
52
corporate governance statement
continued
scrutiny of investment and capital expenditure 
there are detailed procedures and deﬁned levels of authority in 
relation to corporate transactions investment capital expenditure 
signiﬁcant cost commitments and asset disposals with approvals 
required from the board the executive directors or divisional 
boards depending on the value andor nature of the investment 
or contract 
detailed review of tenders and project selection
individual tenders or projects are subject to detailed review with 
approvals required at relevant levels and at various stages from 
commencement of the bidding process through to contract 
award as part of this process the ﬁnancial standing of both 
clients and key subcontractors is assessed
robust contract controls
robust procedures exist to manage the ongoing risks associated 
with contracts with monthly reviews at an appropriate level of 
each contract’s performance covering both ﬁnancial and 
operational issues
continual monitoring of working capital 
the group continually monitors current and forecast cash and 
working capital balances through a regime of daily and monthly 
reporting
health safety and environmental issues
the group has well established safety systems including site  
visits and regular training and updates monthly monitoring and 
reporting to the board includes a report from the commercial 
director on the group’s performance in relation to health and 
safety matters and environmental compliance further details  
are included in the chief executive’s review on page 10 and in  
the sustainability review on pages 42 to 44
risk management
the board has reserved for itself speciﬁc responsibility for  
the formulation of the risk management strategy of the group  
a formal process is in place through which the group identiﬁes 
the signiﬁcant risks attached to its strategy and objectives 
conﬁrms the control strategy for each risk identiﬁes the root 
cause and appropriate treatment for each including the relevant 
internal controls and actions required this process includes the 
identiﬁcation and assessment of the key sustainability risks facing 
the business which include environmental social and governance 
risks internal control and risk management systems are 
embedded in the operations of the divisions a consolidated 
report of each of the divisional risk reviews together with risks 
identiﬁed at group level is compiled in a group risk register which 
is updated and reviewed by the board twice yearly this process 
ensures that adequate information in relation to risk management 
matters including environmental social and governance matters 
is available to the board and the board is fully aware of the 
signiﬁcance of these matters to the business of the group the 
principal risks identiﬁed as facing the group are highlighted in the 
business review on pages 18 to 21 in addition to the standing risk 
register review process the board devotes time during some of 
the scheduled board meetings to considering the commercial 
issues which at the time represent the greatest risks to the 
achievement of the group’s objectives and the mitigating actions 
in place to address these risks 
internal audit 
the group head of audit and assurance is responsible for 
managing the internal audit function overseeing the divisional 
heads of internal audit and assisting with risk management 
practices internal audit and assurance work carried out during the 
year included operational project and ﬁnancial reviews across the 
group the results of these reviews were recorded in audit reports 
and presented to the audit committee the status of agreed 
management actions to address identiﬁed operational 
weaknesses is actively tracked until implementation 
the group head of audit and assurance reports to the board 
monthly on a range of performance metrics including the current 
status of agreed audit actions and progress against the annual 
audit plan he also meets separately with the chair of the audit 
committee at least once a year
the internal audit process is supplemented by a rolling 
programme of peer group reviews within the divisions which 
assist in the professional development of the individual staff 
concerned whilst at the same time providing a mechanism for  
the crossfertilisation of ideas and best practice throughout each 
division these reviews are overseen by the divisional heads of 
internal audit and tracking of agreed management actions is 
included within the overall internal audit process 
board review of effectiveness of internal controls
the board has conducted a review of the effectiveness of the 
system of internal controls for the year ended 31 december 2011 
and for the period to the date of this report the process included 
a formal review conducted by the board of the group risk register 
referred to under risk management above as well as a review of 
the results of internal audit work and the overall effectiveness of 
the process morgan sindall group plc annual report and accounts 2011
remuneration report
53
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
remuneration report
executive pay is an area of continual development reﬂecting the 
challenges of the current economic climate the remuneration 
committee stays fully abreast of the latest developments and 
issues and takes an increasingly broad perspective when looking 
at how we pay our most senior executives we remain committed 
to ensuring that we have highly talented senior management to 
maximise shareholder value and that we do not pay more than  
is necessary to attract and retain those executives to lead  
the company we believe it is critical that good performance 
delivered with a view to longterm sustainable growth is  
rewarded fairly and that there is no scope to reward failure
2011 was a year of continued challenges for the uk construction 
market in the face of difficult economic conditions and ongoing 
constraints in public spending against this background the 
group has delivered a very resilient ﬁnancial performance for  
the year ended 31 december 2011 revenue increased in 2011 and 
although proﬁt before tax amortisation and nonrecurring items 
was lower than in 2010 this was anticipated given the competitive 
market environment in which the group has been operating and 
in fact exceeded the board’s and market consensus expectations 
and this is reﬂected in the annual bonus outturn for the executive 
directors being 8515 of maximum however the adjusted 
earnings per share targets under the long term incentive awards 
made in 2009 measuring performance in 2011 were not met  
and no awards will vest this year 
turning to our policy for 2012 with the challenging market 
conditions expected to continue we remain committed to 
restraining our ﬁxed costs to achieve this we have frozen the 
salary rate for the chairman and chief executive for the third  
time in four years and for the ﬁnance director and commercial 
director determined that any increases should be no higher than 
the broad average of the workforce generally the annual bonus 
will operate on similar terms to 2011 based on stretching proﬁt 
performance targets for the 2012 ﬁnancial year
the main focus of the committee’s attention during 2011 has been 
a review of our future policy for longterm incentives this has 
changed as follows
  we have simpliﬁed the policy by removing the choice given to 
the executive to receive their award in the form of share options 
or performance shares so that the award structure will be 
performance shares only
  subject to achieving shareholders’ approval to an amendment 
to the individual limit in the executive remuneration plan the 
normal annual grant level will be increased from 75 to 100  
of salary which is in line but no higher than midmarket levels
  instead of an award being determined solely by adjusted eps 
performance a total shareholder return performance condition 
has been added for one half of the award comparing our 
longterm stock market returns to other uk construction 
businesses 
  the remaining one half of the award is based on a stretching 
range of eps performance conditions which have been made 
more challenging at the top end of the range reﬂecting the 
higher award potential
to improve the risk proﬁle of the policy further we have made  
two further amendments 
  an incentive recovery provision has been added both to the 
annual bonus and executive remuneration plan this provides 
the company with the power to recover erroneous payments 
of annual bonus or longterm incentive awards 
  a shareholding guideline policy has been introduced  
which requires all executive directors to build and maintain  
a shareholding worth no less than 100 of their base salary  
this policy has the additional beneﬁt of improving alignment  
of interest between executives and shareholders
we have consulted with our major institutional shareholders on 
the revised policy and made certain changes in response
finally having completed seven years service as a nonexecutive 
director i have announced my intention to retire from the board  
at this year’s agm between now and the agm there will be an 
orderly handover to patrick de smedt who has served on this 
committee for two years and has experience of chairing 
remuneration committees at other uk listed companies
gill barr
chair of the remuneration committee morgan sindall group plc annual report and accounts 2011
remuneration report
54
remuneration report
continued
this report has been prepared by the remuneration committee 
‘the committee’ on behalf of the board in accordance with 
schedule 8 to the large and mediumsized companies and 
groups accounts and reports regulations 2008 this report 
also meets the relevant requirements of the listing rules of the 
financial services authority and the uk corporate governance 
code ‘the code’ a resolution to approve the report will be 
proposed at the agm to be held on 3 may 2012
the companies act 2006 ‘the act’ requires the auditors to 
report to the company’s members on certain parts of the 
remuneration report and to state whether in their opinion those 
parts of the report have been properly prepared in accordance 
with the act the report has therefore been divided into separate 
sections for unaudited and audited information
unaudited information
members and activities of the committee
the members of the committee during 2011 were gill barr chair 
geraldine gallacher adrian martin and patrick de smedt all 
members during the year were independent nonexecutive 
directors patrick de smedt will chair the committee after  
gill barr retires from the board at the forthcoming agm 
the committee met on two occasions during the year and 
attendance at meetings is disclosed in the corporate governance 
statement on page 49 additional consultation between 
committee members and between the chair of the committee and 
the chief executive were held as necessary to reﬁne the changes 
to the longterm incentive arrangements discussed below 
responsibilities of the committee
the committee is responsible for determining and agreeing with 
the board the broad policy for the remuneration of the executive 
directors including the executive chairman and it sets their 
salaries and remuneration packages in addition the committee 
monitors the structure and level of remuneration for other senior 
executives in the group and is aware of pay and conditions in the 
workforce generally
external advice received
during the year the committee received advice from new bridge 
street ‘nbs’ in relation to its consideration of the structure of the 
executive directors’ remuneration for 2012 the committee also 
consulted the chief executive and the ﬁnance director but in each 
case not in relation to their own remuneration nbs provided 
advice to the company on accounting for share awards but 
provided no other material services to the company or the group 
the committee’s approach to executive directors’ remuneration
the general principles underlying the committee’s approach to 
developing remuneration packages for the executive directors are
  to attract retain and motivate the best possible person for  
each position without paying more than is necessary
  that the remuneration packages should be perceived as simple 
and fair and therefore should be valued by participants
  to ensure that the ﬁxed element of remuneration salary 
pension and other beneﬁts is determined in line with market 
rates taking account of individual performance and experience 
and that a signiﬁcant proportion of the total remuneration 
package is determined by the company’s performance
  to recognise the importance of rewarding over performance 
but not under performance in both the short and longterm
  to balance performance pay between the achievement of 
ﬁnancial performance objectives and delivering sustainable 
stock market outperformance with ﬁnancial performance 
creating a clear line of sight for individuals between 
performance and reward and providing a focus on sustained 
improvements in proﬁtability whilst total shareholder return 
‘tsr’ compared with that of our competitors provides a  
more direct alignment between the interests of executives  
and shareholders
  to calibrate carefully all ﬁnancial and total shareholder return 
performance metrics and associated sliding scale ranges 
carefully to ensure that performance is incrementally rewarded 
and that executives are not inadvertently incentivised to take 
inappropriate business risks including environmental social 
and governance risks
  to provide a signiﬁcant proportion of performance linked pay  
in sharebased form providing an opportunity for executives  
to build signiﬁcant shareholdings in the business subject  
to performance
  to align the interests of executives with those of the company’s 
shareholders
the committee considers pay and employment conditions of 
employees elsewhere in the group when determining executive 
directors’ remuneration
the committee takes account of remuneration levels offered to 
other senior executives within the group as well as pay awards 
affecting group employees when determining policy in relation  
to executive directors at the meeting to determine the executive 
directors’ remuneration structure and levels for 2012 the 
committee reviewed a detailed breakdown of the compensation 
received by senior executives below board level and at divisional 
board and business unit level to ensure that there is a coherent 
approach at all senior management levels it also reviewed general 
employee pay awards for 2012 operating throughout the group 
fixed versus performance related remuneration
a signiﬁcant proportion of the package is subject to performance 
related elements and this proportion will increase if the changes  
to the longterm incentive arrangements described below are 
approved by shareholders 
the chart following shows that assuming the changes are 
approved by shareholders just under half of the value of the 
package at a broadly target level of performance will comprise 
performance related elements whilst at a maximum level of 
reward assuming a maximum bonus and full vesting of the plan 
awards more than 60 of the total remuneration will comprise 
performance related elements  morgan sindall group plc annual report and accounts 2011
remuneration report
55
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
chart showing proportionate breakdown of directors’ 
remuneration at target and maximum performance
longterm incentive
annual bonus
pension
salary
t arget
maximum
20 40 60 80 100 0
percentage of maximum remuneration 
addition of incentive recovery provision
to improve the risk proﬁle of the remuneration policy further  
the committee has added an incentive recovery provision to the 
policy this provides the company with the power to reclaim 
overpayments to executive directors under future annual bonus or 
longterm incentive awards in the event of ﬁnancial misstatement 
or error in the calculation of an annual bonus or longterm 
incentive performance condition 
continued restraint in setting base salary levels 
the base salary of individual executive directors is determined  
by the committee prior to the beginning of each year and if 
appropriate in the event of a change in an individual’s position  
or responsibilities a formal benchmarking exercise of executive 
directors’ remuneration is carried out periodically on behalf of  
the committee to ensure that it remains aware of relevant market 
data the committee is aware however of the risk of an upward 
ratchet in remuneration levels through the use of comparative  
pay surveys
at its meeting in november 2011 the committee considered the 
budgeted level of increases in base salary for senior executives 
below board level and the workforce generally whilst the average 
budgeted increase across the group was c3 not all divisional 
management has received an increase in base salary for 2012 
having regard to the above and to the challenging market 
conditions expected to continue in 2012 the committee 
determined that david mulligan and paul whitmore should each 
receive an increase in their base salaries of c36 but that the 
salaries of john morgan and paul smith should not be increased 
accordingly base salaries for the executive directors for 2012 will 
be as follows
 from 1012012 from 1012011 increase
john morgan £438000 £438000 0  
paul smith £515000 £515000 0 
david mulligan £315000 £304000 362 
paul whitmore £311000 £300000 367
pension arrangements
the company makes contributions equivalent to 10 of base 
salary in the case of david mulligan to the morgan sindall 
retirement beneﬁts plan ‘the plan’ and in the case of  
john morgan and paul whitmore to their individual personal 
pension plans 
the company ceased contributing to the plan in respect of  
paul smith with effect from 31 march 2011 and as disclosed in  
last year’s report since 1 april 2011 it has paid paul smith a cash 
allowance equal to 10 of his base salary in lieu of any pension 
contribution less half of the consequent additional national 
insurance contribution ‘nic’ cost to the company 
the company operates a salary exchange process that allows all 
employees who are members of the plan ﬂexibility in setting the 
proportion in which salary and bonus is distributed between cash 
payments and additional pension contributions where additional 
pension contributions are made through the salary exchange 
process the company enhances the contributions by half of the 
saved employer’s nic 
other beneﬁts 
the executive directors receive certain other beneﬁts principally  
a car allowance private medical insurance permanent health 
insurance and life assurance
challenging targets for annual bonus
for the 2012 annual bonus plan the committee has retained  
a performance condition based on a proﬁt before tax and 
amortisation ‘pbta’ target range set relative to the group’s 
budget this has the beneﬁt of transparency and simplicity and 
encourages the executive directors to focus on the overall 
ﬁnancial performance of the group other performance measures 
have been considered by the committee but as most of the 
company’s annual ﬁnancial performance is reﬂected in its pbta 
the use of other ﬁnancial and nonﬁnancial measures was 
considered inappropriate due to the additional complexity and  
in the case of the latter the potential lack of objectivity around 
target measurement 
the committee has sought to structure the bonus with an 
appropriate sliding scale range around a challenging target for 
executives recognising however that the target has to be realistic 
in order to serve as a proper incentive and needs to take into 
account the difficult economic environment in which the 
company continues to operate
the maximum potential annual cash bonus for executive directors 
for 2012 is unchanged from 2011 at 100 of base salary 
longterm incentives
the group’s current longterm incentive arrangement for senior 
executives is the morgan sindall executive remuneration plan 
2005 ‘the plan’ the plan was approved by shareholders in april 
2005 during the year the committee reviewed the policy under 
the plan and has made a number of changes these are 
highlighted in the description of our policy overleaf morgan sindall group plc annual report and accounts 2011
remuneration report
56
remuneration report
continued
structure of plan awards reviewed and simpliﬁed
for a number of years executives have been given the choice at 
the time of grant of receiving their awards either in the form of 
performance shares or by electing to receive market price share 
options to replace some or all of their performance shares at a 
rate of four share options for every one performance share to 
simplify the policy the committee has determined that the choice 
of taking the award in share options should be removed 
accordingly awards will take the form of performance shares only 
ie a conditional award of shares vesting after three years subject 
to continued employment and the achievement of challenging 
performance conditions
award levels reviewed and increased for 2012
since 2005 when the plan was introduced executive directors 
have been given the choice of receiving awards up to a maximum 
limit of 75 of salary for performance shares or 300 of salary for 
market price share options the committee has now determined 
that the normal award level for performance shares should be 
increased to 100 of base salary
this increase is subject to shareholder approval at the 
forthcoming agm a resolution will be proposed to increase the 
maximum limit to 150 of base salary for the foreseeable future 
at executive director level the committee plans to make awards at 
a 100 of base salary level but this higher limit has been included 
for future ﬂexibility in exceptional circumstances such as 
recruitment or acute retention
this increase is considered appropriate so as to ensure that the 
overall package remains competitive with our peers and to ensure 
that there is an appropriate focus on the achievement of long
term performance metrics upon which longterm incentive 
awards are based
performance conditions for 2012 awards reviewed and a new 
approach proposed 
the committee continues to believe that longterm incentives 
should provide a focus on maximising sustainable longterm 
proﬁtability by the use of a performance condition based on 
earnings per share before amortisation of intangible assets and 
nonrecurring items ‘adjusted eps’ the company’s adjusted 
eps performance for each annual award is measured over a single 
three year period
the committee has however determined that a more rounded 
assessment of longterm performance would be provided if in 
addition to adjusted eps there is a performance condition based 
directly on the level of shareholder value created accordingly for 
the 2012 awards 50 of an award will be based on an adjusted 
eps performance condition and the remaining 50 will be based 
on a condition measuring the company’s total shareholder return 
compared with eight of our uk listed peers over a three year 
period total shareholder return measures the level of return made 
by an investor in morgan sindall group plc shares based on share 
price and dividend accordingly this provides a direct measure of 
our stock market performance
eps performance condition
performance will be assessed by reference to the adjusted eps 
performance in 2014 and all points in the target range have been 
increased in comparison to last year’s award in addition the entire 
adjusted eps range represents growth from the 31 december 2011 
year end ﬁgure at a time when little or no growth is forecast in the 
uk construction industry in what remain highly challenging and 
uncertain market conditions these targets are considered an 
appropriate incentive to preserve and maximise longterm 
proﬁtability within an appropriate risk framework thereby 
providing a good link with the strategy of the business in setting 
this range the committee also recognises that zero vesting at the 
eps performance threshold is tougher than market norms and 
that there is a signiﬁcant upside stretch
the eps performance targets will be as follows
adjusted eps performance vesting percentage 
for the year ending 31 december 2014  for 50 of the award
less than 80p 0
at 919p  50
between 80p and 919p  pro rata on a straightline basis
106p or more 100
between 919p and 106p pro rata on a straightline basis
this vesting range is shown graphically below
70 75 80 85 90 95 100 105 110
2014 adjusted eps pence
no vesting
below 80p
50 vesting at 919p
100 vesting above 106p
percentage of half of award vesting
0
25
50
75
100
the committee will continue to set targets for future awards 
appropriate to the economic outlook prevailing at the time 
ensuring that such targets remain challenging in the 
circumstances whilst remaining realistic enough to motivate  
and incentivise management the committee will also bear  
in mind the need to avoid incentive arrangements which 
encourage management to take undue business risks including 
environmental social and governance risks morgan sindall group plc annual report and accounts 2011
remuneration report
57
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
tsr performance condition
the target range for the total shareholder return performance 
condition will be as follows 
tsr performance compared  vesting percentage 
with comparator group for 50 of the award
lower than median 0
median 25
between median 
and 2nd position pro rata on a straightline basis
2nd position or higher 100
the tsr comparator group comprises balfour beatty plc carillion 
plc costain group plc galliford try plc interior services group 
plc interserve plc keller group plc and kier group plc
this vesting range is shown graphically below
median 2nd
morgan sindall’s position relative to the comparator group
for this purpose median out of eight companies is deﬁned as the tsr value 
half way between the companies ranked at four and ﬁve
no vesting
below median
vesting at median 25
percentage of half of award vesting
0
20
40
60
80
100
40 vesting at 4th position
70 vesting at 3rd position
vesting at 2nd 
position or
better 100
in addition to the vesting being determined by the sliding scale  
of tsr performance shown above there will be two additional 
conditions governing the level of vesting speciﬁcally the result 
indicated by the tsr performance condition may be scaled back 
potentially to zero in the event that the committee considers 
that
  ﬁnancial performance has been unsatisfactory andor 
  the outcome has been distorted due to the tsr for morgan 
sindall or any comparator company being considered 
abnormal
introduction of formal shareholding guidelines
through participation in performance linked sharebased plans 
there is strong encouragement for senior executives to build and 
maintain a signiﬁcant shareholding in the business
however the committee considers that the policy could be 
improved further if this policy is operated on a more formalised 
basis accordingly the committee has adopted a formal policy 
requiring all executive directors to build and maintain a 
shareholding in the company equivalent to 100 of base salary 
until such time as this threshold is achieved there is a requirement 
for executives to retain no less than 50 of the net of tax value of 
vested plan awards
other share plans
the company currently operates two other share plans for  
its employees
  the morgan sindall sharesave plan in which executive  
directors are permitted to participate on the same terms  
as other employees
  the morgan sindall employee share option plan 2007  
‘the 2007 scheme’ under which executive directors  
do not receive awards
dilution and share usage under employee share plans
shares required for the 2007 scheme are satisﬁed by shares 
purchased in the market via the company’s employee beneﬁt 
trust and shares for the 2005 plan may be satisﬁed using either 
new issue shares or market purchased shares the company’s 
present intention is to use market purchase shares to satisfy 
awards under the plan however it retains the ability to use new 
issue shares instead and may decide to do so up to the dilution 
limits recommended by the association of british insurers 10  
of issued ordinary share capital for all employee share plans over  
a 10 year period and within this limit no more than 5 of issued 
ordinary share capital for executive or discretionary share plans 
the outstanding level of dilution against these limits equates to 
68 of the current issued ordinary share capital under all 
employee share plans of which 19 relates to discretionary  
share plans 
separately the employee beneﬁt trust currently holds 766714 
shares which may be used to satisfy awards morgan sindall group plc annual report and accounts 2011
remuneration report
58
remuneration report
continued
five year performance graph 
the graph below shows the tsr for the company’s shares over 
the last ﬁve ﬁnancial years it shows the value to 31 december 2011 
of £100 invested in morgan sindall group plc on 1 january 2007 
compared with the value of £100 invested in the ftse all share 
excluding investment trusts total return index and the ftse  
all share construction and materials sector total return index  
the other points plotted are the values at intervening ﬁnancial 
year ends
31 dec
2006
31 dec
2007
31 dec
2008
31 dec
2009
31 dec
2010
31 dec
2011
ftse all share index construction and materials sector
ftse all share index  excluding investment trusts 
morgan sindall group plc
source thomson reuters
value £
0
20
40
60
80
100
120
total shareholder return
 
service contracts
john morgan paul smith and david mulligan have all entered  
into new service agreements updated to bring them into line  
with current best practice and to reﬂect more closely the terms  
in place for paul whitmore all executive directors’ service 
agreements are terminable on 12 months’ notice in circumstances 
of termination on notice except in cases of removal for cause the 
approach taken by the committee will be to determine having 
regard to the particular circumstances of the case an equitable 
compensation package which takes into account the departing 
director’s obligations to mitigate his loss and avoids rewarding 
poor performance the committee has discretion to require notice 
to be worked or to make payment in lieu of notice or to place the 
director on garden leave for the notice period
in case of payment in lieu or garden leave base salary employer 
pension contributions and employee beneﬁts other than bonus 
will be paid for the period of notice served on garden leave or  
paid in lieu bonus will be paid in accordance with the rules of the 
scheme for the period of the bonus scheme year actually worked 
by the director there is no provision for an amount in lieu of  
bonus to be payable for any part of the notice period not worked 
entitlement to shares or share options under the longterm 
incentive schemes will be determined in accordance with the rules 
of the scheme which comply with abi guidelines there is no 
speciﬁc provision for compensation on early termination or loss  
of office due to a takeover bid
the dates of the executive directors’ contracts are
john morgan 20 february 2012 
paul smith 20 february 2012 
david mulligan 20 february 2012 
paul whitmore 21 march 2000
at the discretion of the board executive directors are allowed to 
act as nonexecutive directors of other companies and retain any 
fees relating to those posts none of the executive directors is 
currently receiving fees for nonexecutive positions with other 
companies
nonexecutive directors’ terms of engagement
the dates of the terms of engagement of the nonexecutive 
directors are
gill barr 11 august 2004 
patrick de smedt  26 november 2009 
geraldine gallacher 16 august 2007 
adrian martin 28 november 2008 
simon gulliford 24 february 2010
all nonexecutive directors have speciﬁc terms of engagement 
being an initial period of three years which thereafter may be 
extended by mutual consent subject always to the requirements 
for reelection and the act their remuneration is determined by 
the board within the limits set by the articles and is based on 
surveys together with external advice as appropriate having 
been increased last year the fees for nonexecutive directors  
for 2012 will remain unchanged the basic fee will therefore be 
£41200 per annum whilst the chair of the audit committee will 
receive an additional £7500 per annum and the chair of the 
remuneration committee an additional £6000 per annum 
nonexecutive directors receive no other beneﬁts and do not 
participate in shortterm or longterm reward schemes 59
morgan sindall group plc annual report and accounts 2011
remuneration report
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
audited information
directors’ emoluments
       2011 2010 
       gains on gains on 
       amounts amounts 
       vesting vesting 
   money    under under 
   purchase    longterm longterm 
 feesbasic  pension annual cash total total incentive incentive 
 salary beneﬁts contributions bonuses
1
 2011 2010
3
 schemes schemes 
name of director £’000s £’000s  £’000s £’000s £’000s £’000s £’000s £’000s
executive 
john morgan 438 22 42 373 875 913 – – 
paul smith 515 22  49
2
 439 1025 1073 – 23 
david mulligan 304 20 33 259 616 638 – 11 
paul whitmore 300 20 30 255 605 585 – 24
 1557 84 154 1326 3121 3209 – 58
nonexecutive 
gill barr 47 – – – 47 45 – – 
patrick de smedt 41 – – – 41 40 – – 
geraldine gallacher 41 – – – 41 40 – – 
adrian martin 49 – – – 49 45 – – 
simon gulliford 41 – – – 41 33 – – 
jon walden
4
 – – – – – 16 – –
 219 – – – 219 219 – –
total 1776 84 154 1326 3340 3428 – 58
1
  group pbta in 2011 of £439m resulted in the executive directors becoming entitled to 8515 of the maximum cash bonus  
the maximum cash bonus required pbta of £448m and the threshold pbta was £378m 
2
  the cash allowance paid to paul smith in lieu of pension contribution since april 2011 is shown in the column headed money purchase 
pension contributions
3
  the 2010 total ﬁgures have been restated to include the pension contributions that were reported separately last year
4
  jon walden ceased to be a director on 6 may 2010
directors’ interests in shares
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 2011 and 21 february 2012 
    2011 2010 
    no of shares no of shares 
john morgan    4497508 4497508 
paul smith    217915 217915 
david mulligan    24544 24544 
paul whitmore    62840 62840 
gill barr    1013 1013 
geraldine gallacher    7772 7772 
adrian martin    2000 2000 
patrick de smedt    – – 
simon gulliford    – – remuneration report
continued
the 2005 plan 
details of the executive directors’ interests in longterm incentive awards under the 2005 plan as at 31 december 2011 and movements 
during the year are as follows 
performance shares
  no of awards    no of no of awards 
  outstanding no of no of shares outstanding date market 
  as at  shares shares lapsed as at awards price on 
 date of award 1 jan 2011 awarded   vested  march 2011
1
 31 dec 2011 vest  award
paul smith 9042008 18046 – – 18046 – – £1034 
 30032009
2
 32328 – – – 32328 30032012 £561 
 17032010 33784 – – – 33784 17032013 £552 
 30032011 – 58790 – – 58790 30032014 £657
total  84158 58790 – 18046 124902  
david mulligan 9042008 9745 – – 9745 – – £1034 
 30032009
2 
19073 – – – 19073 30032012 £561 
 17032010 19932 – – – 19932 17032013 £552 
 30032011 – 34703 – – 34703 30032014 £657
total  48750 34703 – 9745 73708
paul whitmore 9042008 18046 – – 18046 – – £1034 
 30032009
2
 34914 – – – 34914 30032012 £561 
 17032010 36486 – – – 36486 17032013 £552 
 30032011 – 34247 – – 34247 30032014 £657
total  89446 34247 – 18046 105647  
notes
1
 the threshold performance condition for the performance shares awarded on 9 april 2008 was not met and the awards have lapsed 
2  
the performance condition for the performance shares awarded on 30 march 2009 was tested after the year end and as the 
threshold was not met the awards have lapsed
share options 
     no of 
  no of options no of no of options 
  outstanding  options options outstanding  date from 
  as at granted lapsed as at exercise which 
 date of grant 1 jan 2011  30 mar 2011 9 apr 2011 31 dec 2011 price exercisable
john morgan 20052005 107736 – – 107736 £724 20052008 
 5042006 81016 – – 81016 £1259 5042009 
 9042008 122716 – 122716 – – – 
 30032009 219828 – – 219828 £580 30032012 
 17032010 229728 – – 229728 £555 17032013 
 30032011 – 200000 – 200000 £657 30032014
total  761024 200000 122716 838308
paul smith 20052005 68370 – – 68370 £724 20052008 
 5042006 47656 – – 47656 £1259 5042009 
 9042008 72814 – 72814 – – – 
 30032009 129310 – – 129310 £580 30032012 
 17032010 135136 – – 135136 £555 17032013
total  453286 – 72814 380472 
david mulligan 20052005 35220 – – 35220 £724 20052008 
 5042006 28594 – – 28594 £1259 5042009 
 9042008 38980 – 38980 – – – 
 30032009 76294 – – 76294 £580 30032012 
 17032010 79730 – – 79730 £555 17032013
total  258818 – 38980 219838  
morgan sindall group plc annual report and accounts 2011
remuneration report
60 directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
notes
no options were exercised during the year
 the maximum performance condition for the options granted in 2005 and 2006 was satisﬁed and the options are therefore fully 
exercisable
the threshold performance condition for the options granted on 9 april 2008 was not met and the options lapsed 
the performance condition for options granted on 30 march 2009 was tested after the year end and as the threshold was not met the 
options have lapsed
the awards of performance shares and share options made in 2010 are subject to an absolute adjusted eps performance target with full 
vesting of awards for achieving adjusted eps of 1012p or more for the year ending 31 december 2012 reducing on a sliding scale to 50 
vesting for achieving 810p and reducing on a sliding scale to 0 vesting for achieving 689p performance shares or 770p share 
options the awards of performance shares and share options made in 2011 are subject to an absolute adjusted eps performance 
target with full vesting of awards for achieving adjusted eps of 1022p or more for the year ending 31 december 2013 reducing on a 
sliding scale to 50 vesting for achieving 817p and reducing on a sliding scale to 0 vesting for achieving 695p performance shares 
or 776p share options
the outstanding options detailed above will if not lapsed or exercised earlier lapse ten years from the date of grant
the midmarket price of a share on 31 december 2011 was £594 and the range during the year was £510 to £730
the morgan sindall savings related share option scheme ‘the saye scheme’
the executive directors hold the following options granted under the saye scheme further details of which are given in note 24 on 
page 98
  outstanding  granted lapsed outstanding option  
  as at during the during the as at exercise dates within 
 date of grant 1 jan 2011 year year 31 dec 2011 price which exercisable
john morgan 27092011  – 1814 – 1814  £496 1112014–1052015
total     1814
paul smith 1072008 1338 – – 1338 £702 1092011– 28022012 
 27092011 – 1814 – 1814 £496 1112014–1052015
total     3152
david mulligan 1072008 1338 – – 1338 £702 1092011–28022012  
 27092011 – 1814 – 1814 £496 1112014–1052015
total     3152
paul whitmore 1072008 1338 – – 1338 £702 1092011–28022012  
 27092011 – 1814 – 1814 £496 1112014–1052015
total     3152  
note
no options were exercised during the year
this report was approved by the board and signed on its behalf by
gill barr
chair of the remuneration committee 
21 february 2012 
morgan sindall group plc annual report and accounts 2011
remuneration report
61 morgan sindall group plc annual report and accounts 2011
other statutory and regulatory information
62
other statutory and regulatory information
enhanced business review
the companies act 2006 ‘the act’ requires the company to  
set out in the directors’ report a fair review of the business of the 
group during the ﬁnancial year ended 31 december 2011 and the 
position of the group at the end of the year including but not 
limited to a description of the principal risks and uncertainties 
facing it and analysis using key performance indicators the 
information required to fulﬁl these requirements of the act can  
be found in this governance section of the directors’ report on 
pages 45 to 66 and in the business review section of the directors’ 
report on pages 2 to 44 each of which is incorporated by 
reference into and is deemed to form part of the directors’ 
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 construction and infrastructure affordable 
housing fit out urban regeneration and investments  
the principal subsidiary companies and joint ventures operating  
within this divisional structure are listed in note 14 of the  
company ﬁnancial statements on page 122
results and dividends
the group’s proﬁt before tax for the year amounted to £400m 
2010 £407m 
an interim dividend of 120p 2010 120p per share amounting to 
£51m 2010 £51m was paid on 16 september 2011 the directors 
recommend a ﬁnal dividend for the year of 300p 2010 second 
interim dividend 300p per share amounting to £128m 2010 
£128m payable on 18 may 2012 to shareholders on the register  
at close of business on 27 april 2012 together with the interim 
dividend this makes a total dividend of 420p for the year 2010 
420p 
capital structure
details of the company’s issued share capital together with 
details of the movements in the company’s issued share capital 
during the year are shown in note 8 of the company ﬁnancial 
statements the company’s issued share capital comprises a 
single class of ordinary shares of 5p each ‘shares’ 
at each agm the board seeks authorisation from its shareholders 
to allot shares the directors were granted authority at the agm 
on 5 may 2011 to allot relevant securities up to a nominal amount 
of £107981 that authority will apply until the conclusion of this 
year’s agm and a resolution to renew the authority will be 
proposed at the forthcoming agm as explained further in the 
circular to shareholders accompanying this report
a special resolution will also be proposed to renew the directors’ 
power to make nonpreemptive issues for cash as explained in 
the circular accompanying this report
rights and obligations attaching to shares
subject to applicable statutes shares may be issued with such 
rights and restrictions as the company may by ordinary resolution 
decide or if there is no such resolution or so far as it does not 
make speciﬁc provision as the board as deﬁned in the company’s 
articles of association the ‘articles’ may decide subject to the 
articles the act and other shareholders’ rights unissued shares 
are at the disposal of the board
subject to the act rights attached to any class of shares may  
be varied with the written consent of the holders of not less than 
threefourths in nominal value of the issued shares of that class 
calculated excluding any shares held as treasury shares or with 
the sanction of a special resolution passed at a separate general 
meeting of the holders of those shares 
the rights conferred upon the holders of any shares shall not 
unless otherwise expressly provided in the rights attaching to 
those shares be deemed to be varied by the creation or issue  
of further shares ranking pari passu with them
voting
subject to any other provisions of the articles every member 
present in person or by proxy at a general meeting has upon a 
show of hands one vote and upon a poll one vote for every share 
held by him or her in the case of joint holders of a share the vote 
of the senior who tenders a vote whether in person or by proxy 
shall be accepted to the exclusion of the votes of the other joint 
holders and for this purpose seniority shall be determined by the 
order in which the names stand in the register in respect of the 
joint holding
no member shall be entitled to vote at any general meeting  
in respect of any share held by him or her if any call or other  
sum then payable by him or her in respect of that share remains 
unpaid or if a member has been served with a restriction notice 
as deﬁned in the articles after failure to provide the company 
with information concerning interests in those shares required  
to be provided under the act
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 on 
voting rights
transfer of shares
there are no restrictions on the transfer of securities in the 
company except
  that certain restrictions may from time to time be imposed  
by laws and regulations for example insider trading laws
  pursuant to the listing rules of the financial services authority 
whereby certain employees of the company require its 
approval to deal in the company’s shares morgan sindall group plc annual report and accounts 2011
other statutory and regulatory information
63
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
the company is not aware of any agreements between  
holders of securities that may result in restrictions on the  
transfer of securities
purchase of own shares
at the agm on 5 may 2011 a resolution was passed giving the 
directors authority to make market purchases of its shares up to 
4319247 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 5 august 2012 and a resolution 
to renew the authority will be proposed at the forthcoming agm 
as explained further in the circular to shareholders accompanying 
this report
dividends and distributions
the company may by ordinary resolution from time to time 
declare dividends not exceeding the amount recommended by 
the board subject to the act the board may pay interim 
dividends and also any ﬁxed rate dividend whenever the ﬁnancial 
position of the company in the opinion of the board justiﬁes its 
payment
the board may withhold payment of all or any part of any 
dividends or other monies payable in respect of the company’s 
shares from a person with a 025 interest as deﬁned in the 
articles if such a person has been served with a restriction notice 
as deﬁned in the articles after failure to provide the company 
with information concerning interests in those shares required to 
be provided under the act
rights under employee share schemes
the legis trust limited as trustee of the morgan sindall 
employee beneﬁt trust ‘the trust’ held 18 of the issued share 
capital of the company as at 31 december 2011 on trust for the 
beneﬁt of the employees and former employees of the group  
and their dependents the voting rights in relation to these shares 
are exercised by the trustee and there are no restrictions on the 
exercise of the voting of or the acceptance of any offer relating  
to the shares further details of the shares held by the trust may 
be found in note 24 to the consolidated ﬁnancial statements  
on page 98
appointment and replacement of directors
the directors shall be not less than two and not more than twelve 
in number the company may by ordinary resolution vary the 
minimum andor maximum number of directors directors may  
be appointed by the company by ordinary resolution or by the 
board a director appointed by the board holds office only until 
the next agm of the company and is then eligible for 
reappointment 
at every agm of the company any director who has been 
appointed by the board since the last agm or who held office  
at the time of the two preceding agms and who did not retire  
at either of them shall retire from office and may offer himself for 
reappointment by the members the company may by special 
resolution remove any director before the expiration of his period 
of office the office of a director shall be vacated if i he resigns 
or offers to resign and the board resolves to accept such offer ii 
his resignation is requested by all of the other directors and all of 
the other directors are not less than three in number iii he is or 
has been suffering from mental ill health and the board resolves 
that his office be vacated iv he is absent without the permission 
of the board from meetings of the board whether or not an 
alternate director appointed by him attends for six consecutive 
months and the board resolves that his office is vacated v he 
becomes bankrupt or compounds with his creditors generally vi 
he is prohibited by law from being a director vii he ceases to be 
a director by virtue of the act or viii he is removed from office 
pursuant to the articles 
however at the forthcoming agm of the company to be held on 
3 may 2012 notwithstanding the provisions of the articles each of 
the directors except gill barr who has indicated her intention not 
to seek reelection will offer themselves for reelection in 
accordance with the uk corporate governance code
powers of directors
subject to the articles the act and any directions given by the 
company by special resolution the business of the company will 
be managed by the board who may exercise all the powers of the 
company whether relating to the management of the business or 
not in particular the board may exercise all the powers of the 
company to borrow money to mortgage or charge any of its 
undertaking property assets present and future and uncalled 
capital and to issue debentures and other securities and to give 
security for any debt liability or obligation of the company or of 
any third party
directors
biographical details of the directors of the company as at  
21 february 2012 are set out on pages 46 and 47 
details of directors’ interests including interests in the company’s 
shares are disclosed in the directors’ remuneration report on 
pages 53 to 61
directors’ indemnities
the articles entitle the directors of the company to be 
indemniﬁed to the extent permitted by the act 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 morgan sindall group plc annual report and accounts 2011
other statutory and regulatory information
64
other statutory and regulatory information
continued
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
amendment of articles of association
any amendments to the articles may be made in accordance  
with the provisions of the act by way of special resolution
substantial shareholdings 
as at 21 february 2012 the company had been notiﬁed of the 
following interests in voting rights attaching to the company’s 
shares in accordance with chapter 5 of the disclosure and 
transparency rules
name of holder no of shares  of total
aviva plc 4680684 1083 
john morgan 4497508 1041 
standard life group 3463660 801 
john james clifford lovell 2415273 559  
aberdeen asset management plc 2234219 517 
jpmorgan chase  co 2123287 491 
barclays global investors 1303861 302
research and development
the group undertakes research and development activity in 
creating innovative construction techniques and designs integral 
to the delivery of its projects the direct spending incurred is 
generally not separately identiﬁable as the investment is usually 
contained within project work performed for customers
change of control
the group’s banking facilities which are described in the ﬁnance 
review on page 14 require repayment in the event of a change in 
control the group’s facilities for surety bonding require provision 
of cash collateral for outstanding bonds upon a change of control 
of the company in addition the company’s employee share 
incentive schemes contain provisions whereby upon a change of 
control of the company outstanding options and awards would 
vest and become exercisable subject to the rules of the relevant 
schemes
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 
sustainability
the group is publishing its ﬁrst separate 2011 sustainability report 
this year to coincide with the publication of this report which is 
displayed on the company’s website wwwmorgansindallcom
sustainability details of the group’s sustainability roadmap which 
was launched in 2011 and its six total commitments to drive 
improvement are set out on page 12 of the chief executive’s review 
and in the sustainability review on pages 42 to 44 the 2011 
sustainability report will provide further details of the group’s 
approach and its performance against the total commitments
the group has a robust series of sustainability compliance and 
business ethics policies together with a range of mechanisms that 
help deliver the group’s sustainability programme including health 
and safety environmental impact employees customers and 
supply chain and community engagement
the average number of employees in the group during the year  
is given in note 3 to the consolidated ﬁnancial statements on  
page 83
the group has a policy of equal opportunities which applies in 
relation to recruitment of all new employees and to the 
management of existing personnel the group gives full 
consideration to applications for employment from disabled 
persons where the requirements of the job can be adequately 
fulﬁlled by such persons in the event of employees becoming 
disabled every effort is made to ensure that their employment 
with the group continues and that appropriate training is 
arranged investment and resources continue to be provided  
to support train and motivate all employees 
the group places considerable value on the involvement of its 
employees and ensures that all signiﬁcant events economic 
factors and ﬁnancial updates and the impact of these on the 
performance of the group are communicated to employees 
through email alerts and regular newsletters in addition the 
divisions use a variety of methods to encourage employee 
involvement in the group’s performance and communicate key 
business goals and issues to employees the divisions also consult 
and involve their employees through local publications brieﬁng 
groups consultative meetings training programmes employee 
surveys and working groups to assist the process of continuous 
improvement in the way the business is conducted 
details of the company’s savings related share option scheme 
the ‘saye scheme’ which is open to all employees is set out  
in notes 24 and 27 of the consolidated ﬁnancial statements on 
pages 98 to 101 respectively morgan sindall group plc annual report and accounts 2011
other statutory and regulatory information
65
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
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 2011 the group’s number of creditor days 
outstanding was equivalent to 28 days’ purchases 2010 25 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 £47134 
2010 £60314 principally to local charities serving the 
communities in which it operates more details of the group’s 
involvement in the community can be found in the separate 2011 
sustainability report at wwwmorgansindallcomsustainability
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 
post balance sheet events 
on 15 february 2012 the group disposed of its 33 interest in the 
dorset fire  rescue pfi for cash consideration of £38m further 
details may be found in note 30 of the consolidated ﬁnancial 
statements
disclosure of information to the external auditors
the directors who held office at the date of approval of this 
directors’ report conﬁrm that so far as they are each aware there 
is no relevant audit information of which the company’s auditor is 
unaware and each director has taken all the steps that he or she 
ought to have taken as a director in order to make himself or 
herself aware of any relevant audit information and to establish 
that the company’s auditor is aware of that information this 
conﬁrmation is given and should be interpreted in accordance 
with the provisions of section 418 of the act
external auditor 
deloitte llp has expressed its willingness to continue in office as 
external auditor and a resolution to reappoint it will be proposed 
at the forthcoming agm 
annual general meeting
the agm of the company will be held at the offices of rbs  
250 bishopsgate london ec2m 4aa on 3 may 2012 at 1200 
noon the formal notice convening the agm together with 
explanatory notes can be found in the separate circular 
accompanying this document and is available on the company’s 
website at wwwmorgansindallcom shareholders will also ﬁnd 
enclosed with this document a form of proxy for use in connection 
with the meeting 
the directors’ report from pages 2 to 66 inclusive was approved 
by the board and signed on its behalf by
mary nettleship
company secretary 
21 february 2012 morgan sindall group plc annual report and accounts 2011
directors’ responsibilities statement
66
directors’ responsibilities statement
the directors are responsible for preparing the annual report and 
the ﬁnancial statements in accordance with applicable laws and 
regulations
company law requires the directors to prepare ﬁnancial 
statements for each ﬁnancial year under that law the directors 
are required to prepare the group ﬁnancial statements in 
accordance with international financial reporting standards 
‘ifrss’ as adopted by the european union and article 4 of  
the ias regulation and have elected to prepare the parent 
company ﬁnancial statements in accordance with united 
kingdom generally accepted accounting practice uk 
accounting standards and applicable law under company law 
the directors must not approve the accounts unless they are 
satisﬁed that they give a true and fair view of the state of affairs  
of the company and of the proﬁt or loss of the company  
for that period 
in preparing the parent company ﬁnancial statements the 
directors are required to
  select suitable accounting policies and then apply them 
consistently
  make judgments and accounting estimates that are reasonable 
and prudent
  state whether applicable uk accounting standards have been 
followed subject to any material departures disclosed and 
explained in the ﬁnancial statements
  prepare the ﬁnancial statements on the going concern basis 
unless it is inappropriate to presume that the company will 
continue in business
in preparing the group ﬁnancial statements international 
accounting standard 1 requires that directors
  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 are insufficient to enable users to 
understand the impact of particular transactions other events 
and conditions on the entity’s ﬁnancial position and ﬁnancial 
performance 
  make an assessment of the company’s ability to continue as a 
going concern
the directors are responsible for keeping adequate accounting 
records that are sufficient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time 
the ﬁnancial position of the company and enable them to ensure 
that the ﬁnancial statements comply with the companies act 
2006 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
responsibility statement 
each of the directors whose names are set out on pages 46  
and 47 conﬁrms that to the best of his or her knowledge
  the ﬁnancial statements prepared in accordance with the 
relevant ﬁnancial reporting framework give a true and fair  
view of the assets liabilities ﬁnancial position and proﬁt  
or loss of the company and the undertakings included in  
the consolidation taken as a whole
  the management report which is incorporated into the 
directors’ report includes a fair review of the development and 
performance of the business and the position of the company 
and the undertakings included in the consolidation taken as a 
whole together with a description of the principal risks and 
uncertainties that they face
by order of the board 
paul smith david mulligan
chief executive finance director 
21 february 2012 21 february 2012 morgan sindall group plc annual report and accounts 2011
financial statements
67
financial statements
for the ﬁnancial year ended 31 december 2011
 consolidated
68 independent auditor’s report
69 income statement
69 statement of comprehensive income
70 balance sheet
71 cash ﬂow statement
72 statement of changes in equity
73 signiﬁcant accounting policies
81 notes to the ﬁnancial statements
 company
110  independent auditor’s report
111  balance sheet
112  combined statement of movement  
in reserves and shareholders’ funds
113  signiﬁcant accounting policies
116  notes to the ﬁnancial statements
constructing  
and 
regenerating
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
68
independent auditor’s report
to the members of morgan sindall group plc
we have audited the group ﬁnancial statements of morgan sindall 
group plc for the year ended 31 december 2011 which comprise 
the consolidated income statement the consolidated statement 
of comprehensive income the consolidated balance sheet the 
consolidated cash ﬂow statement the consolidated statement of 
changes in equity signiﬁcant accounting policies and the related 
notes 1 to 30 the ﬁnancial reporting framework that has been 
applied in their preparation is applicable law and international 
financial reporting standards ‘ifrss’ as adopted by the 
european union
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might state 
to the company’s members those matters we are required to 
state to them in an auditor’s report and for no other purpose to 
the fullest extent permitted by law we do not accept or assume 
responsibility to anyone other than the company and the 
company’s members as a body for our audit work for this report 
or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities statement 
the directors are responsible for the preparation of the group 
ﬁnancial statements and for being satisﬁed that they give a true 
and fair view our responsibility is to audit and express an opinion 
on the group ﬁnancial statements in accordance with applicable 
law and international standards on auditing uk and ireland 
those standards require us to comply with the auditing practices 
board’s ethical standards for auditors
scope of the audit of the ﬁnancial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the ﬁnancial statements sufficient to give reasonable 
assurance that the ﬁnancial statements are free from material 
misstatement whether caused by fraud or error this includes an 
assessment of whether the accounting policies are appropriate to 
the group’s circumstances and have been consistently applied 
and adequately disclosed the reasonableness of signiﬁcant 
accounting estimates made by the directors and the overall 
presentation of the ﬁnancial statements in addition we read all 
the ﬁnancial and nonﬁnancial information in the annual report  
to identify material inconsistencies with the audited ﬁnancial 
statements if we become aware of any apparent material 
misstatements or inconsistencies we consider the implications  
for our report
opinion on ﬁnancial statements
in our opinion the group ﬁnancial statements
  give a true and fair view of the state of the group’s affairs as at 
31 december 2011 and of its proﬁt for the year then ended
  have been properly prepared in accordance with ifrss as 
adopted by the european union and
  have been prepared in accordance with the requirements of 
the companies act 2006 and article 4 of the ias regulation
opinion on other matter prescribed by the companies act 2006
in our opinion the information given in the directors’ report for the 
ﬁnancial year for which the group ﬁnancial statements are 
prepared is consistent with the group ﬁnancial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report to you 
if in our opinion
  certain disclosures of directors’ remuneration speciﬁed by law 
are not made or
  we have not received all the information and explanations we 
require for our audit
under the listing rules we are required to review
  the directors’ statement contained within the ﬁnancial review 
in relation to going concern and
  the part of the corporate governance statement relating to the 
company’s compliance with the nine provisions of the uk 
corporate governance code speciﬁed for our review
  certain elements of the report to shareholders by the board on 
directors’ remuneration
other matter
we have reported separately on the parent company ﬁnancial 
statements of morgan sindall group plc for the year ended  
31 december 2011 and on the information in the directors’ 
remuneration report that is described as having been audited
ian krieger
senior statutory auditor 
for and on behalf of deloitte llp 
chartered accountants and statutory auditor 
london united kingdom 
21 february 2012 consolidated income statement
for the year ended 31 december 2011
     2011 2010  
    notes £m £m
continuing operations 
revenue    1 22266 21019  
cost of sales     20109 18847
gross proﬁt      2157  2172 
amortisation of intangible assets    1 2 9 39 55 
nonrecurring items    2 14 51 
other administrative expenses     1703 1652
total administrative expenses     1756 1758
share of net proﬁt of equity accounted joint ventures    1 12 03  01  
other gains and losses     04 03 
proﬁt from operations    1 408 418 
finance income    5 16 17  
finance costs    5 24 28
net ﬁnance expense     08 11
proﬁt before income tax expense    1 400  407 
income tax expense    6 72 109
proﬁt for the year    2 328  298
attributable to 
owners of the company     329 299  
noncontrolling interests     01 01
     328  298 
earnings per share 
from continuing operations 
basic    8 775p 705p 
diluted    8 765p 697p
there were no discontinued operations in either the current or comparative year
consolidated statement of comprehensive income
for the year ended 31 december 2011
     2011  2010 
    notes £m £m
proﬁt for the year     328  298 
other comprehensive incomeexpense 
actuarial gain arising on deﬁned beneﬁt obligation    19 –  08  
deferred tax on deﬁned beneﬁt obligation    20 01 03 
movement on cash ﬂow hedges in equity accounted joint ventures    12 07 14 
other movement on cash ﬂow hedges     02 – 
other comprehensive expense for the year net of income tax     10 09
total comprehensive income for the year     318  289 
attributable to 
 owners of the company     319  290  
 noncontrolling interests     01 01
     318  289 
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
69
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 consolidated balance sheet
at 31 december 2011
      restated 
     2011  2010  
    notes £m £m
noncurrent assets 
goodwill    9 2141  2143  
other intangible assets    9 125  166  
property plant and equipment    10 216  278  
investment property    11 111  43  
investments in equity accounted joint ventures    1 12 498  454  
investments     04  01  
shared equity loan receivables    13 176  139  
deferred tax assets    20 –  32 
     3271  3256 
current assets 
inventories    14 1460  1411 
amounts due from construction contract customers    16 2286  1784  
trade and other receivables    15 1865  2292  
cash and cash equivalents    29 1089  1486 
     6700  6973 
total assets    1 9971  10229 
current liabilities 
trade and other payables    17 6209 6672 
amounts due to construction contract customers    16 788 707 
current tax liabilities     87 306 
finance lease liabilities    18 08 17 
provisions    21 46 77
     7138 7779
net current liabilities     438 806
noncurrent liabilities 
trade and other payables    17 03 –  
finance lease liabilities    18 43 60 
retirement beneﬁt obligation    19 13 19 
deferred tax liabilities    20 198 –  
provisions    21 220 154
     47 7 233
total liabilities     7615 8012
net assets     2356  2217 
equity 
share capital    24 22  22  
share premium account     267  267  
capital redemption reserve     06  06  
own shares     58 59 
hedging reserve     40 31 
retained earnings     2162  2014 
equity attributable to owners of the company     2359  2219  
noncontrolling interests     03 02
total equity     2356  2217 
in the course of the year fair values on an acquisition in 2010 were ﬁnalised leading to a restatement of the 2010 comparative balance 
sheet details are included in note 25
the consolidated ﬁnancial statements of morgan sindall group plc company number 00521970 were approved by the board and 
authorised for issue on 21 february 2012 and signed on its behalf by
paul smith david mulligan
chief executive  finance director
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
70 consolidated cash ﬂow statement
for the year ended 31 december 2011
     2011  2010  
    notes £m £m
net cash outﬂowinﬂow from operating activities    26 118 906 
cash ﬂows from investing activities 
interest received     14  19  
dividend from joint ventures    12 03  08  
proceeds on disposal of property plant and equipment     46  11  
purchases of property plant and equipment     54 28 
payments to acquire interests in joint ventures     60 43 
payment to acquire other investment     03 –  
payments for the acquisition of subsidiaries and other businesses    25 04 352
net cash outﬂow from investing activities     58 385
cash ﬂows from ﬁnancing activities 
dividends paid     178 178 
repayments of obligations under ﬁnance leases     43 34
net cash outﬂow from ﬁnancing activities     221 212
net decreaseincrease in cash and cash equivalents     397 309  
cash and cash equivalents at the beginning of the year     1486  1177 
cash and cash equivalents at the end of the year 
bank balances and cash     1089  1486 
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
71
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 consolidated statement of changes in equity
for the year ended 31 december 2011
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
72
 attributable to owners of the company 
  
   share capital reserve for    non  
 share premium redemption own shares hedging retained  controlling total 
 capital  account reserve held  reserve  earnings  total  interests  equity 
 £m  £m  £m  £m  £m  £m  £m  £m  £m 
balance at 1 january 2010 22  267  06  60 17 1876  2094  01 2093 
total comprehensive income for the year 
net proﬁt –  –  –  –  –  299  299  01 298  
other comprehensive income 
 actuarial gain arising on deﬁned  
  beneﬁt obligation note 19 –  –  –  –  –  08  08  –  08  
 deferred tax on deﬁned  
  beneﬁt obligation note 20 –  –  –  –  –  03 03 –  03 
 movement on cash ﬂow hedges in equity  
  accounted joint ventures note 12 –  –  –  –  14 –  14 –  14
total comprehensive income for the year  
 net of income tax –  –  –  –  14 304  290 01 289 
sharebased payments –  –  –  –  –  07  07  –  07  
exercise of share options –  –  –  01  –  01 –  –  –  
movement on deferred tax asset  
 on sharebased payments –  –  –  –  –  06  06  –  06  
dividends paid 
 second interim dividend for 2009 –  –  –  –  –  127 127 –  127 
 interim dividend for 2010 –  –  –  –  –  51 51 –  51
balance at 31 december 2010 22  267  06  59 31 2014  2219  02 2217 
balance at 1 january 2011 22  267  06  5 9 31 2014  2219  02 2217 
total comprehensive income for the year 
net proﬁt –  –  –  –  –  329  329  01 328  
other comprehensive income 
 actuarial gain arising on deﬁned  
  beneﬁt obligation note 19 –  –  –  –  – –  –  –  –  
 deferred tax on deﬁned  
  beneﬁt obligation note 20 –  –  –  –  –  01 01 –  01 
 movement on cash ﬂow hedges in equity  
  accounted joint ventures note 12 –  –  –  –  07 –  07 –  07 
  other movement on cash ﬂow hedges –  –  –  –  02 –  02 –  02
total comprehensive income for the  
 year net of income tax –  –  –  –  09 328  319  01 318 
sharebased payments –  –  –  –  –  05  05  –  05  
exercise of share options –  –  –  01  –  01 –  –  –  
movement on deferred tax asset  
 on sharebased payments –  –  –  –  –  06 06 –  06 
dividends paid 
 second interim dividend for 2010 –  –  –  –  –  127 127 –  127 
 interim dividend for 2011 –  –  –  –  –  51 51 –  51
balance at 31 december 2011 22  267  06  58 40 2162  2359  03 2356 
share premium account
the share premium account represents the difference between the fair value of consideration received and the nominal value of the 
shares issued
capital redemption reserve
the capital redemption reserve was created on the redemption of preference shares in 2003
reserve for own shares held
the shares are held as ‘treasury shares’ and represent the cost to morgan sindall group plc of shares purchased in the market and held 
by the morgan sindall employee beneﬁt trust the ‘trust’ to satisfy options under the group’s share incentive schemes
the number of shares held by the trust at 31 december 2011 was 776714 2010 781444
hedging reserve
under cash ﬂow hedge accounting movements on the effective portion of hedges are recognised through the hedging reserve whilst 
any ineffectiveness is taken to the income statement signiﬁcant accounting policies
for the year ended 31 december 2011
reporting entity
morgan sindall group plc the ‘company’ is domiciled and 
incorporated in the uk the report and accounts includes the 
consolidated ﬁnancial statements of the company and its 
subsidiaries collectively referred to as the ‘group’ and the 
group’s interests in joint ventures and separate ﬁnancial 
statements for the company the nature of the group’s 
operations and its principal activities are set out in note 1 and  
in the directors’ report business review on pages 2 to 44
basis of preparation
a statement of compliance
the consolidated ﬁnancial statements have been prepared  
on a going concern basis as discussed in the ﬁnance review on 
page 14 and in accordance with international financial reporting 
standards ‘ifrs’ adopted by the european union and therefore 
comply with article 4 of the eu ias regulation
b basis of accounting
the consolidated ﬁnancial statements have been prepared under 
the historical cost convention except where otherwise indicated
c functional and presentation currency
these consolidated ﬁnancial statements are presented in pounds 
sterling which is the group’s functional currency all ﬁnancial 
information unless otherwise stated has been rounded to the 
nearest £01m
d restatement of comparative balances
as was stated in note 25 on pages 104 to 105 of the 2010 annual 
report and accounts the fair value of adjustments arising on  
the acquisition of the business obligations and certain assets  
from the administrators of connaught partnerships limited 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 25 in accordance with ifrs 3 ‘business 
combinations’ the affected ﬁnancial statements 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 previously stated
e changes in accounting policy and disclosures
i new and revised accounting standards adopted by the group
during the year the group has adopted the following standards 
amendments and interpretations they have either had no 
material impact on the group’s consolidated ﬁnancial statements 
or are not currently relevant to the group but may affect future 
transactions and events
  ifric 19 ‘extinguishing financial liabilities with equity 
instruments’ the interpretation provides guidance on the 
accounting for ‘debt for equity swaps’ from the perspective of 
the borrower
  amendment to ifrs 3 ‘business combinations’ ifrs 3 has 
been amended such that only those noncontrolling interests 
which are current ownership interests and which entitle their 
holders to a proportionate share of net assets upon liquidation 
can be measured at fair value or the proportionate share of  
net identiﬁable assets other noncontrolling interests are 
measured at fair value unless another measurement basis  
is required by ifrss
  ias 24 2009 ‘related party disclosures’ the revised  
standard has a new clearer deﬁnition of a related party  
with inconsistencies under the previous deﬁnition having  
been removed
  amendment to ias 32 ‘classiﬁcation of rights issues’ under 
the amendment rights issues of instruments issued to acquire  
a ﬁxed number of an entity’s own nonderivative equity 
instruments for a ﬁxed amount in any currency and which 
otherwise meet the deﬁnition of equity are classiﬁed as equity
  amendments to ifric 14 ‘prepayments of a minimum funding 
requirement’ the amendments now enable recognition of an 
asset in the form of prepaid minimum funding contributions
  ‘improvements to ifrss 2010’ the amendments made to 
standards under the 2010 improvements to ifrss have had  
no impact on the group
ii accounting standards amendments and interpretations to 
existing standards not yet effective endorsed by the eu and not 
adopted early by the group
the following have been published and when approved by the 
eu will be mandatory for periods beginning on or after 1 january 
2012 and have not been adopted early by the group
  ifrs 1 amended ‘severe hyperinﬂation and removal of  
fixed dates for firsttime adopters’
  ifrs 7 amended ‘transfers of financial assets’
  ifrs 10 ‘consolidated financial statements’
  ifrs 11 ‘ joint arrangements’
  ifrs 12’ disclosures of interests in other entities’
  ifrs 13 ‘fair value measurement’
  ias 1 amended ‘presentation of items of other 
comprehensive income’
  ias 12 amended ‘deferred tax recovery of underlying 
assets’
  ias 19 revised ‘employee beneﬁts’
  ias 27 revised ‘separate financial statements’
  ias 28 revised ‘investments in associates and joint ventures’
the directors do not expect that the adoption of the standards 
listed above will have a material impact on the ﬁnancial statements 
of the group in future periods except as follows
  ifrs 11 will impact both the measurement and disclosure of 
joint arrangements
  ifrs 12 will impact the disclosure of the interests the group has 
in other entities
  ifrs 13 will impact the measurement of fair value for certain 
assets and liabilities as well as the associated disclosures
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
73
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
74
signiﬁcant accounting policies
for the year ended 31 december 2011
  ias 12 amended will impact the measurement of deferred  
tax on the group’s investment properties by introducing  
the rebuttable presumption that the carrying value will be 
recovered entirely through sale
  ias 19 revised will impact the measurement of the various 
components representing movements in the deﬁned beneﬁt 
pension obligation and associated disclosures but not the 
group’s total obligation
f critical accounting judgments key assumptions and sources 
of estimation uncertainty
the preparation of ﬁnancial statements under ifrs requires 
management to make judgments assumptions and estimates that 
affect the application of accounting policies and the reported 
amounts of assets liabilities income and expense actual results 
may differ from these estimates
assumptions and estimates are reviewed on an ongoing basis and 
any revisions to them are recognised in the period in which they 
are revised
i critical accounting judgments
the following are critical judgments apart from those involving 
estimations which are dealt with separately below that the 
directors have made in the process of applying the group’s 
accounting policies and that have the most signiﬁcant effect on 
the amounts recognised in the consolidated ﬁnancial statements
  determination of cashgenerating units for goodwill 
impairment testing 
for the purposes of performing the group’s annual impairment 
testing in allocating goodwill to the cashgenerating unit or 
groups of cashgenerating units judgement is required to 
establish the lowest level at which goodwill is monitored for 
management purposes and which are expected to beneﬁt 
from the business combination giving rise to the goodwill
  disclosure of nonrecurring items 
the group has presented certain items of a oneoff and 
material nature as nonrecurring items in the income statement 
and notes to the consolidated ﬁnancial statements these items 
have been disclosed because the directors view their 
presentation as relevant to the understanding of the group’s 
underlying ﬁnancial performance inclusion within this category 
is restrictive and is applied consistently to oneoff costs and 
oneoff gains
  disclosure of sensitivities 
judgment is required in establishing whether it is necessary  
to disclose the sensitivity of the results of impairment testing  
to changes in estimates in arriving at valueinuse of the 
cashgenerating units additionally judgement is required in 
establishing which if any sensitivities in the fair value of shared 
equity loans arise from changes to inputs used in determining 
fair value
  fair value adjustments in business combinations 
the group has made certain ﬁnal fair value adjustments in 
respect of the acquisition of the business obligations and 
certain assets from the administrators of connaught 
partnerships limited and fair value adjustments in respect of 
acquiring full control of north shore development partnership 
limited in which the group previously had a 50 shareholding
ii key assumptions and sources of estimation uncertainty
the key assumptions concerning the future and other key sources 
of estimation at the balance sheet date that have a signiﬁcant risk 
of causing a material adjustment to the carrying value of assets 
and liabilities within the next ﬁnancial year are discussed below
   accounting for construction and service contracts 
recognition of revenue and margin is based on judgments 
made in respect of the ultimate proﬁtability of a contract  
such judgments are arrived at through the use of estimates in 
relation to the costs and value of work performed to date and 
to be performed in bringing contracts to completion including 
satisfaction of maintenance responsibilities these estimates 
are made by reference to recovery of precontract costs 
surveys of progress against the construction programme 
changes in work scope the contractual terms under which the 
work is being performed including the recoverability of any 
unagreed income from variations and the likely outcome of 
discussions on claims costs incurred and external certiﬁcation 
of the work performed the group has appropriate control 
procedures to ensure all estimates are determined on a 
consistent basis and subject to appropriate review and 
authorisation
  tax 
judgments are required in establishing the group’s liability  
to pay taxes where tax positions are uncertain
  recognition and measurement of intangible assets 
the group recognises certain intangible assets in respect  
of secured customer contracts other contracts and related 
relationships software noncompete agreements and 
goodwill recognition and subsequent measurement requires 
management to make certain assumptions and estimates 
particularly in respect of the future potential beneﬁts to be 
derived and the estimated useful lives over which the future 
economic beneﬁts are expected to ﬂow to the group
  impairment of goodwill and other intangible assets 
goodwill and other intangible assets are subject to an 
impairment test on an annual basis or earlier where any event 
or change in circumstance is identiﬁed that indicates that the 
carrying value may not be recoverable testing for impairment 
requires a comparison of the carrying amount of goodwill and 
other intangible assets against the recoverable amount which 
is the valueinuse of the cashgenerating unit to which the 
goodwill and other intangible assets are allocated
valueinuse requires estimation of the future cash ﬂows expected 
from the cashgenerating unit as well as an appropriate growth 
factor and a pretax discount rate reﬂecting current market 
assessments of the time value of money and the risks speciﬁc to 
the asset to calculate the present value of the cash ﬂows details 
of the estimates used are set out in note 9
   investment properties 
in assessing the fair value of investment properties estimates 
are made of the value of properties with reference to market 
evidence of transaction proceeds for similar properties
  recognition and measurement of the fair value of shared 
equity loans 
the group’s balance sheet includes loans that arise on the sale 
of properties under shared equity home ownership schemes 
which are recognised and measured at fair value through proﬁt 
or loss as discussed in the group’s accounting policies below  morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
75
because it is impracticable to obtain regular market valuations 
on a propertybyproperty basis except as required at 
repayment the group makes estimates of fair value of the 
loans on a portfolio basis key assumptions used by 
management in making these estimates include market value 
growth the discount rate the anticipated loan duration and the 
expected rate of debtor default assumptions made in relation 
to these inputs are set out in note 13 and have a material impact 
on the carrying value of the loan portfolio recognised on the 
balance sheet and the fair value movement recognised in the 
income statement
  impairment of work in progress 
in assessing whether work in progress is impaired estimates 
are made of future sales revenue timing and build costs the 
group has controls in place to ensure that estimates of sales 
revenue are consistent and external valuations are used where 
appropriate
  accounting for the group’s deﬁned beneﬁt plan 
the directors engage an independent and qualiﬁed actuary to 
calculate the group’s liability in respect of the deﬁned beneﬁt 
plan in order to arrive at this valuation certain assumptions in 
respect of discount rates salary escalations expected return 
on the plan’s assets and future pension increases have been 
made estimates and judgments regarding future mortality are 
derived using published statistics and mortality tables as the 
actual rates of increase and mortality may differ from those 
assumed the actual pension liability may differ from that 
recognised in these consolidated ﬁnancial statements details 
of the assumptions made are set out in note 19
  provisions 
in valuing the provision for the group’s retained insurance  
risks assumptions are made on the rate of occurrence and 
severity of events for which the group will bear liability and 
external valuations are used where appropriate when valuing 
provisions for known legal claims assessment of the likely 
success and value of any claim is based on internal and  
external advice
the accounting policies as set out below have been applied 
consistently to all periods presented in these consolidated 
ﬁnancial statements
basis of consolidation
the consolidated ﬁnancial statements incorporate the ﬁnancial 
statements of the company and the entities controlled by the 
company its subsidiaries together with the group’s share of  
the results of joint ventures made up to 31 december each year
business combinations are accounted for using the acquisition 
method the consideration transferred for the acquisition of a 
subsidiary is the fair value of the assets transferred the liabilities 
incurred and equity interests issued by the group in exchange for 
control of the acquiree consideration transferred also includes 
the fair value of any asset or liability resulting from a contingent 
consideration arrangement acquisition related costs are 
expensed in administrative expenses as incurred all identiﬁable 
assets and liabilities acquired and contingent liabilities assumed 
are initially measured at their fair values at the acquisition date  
as permitted on an acquisitionbyacquisition basis a non
controlling interest in the acquiree is recognised at fair value  
or at the acquiree’s share of the acquiree’s net assets
the excess of the consideration transferred the amount of any 
noncontrolling interest and the acquisition date fair value of any 
previously held equity interest in the acquiree as compared with 
the group’s share of the identiﬁable net assets are recognised  
as goodwill where the group’s share of identiﬁable net assets 
acquired exceeds the total consideration transferred a gain from 
a bargain purchase is recognised immediately in the income 
statement after the fair values initially determined have been 
reassessed
noncontrolling interests in the net assets of consolidated 
subsidiaries are identiﬁed separately from the group’s equity 
therein subsequent to acquisition noncontrolling interests 
consist of the amount of those interests at the date of the original 
business combination see below and the noncontrolling 
interest’s share of the changes in equity since the date of the 
combination
a subsidiaries
subsidiaries are entities that are controlled by the group control 
is exerted where the group has the power to govern directly or 
indirectly the ﬁnancial and operating policies of the entity so as  
to obtain economic beneﬁts from its activities typically a 
shareholding of more than 50 of the voting rights is indicative  
of control however the impact of potential voting rights currently 
exercisable is taken into consideration
the ﬁnancial statements of subsidiaries are included in the 
consolidated ﬁnancial statements of the group from the date that 
control is obtained to the date that control ceases the accounting 
policies of new subsidiaries are changed where necessary to align 
them with those of the group
noncontrolling interests in the net assets of the acquiree are 
initially measured at the noncontrolling interests’ share of the  
net fair value of the assets and liabilities recognised or at fair  
value as determined on an acquisitionbyacquisition basis
b joint ventures
a joint venture is a contractual arrangement whereby two or  
more parties undertake an economic activity that is subject to 
joint control which requires unanimous consent for strategic 
ﬁnancial and operating decisions
i jointly controlled entities
a jointly controlled entity is a joint venture that involves the 
establishment of a corporation partnership or other entity in 
which each venturer has an interest the results assets and 
liabilities of jointly controlled entities are incorporated in the 
ﬁnancial statements using the equity method of accounting
goodwill relating to a joint venture which is acquired directly is 
included in the carrying amount of the investment and is not 
amortised after application of the equity method the group’s 
investments in joint ventures are reviewed to determine whether 
any additional impairment loss in relation to the net investment in 
the joint venture is required when there is a change recognised 
directly in the equity of the joint venture the group recognises its 
share of any change and discloses this where applicable in the 
consolidated statement of comprehensive income
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
76
signiﬁcant accounting policies
for the year ended 31 december 2011
where the group’s share of losses exceeds its equity accounted 
investment in a joint venture the carrying amount of the equity 
interest is reduced to nil and the recognition of further losses is 
discontinued except to the extent that the group has incurred 
legal or constructive obligations appropriate adjustment is made 
to the results of joint ventures where material differences exist 
between a joint venture’s accounting policies and those of  
the group
dividend income from investments is recognised when the 
shareholders’ rights to receive payment have been established
ii jointly controlled operations
construction contracts carried out in joint venture without the 
establishment of a legal entity are jointly controlled operations 
the group’s share of the results and net assets of these jointly 
controlled operations are included under each relevant heading  
in the income statement and the balance sheet
c transactions eliminated on consolidation
intragroup balances and transactions and any unrealised income 
and expense arising from intragroup transactions are eliminated 
in preparing the consolidated ﬁnancial statements unrealised 
gains arising from transactions with equity accounted investments 
are eliminated to the extent of the group’s interest in that 
investment unrealised losses are eliminated in the same way  
as unrealised gains but only to the extent that there is no 
evidence of impairment
revenue and margin recognition
revenue and margin are recognised as follows
a construction contracts
revenue comprises the fair value of construction carried out in 
the year based on an internal assessment of work carried out 
once the outcome of a construction contract can be estimated 
reliably margin is recognised in the income statement on a stage 
of contract completion basis by reference to costs incurred to 
date and total forecast costs on the contract as a whole losses 
expected in bringing a contract to completion are recognised 
immediately in the income statement as soon as they are forecast 
where the outcome of variations is uncertain the group only 
recognises revenue and associated margin where it is probable 
that the client will approve the variation where the outcome of 
claims is uncertain the group only recognises revenue when 
negotiations have reached an advanced stage such that it is 
probable that the customer will accept the claim
where houses for open market sale are included in a construction 
contract as part of a mixedtenure development revenue on  
open market sales is recognised at fair value on sale completion 
and margin is recognised using the same principle as for the 
construction contract element of the development
b service contracts
revenue comprises the fair value of work performed in the year 
based on an internal assessment of work carried out
c sale of development properties
revenue from the sale of development properties is measured at 
the fair value of the consideration received or receivable revenue 
is recognised when the signiﬁcant risks and rewards of ownership 
have been transferred to the buyer there is no continuing 
management involvement with the properties and the amount  
of revenue can be estimated reliably
the transfer of risks and rewards vary depending on the individual 
terms of the contract of sale for properties transfer usually 
occurs when the ownership has been legally transferred to the 
purchaser revenue from the sale of properties taken in part 
exchange is not included in revenue
d sale of properties under the shared equity scheme
revenue resulting from the sale of properties under the shared 
equity scheme is recognised at the fair value of the consideration 
received or receivable
e precontract costs
costs incurred prior to the award of a contract are expensed  
until the point where it becomes probable that the contract will  
be obtained only after it is probable that the contract is forecast 
to be proﬁtable costs that were directly related to obtaining  
the contract and which are separately identiﬁable and can be 
measured reliably are recognised as contract assets precontract 
costs are expensed in the income statement over the period of 
the contract
in the case of ppppfi contracts all costs incurred before the 
appointment as preferred bidder are expensed
where precontract costs are reimbursable the amount received 
is applied against amounts expensed with any surplus over this 
amount being applied to costs which have been recognised as 
contract assets
f mobilisation costs
mobilisation costs are those costs speciﬁcally incurred to enable 
performance of obligations in a contract after its award and form 
an integral part of the overall costs of a contract such costs are 
amortised over the period of the contract except where the 
contract becomes loss making in which case the balance is 
immediately expensed
g government grants
funding received in respect of developer grants where funding  
is awarded to encourage the building and renovation of affordable 
housing is recognised as revenue on a stage of completion basis 
over the life of the project to which the funding relates
funding received to support the construction of housing where 
current market prices would otherwise make a scheme ﬁnancially 
unviable is recognised as revenue on a legal completion basis 
when the properties to which it relates are sold morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
77
government grants are initially recognised as deferred income  
at fair value when there is reasonable assurance that the group 
will comply with the conditions attached and the grants will  
be received
finance income and expense
finance income comprises interest income on funds invested and 
other interest earned interest income is recognised as it accrues 
in the income statement using the effective interest rate method
finance expense comprises interest on bank overdrafts the 
unwinding of discounts on provisions impairment losses 
recognised on ﬁnancial assets amortisation of prepaid bank 
facility arrangement fees commitment fees charged by lenders 
on the undrawn portion of available bank facilities and losses on 
hedging instruments recognised through the income statement 
the ﬁnance charge component of minimum lease payments 
made under ﬁnance leases is also recognised as a ﬁnance expense 
using the effective interest rate method
borrowing costs are recognised in the income statement on  
an effective interest rate method in the period in which they  
are incurred except where such costs relate to qualifying assets 
for which the commencement date for capitalisation was on or 
after 1 january 2009 borrowing costs directly attributable to  
the acquisition construction or production of a qualifying asset 
are included as part of the cost of that asset
income tax
the income tax expense represents the current and deferred tax 
charges income tax is recognised in the income statement except 
to the extent that it relates to items recognised directly in equity
current tax is the group’s expected tax liability on taxable proﬁt 
for the year using tax rates enacted or substantively enacted at 
the reporting date and any adjustments to tax payable in respect 
of previous years
taxable proﬁt differs from that reported in the income statement 
because it is adjusted for items of income or expense that are 
assessable or deductible in other years and is adjusted for items 
that are never assessable or deductible
deferred tax is recognised using the balance sheet method 
providing for temporary differences between the carrying amount 
of assets and liabilities for ﬁnancial reporting purposes and the 
corresponding tax bases used in tax computations deferred tax  
is not recognised for the initial recognition of assets or liabilities  
in a transaction that is not a business combination and affects 
neither accounting nor taxable proﬁt or differences relating to 
investments in subsidiaries and joint ventures to the extent that  
it is probable that they will not reverse in the foreseeable future 
deferred tax is not recognised for taxable temporary differences 
arising on the initial recognition of goodwill
deferred tax is recognised on temporary differences which result 
in an obligation at the balance sheet date to pay more tax or a 
right to pay less tax at a future date at the tax rates expected  
to apply when they reverse based on the laws that have been 
enacted or substantively enacted at the reporting date deferred 
tax assets are recognised to the extent that it is regarded as more 
likely than not that they will be recovered deferred tax assets and 
liabilities are not discounted and are only offset where there is a 
legally enforceable right to offset current tax assets and liabilities
intangible assets
a goodwill
i initial recognition
goodwill arises on the acquisition of subsidiaries associates  
joint ventures and other business assets and liabilities  
goodwill represents the excess of the cost of an acquisition  
over the group’s share of the identiﬁable net assets of the 
acquiree at the acquisition date where that excess is negative  
it is immediately recognised in the income statement as a gain  
from a bargain purchase
goodwill arising on acquisitions before the date of transition to 
ifrs has been retained at the previous uk gaap amounts subject 
to being tested for impairment at that date goodwill written off  
to reserves under uk gaap prior to 1998 has not been reinstated 
and is not included in determining any subsequent proﬁt or loss 
on disposal
ii subsequent measurement
goodwill is measured at cost less accumulated impairment losses 
in respect of equity accounted investments goodwill acquired 
directly is included in the carrying amount of the investment
iii impairment
goodwill is allocated to cashgenerating units for the purpose  
of impairment testing the cashgenerating units to which the 
goodwill has been allocated is the smallest identiﬁable group of 
assets that generates cash inﬂows that are largely independent of 
the cash inﬂows from other assets or group of assets the largest 
group to which goodwill is allocated for impairment testing 
purposes is the operating segment level
if the recoverable amount of the cashgenerating unit is lower 
than the carrying amount of the unit then the impairment loss is 
ﬁrst applied to the goodwill allocated to the cashgenerating unit 
and then to the other assets of the unit on a pro rata basis based 
on the carrying amount of each asset in the unit any such 
impairment loss is recognised immediately in the income 
statement and is not subsequently reversed
b other intangible assets
other intangible assets such as those identiﬁed on acquisition by 
the group that have ﬁnite useful lives are recognised at fair value 
and measured at cost less accumulated amortisation and 
impairment losses
the group has the following signiﬁcant classes of ﬁnite life 
intangible assets
i secured customer contracts
on acquisition value is attributable to customer contracts to the 
extent that future economic beneﬁts are expected to ﬂow from 
the contracts the fair value of customer contracts recognised in 
the consolidated ﬁnancial statements has been determined with 
the assistance of an independent expert secured customer 
contracts are amortised over their expected useful lives at a rate 
to match the expected future economic beneﬁts
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
78
signiﬁcant accounting policies
for the year ended 31 december 2011
ii other contracts and related relationships
on acquisition value is attributed to noncontractual relationships 
and other contracts with longstanding or valued clients to the 
extent that future economic beneﬁts are expected to ﬂow from 
the relationships the fair value of other contracts and related 
relationships recognised in the consolidated ﬁnancial statements 
has been determined with the assistance of an independent 
expert other contracts and related relationships are amortised 
over their expected useful lives at a rate to match the expected 
future economic beneﬁts
iii software
software acquired on acquisition is valued on a replacement cost 
basis and is amortised over its expected useful life on a straight
line basis
iv noncompete agreements
value is attributable to contractual noncompete agreements 
acquired through acquisition to the extent that they ensure that 
the value paid for a business is not diminished by the previous 
owner or its employees taking away revenue through competition 
noncompete agreements are amortised over their useful lives on 
a straightline basis and removed when expired
the estimated useful lives for the group’s ﬁnite life intangible 
assets are
secured customer contracts 1–3 years
other contracts and  
related relationships 1–12 years
software 1–3 years
noncompete agreements 3 years
property plant and equipment
freehold and leasehold property plant machinery and 
equipment are stated at cost less accumulated depreciation and 
any recognised impairment loss depreciation is charged so as to 
write off the cost of the assets other than land over their 
estimated useful lives using the straightline method on the 
following basis
plant machinery  
and equipment between 83 and 33 per annum
freehold property 2 per annum
leasehold property over the period of the lease
assets held under ﬁnance leases are depreciated over their 
expected useful lives on the same basis as owned assets or where 
shorter over the term of the relevant lease residual values of 
property plant and equipment are reviewed and updated 
annually assets under construction are not depreciated until they 
become available for productive use
gains and losses on disposal are determined by comparing the 
proceeds from disposal against the carrying amount and are 
recognised in the income statement
investment property
investment property which is property held to earn rentals andor 
capital appreciation is stated at its fair value at the balance sheet 
date gains or losses arising from changes in the fair value of 
investment property are included in the income statement for the 
period in which they arise
shared equity scheme receivables
the group offers shared equity home ownership schemes under 
which qualifying home buyers can defer payment of part of the 
agreed sales price up to a maximum of 25 until the earlier of 10 
years remortgage or resale of the property on occurrence of one 
of these events the group will receive a repayment based on its 
contributed equity percentage and the applicable market value of 
the property as determined by a member of the royal institute of 
chartered surveyors early or part repayment is allowable under 
the scheme and amounts are secured by way of a second charge 
over the property the loans are noninterest bearing
the shared equity loans receivable are a hybrid ﬁnancial 
instrument consisting of an initial principal component and an 
embedded derivative fair value movements are recognised in 
proﬁt from operations and the resulting ﬁnancial asset is 
presented as a noncurrent receivable
inventories
inventories are stated at the lower of cost and net realisable value 
the cost of work in progress comprises raw materials direct 
labour other direct costs and related overheads net realisable 
value is the estimated selling price less applicable costs
trade receivables
trade receivables are initially recognised at fair value and are 
subsequently measured at amortised cost using the effective 
interest rate method with an appropriate allowance for estimated 
irrecoverable amounts recognised in the income statement when 
there is objective evidence that the asset is impaired
cash and cash equivalents
cash and cash equivalents comprise cash in hand demand 
deposits and other shortterm highly liquid investments that are 
readily convertible to a known amount of cash and are subject to 
an insigniﬁcant risk of change in value
trade payables
trade payables are recognised initially at fair value and are 
subsequently measured at amortised cost using the effective 
interest rate method
leased assets
a finance leases
leases in which the group assumes substantially all the risks and 
rewards incidental to ownership are classiﬁed as ﬁnance leases 
finance lease assets are recognised as assets of the group at an 
amount equal to the lower of their fair value and the present value 
of the minimum lease payments each determined at the inception 
of the lease subsequent to recognition ﬁnance lease assets are 
measured at cost less accumulated depreciation and impairment 
losses morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
79
the lease liability is included in the balance sheet as a ﬁnance 
lease liability lease payments are apportioned between ﬁnance 
charges and the reduction of lease liabilities so as to achieve a 
constant rate of interest on the remaining balance of the liability 
finance charges are charged directly to the income statement
b operating leases
rentals payable under operating leases are charged to the income 
statement on a straightline basis over the term of the relevant 
lease
retirement beneﬁt schemes
a deﬁned contribution plan
a deﬁned contribution plan is a postretirement beneﬁt plan 
under which the group pays ﬁxed contributions to a separate 
entity and has no legal or constructive obligation to pay further 
amounts the group recognises payments to deﬁned contribution 
pension plans as staff costs in the income statement as and when 
they fall due prepaid contributions are recognised as an asset to 
the extent that a cash refund or reduction on future payments is 
available
b deﬁned beneﬁt plan
a deﬁned beneﬁt plan is a postretirement plan other than a 
deﬁned contribution plan the group’s net liability is recognised in 
the balance sheet and is calculated by estimating the amount of 
future beneﬁt that employees have earned in return for their 
service in the current and prior periods and discounting this to its 
present value any unrecognised past service costs and the fair 
value of the plan’s assets are deducted
the calculation of the net liability is performed by a qualiﬁed 
actuary on an annual basis using the projected unit credit method 
the cost of the plan is charged to the income statement based  
on actuarial assumptions at the beginning of the ﬁnancial year 
where the calculation results in a beneﬁt to the group the asset 
recognised is limited to the net of the total unrecognised past 
service costs and the present value of any future refunds from the 
plan or reductions in future contributions to the plan
when the beneﬁts of the plan are improved the portion of 
increased beneﬁt relating to past service by employees is 
recognised in the income statement on a straightline basis over 
the average period until the beneﬁts become vested where the 
beneﬁts vest immediately the expense is recognised in the 
income statement immediately
actuarial gains and losses are recognised in full in the statement 
of comprehensive income in the period in which they occur  
net pension obligations are included in the balance sheet at  
the present value of the plan liabilities less the fair value of the 
plan assets
provisions
provisions are recognised when the group has a present legal or 
constructive obligation as a result of a past event it is probable 
that an outﬂow of resources will be required to settle the 
obligation and the amount of the obligation can be estimated 
reliably
impairment of ﬁnancial assets
financial assets other than shared equity assets are assessed for 
indicators of impairment at each balance sheet date financial 
assets are impaired where there is objective evidence that as a 
result of one or more events that occurred after the initial 
recognition of the ﬁnancial asset the estimated future cash ﬂows 
of the investment have been reduced for loans and receivables 
the amount of the impairment is the difference between the 
asset’s carrying amount and the present value of estimated future 
cash ﬂows discounted at the original effective interest rate
the carrying amount of ﬁnancial assets is reduced by the 
impairment loss directly for all ﬁnancial assets with the exception 
of trade receivables where the carrying amount is reduced 
through the use of a provision for impairment losses when a 
trade receivable is uncollectible it is written off against the 
provision subsequent recoveries of amounts previously written 
off are credited against the provision changes in the carrying 
amount of the allowance are recognised in the income statement
if in a subsequent period the amount of the impairment loss 
previously recognised decreases and this decrease can be 
objectively related to an event that occurred after the impairment 
was recognised the previously recognised impairment loss is 
reversed through the income statement
government grants
revenue arising from government grants is recognised on either a 
stage of completion or legal completion basis
sharebased payments
the group issues equitysettled and cashsettled sharebased 
payments share awards or share options to certain employees 
equitysettled sharebased payments are measured at fair value 
at the date of grant and are recognised as an employee expense 
with a corresponding increase in equity over the period from the 
date of grant to the date on which the employees become 
unconditionally entitled to the awards or options
cashsettled sharebased payments are measured at fair value  
at each balance sheet date and recognised as an expense with  
a corresponding increase in liabilities over the period from the 
date of grant to the date on which the employees become 
unconditionally entitled to the payment any changes in the fair 
value of the liability are recognised as an employee expense in the 
income statement fair value is measured by use of a modiﬁed 
blackscholes model none of these awards when granted was 
subject to a share price related performance condition
related national insurance contributions are accrued on the basis 
of the intrinsic value of outstanding sharebased payments and 
are remeasured at each reporting date
the group has applied the requirements of ifrs 2 ‘sharebased 
payments’ ‘ifrs 2’ in accordance with the transitional 
provisions ifrs 2 has been applied to all grants of equity 
instruments after 7 november 2002 that had not vested as  
of 1 january 2005
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 signiﬁcant accounting policies
for the year ended 31 december 2011
financial receivables
certain joint ventures’ ﬁnancial receivables are measured at fair 
value at the balance sheet date the fair value is determined by 
discounting the future cash ﬂows directly associated with the 
ﬁnancial receivables at a riskadjusted discount rate the change 
in fair value is recognised in equity to the extent of the group’s 
equity accounted investment
derivative ﬁnancial instruments and hedge accounting
derivative ﬁnancial instruments are used in joint ventures to 
hedge longterm ﬂoating interest rate and retail prices index 
‘rpi’ exposures and in group companies to manage their 
exposure to foreign exchange rate risk
under ias 39 ‘financial instruments recognition and 
measurement’ ‘ias 39’ interest rate rpi swaps and foreign 
exchange forward contracts are stated in the balance sheet at  
fair value at the inception of the hedge relationship the entity 
documents the relationship between the hedging instrument  
and the hedged item along with its risk management objectives 
and its strategy for undertaking various hedge transactions 
furthermore at the inception of the hedge and on an ongoing 
basis the group documents whether the hedging instruments 
that are used in hedging transactions are highly effective in 
offsetting changes in fair values or cash ﬂows of hedged items
where ﬁnancial instruments are designated as cash ﬂow  
hedges and are deemed to be effective gains and losses on 
remeasurement relating to the effective portion are recognised  
in equity and gains and losses on the ineffective portion are 
recognised in the income statement both to the extent of the 
group’s equity accounted investment
embedded derivatives are separated from the underlying  
host contract where the economic characteristics and risks  
of the host contract and the embedded derivative are not  
closely related except as is the case with the group’s shared 
equity loan receivables an election has been made to designate  
the ﬁnancial asset which contains an embedded derivative  
as fair value through proﬁt or loss as permitted by ias 39  
this designation can only be made at initial recognition  
and is irrevocable but can be made on a transactionby
transaction basis
dividends
dividends to the company’s shareholders are recognised  
as a liability in the consolidated ﬁnancial statements in the  
period in which the dividends are approved by the company’s 
shareholders
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
80 notes to the consolidated ﬁnancial statements
1 business segments
for management purposes the group is organised into ﬁve operating divisions construction and infrastructure fit out affordable 
housing urban regeneration and investments the divisions’ activities are as follows
  construction and infrastructure offers national design construction and infrastructure services to private and public sector 
customers the division works on projects of all sizes across a broad range of sectors including commercial defence education 
energy healthcare industrial leisure retail transport waste and water
  fit out specialises in ﬁt out and refurbishment projects in the office education retail technology and leisure sectors through 
overbury as a national ﬁt out company operating through multiple procurement routes and morgan lovell specialising in the design 
and build of offices in london and the south
  affordable housing specialises in the design and build refurbishment maintenance regeneration and repair of homes and 
communities across the uk the division operates a full mixedtenure model creating homes for rent shared ownership and open 
market sale
  urban regeneration specialises in working with landowners and public sector partners to unlock value from underdeveloped assets 
to bring about sustainable regeneration and urban renewal through the delivery of mixeduse projects typically creating commercial 
retail residential leisure and public realm facilities
  investments facilitates project development primarily in the public sector by providing ﬂexible ﬁnancing solutions and development 
expertise covering a wide range of markets including urban regeneration education healthcare housing emergency services 
defence and infrastructure
group activities represents costs and income arising from corporate activities which cannot be allocated to the operating segments 
these include costs for central activities such as treasury management corporate tax coordination insurance management pension 
administration and company secretarial and legal services the divisions are the basis on which the group reports its segment 
information segment information about the group’s continuing operations is presented below
2011 
 construction 
 and   affordable urban  group 
 infrastructure fit out housing regeneration investments activities  eliminations total 
 £m £m £m £m £m £m £m £m £m
revenue external 12678  4380  4623  566  19  –  22266  –  22266  
revenue intersegment 02  70  32  –  –  –  104  104 – 
included in proﬁtloss below 
share of results of associates  
 and joint ventures after tax –  –  01 12 16  –  03  –  03 
proﬁtloss from operations  
 before amortisation and  
 nonrecurring items 211  124  185  39  39 59 461  –  461  
amortisation of intangible  
 assets note 9 –  –  09 30 –  –  39 –  39 
nonrecurring items note 2 14 –  –  –  –  –  14 –  14
proﬁtloss from operations 197  124  176  09  39 59 408  –  408 
   
net ﬁnance expense       08  08
    
proﬁt before income tax expense       400   400 
    
during the year to 31 december 2011 and the year ended 31 december 2010 intersegment sales were charged at prevailing market 
prices and signiﬁcantly all of the group’s operations were carried out in the uk
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
81
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
1 business segments continued
2010
 construction 
 and   affordable urban  group 
 infrastructure fit out housing regeneration investments activities  eliminations total 
 £m £m £m £m £m £m £m £m £m
revenue external 12498  4151  3873  458  39  –  21019  –  21019  
revenue intersegment 496  35  22  –  –  –  553  553 – 
included in proﬁtloss below 
share of results of associates  
 and joint ventures after tax –  –  02 05 08 –  01  –  01 
proﬁtloss from operations  
 before amortisation and  
 nonrecurring items 269  148  161  20  33 41 524  –  524  
amortisation of intangible  
 assets note 9 05 –  03 47 –  –  55 –  55
nonrecurring items note 2 32 –  39 20  –  –  51 –  51
proﬁtloss from operations 232  148 119  07  33 41 418  –  418 
   
net ﬁnance expense       11  11
    
proﬁt before income tax expense       407   407 
    
2011 
 construction 
 and   affordable urban  group 
 infrastructure fit out housing regeneration investments activities total 
 £m £m £m £m £m £m £m
goodwill 1511  –  468  162  –  –  2141  
other intangible assets –  –  36  89  –  –  125  
equity accounted joint ventures –  –  –  269  229  –  498  
other assets 4362  1052  2218  316  109 632 7207 
total assets 5873  1052  2722  836  120  632 9971  
total liabilities 4484 835 1753 267 175 101 7615 
other information               
amortisation of intangible  
 assets note 9 –  –  09  30  –  –  39  
depreciation note 10 58  08  21  02  –  06  95  
property plant and equipment  
 additions note 10 31  05  24  –  –  06  66 
2010 restated 
 construction 
 and   affordable urban  group 
 infrastructure fit out housing regeneration investments activities total 
 £m £m £m £m £m £m £m
goodwill 1511  –  468  164  –  –  2143  
other intangible assets 01  –  44  121  –  –  166  
equity accounted joint ventures –  –  –  283  171  –  454  
other assets 4188  1189  2290  217  05  423 7466 
total assets 5700   1189  2802  785  176  423 10229  
total liabilities 4497 991 1904 136 196 288 8012 
other information               
amortisation of intangible  
 assets note 9 05  –  03  47  –  –  55  
depreciation note 10 67  10  03  02  01  05  88  
property plant and equipment  
 additions note 10 39  02  02  –  –  02  45 
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
82 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
83
2 proﬁt for the year
proﬁt before income tax expense for the year is stated after chargingcrediting
     2011  2010  
     £m £m
nonrecurring items see below     14  51  
depreciation of property plant and equipment note 10     95  88  
gain on disposal of property plant and equipment     10 05 
staff costs note 4     3784  3684  
amortisation of intangible assets note 9     39  55  
decrease in fair value of investment property     02  –  
impairment of raw materials recognised as an expense     08  –  
write back of trade receivables note 29     03 06 
auditor’s remuneration for audit and other services see below     10  11 
a more detailed analysis of nonrecurring items is provided below
     2011  2010  
     £m £m
acquisition related costs     –  39  
integration costs     14  32  
oneoff gain from a bargain purchase     –  20
total nonrecurring items     14  51 
total nonrecurring items post income tax     10  40 
additionally there was a nonrecurring credit to the tax charge of £28m 2010 £nil note 6
a more detailed analysis of auditor’s remuneration is provided below
     2011  2010  
     £m £m
fees payable to the company’s auditor and associates for the audit of  
 the company’s annual report and accounts     01  01  
the audit of the company’s subsidiaries and joint ventures     08  09 
total audit fees     09  10 
other services     01  –  
services to joint ventures relating to tax compliance     –  01 
total nonaudit fees     01  01 
total auditor’s remuneration     10  11 
3 employees
the average monthly number of people employed by the group during the year was
     2011  2010  
     no no
construction and infrastructure     3899  4807  
fit out     596  549  
affordable housing     2136  2204  
urban regeneration     50  50  
investments     40  33  
group activities     23  19 
     6744  7662 
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
84
4 staff costs
     2011  2010  
     £m £m
wages and salaries     3354  3243  
social security costs     334  346  
other pension costs     96  95 
     3784  3684 
5 finance income and costs
     2011  2010  
     £m £m
interest income on bank deposits     02  02  
other interest income     05  02  
interest receivable from joint ventures     09  13 
finance income     16  17 
interest payable on bank overdrafts and borrowings     07 –  
interest payable on ﬁnance leases     05 05 
loan arrangement and commitment fees     12 17 
other interest payable     –  06
finance costs     24 28
net ﬁnance costs     08 11
6 income tax expense
     2011  2010  
     £m £m
current tax expense 
uk corporation tax     100  117  
adjustment in respect of prior years as set out below     251 14
     151 103 
deferred tax expense 
current year     10 01  
adjustment in respect of prior years as set out below     233  05 
     223  06 
income tax expense for the year     72  109 
corporation tax is calculated at 265 2010 280 of the estimated assessable proﬁt for the year
the total tax charge for the year of £72m is lower than the standard rate of corporation tax in the uk of 265 2010 280  
the difference can be reconciled as follows
     2011  2010  
     £m £m
current tax expense  
proﬁt before tax     400  407  
uk corporation tax rate     265 280 
income tax expense at uk corporation tax rate     106  114 
tax effect of 
expenses that are not deductible in determining taxable proﬁts     03  08  
agreement with hmrc see below     28 –  
other adjustments in respect of prior years     05 09 
other effect of expected forthcoming change in tax rates  
upon closing deferred tax balance     01 01 
other     03 05
income tax expense for the year     72  109 
effective tax rate for the year     180 268 
effective tax rate for the year ignoring prior year adjustments     263 290 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
85
6 income tax expense continued
during the year the group resolved its discussions with hmrc concerning corporation tax matters arising following the acquisition  
of certain businesses and assets from amec in 2007 this agreement with hmrc resulted in a signiﬁcant deferral of the group’s tax 
liabilities this agreement is shown in the ﬁgures above through a reduction in current tax liabilities of £219m shown as prior year 
adjustments offset by an increase in deferred tax liabilities of £191m calculated at 25 tax rate mainly shown as prior year 
adjustments the net effect a £28m reduction in the tax charge is due to reductions in uk corporation tax rates since 2007 as the 
release of provisions for current taxation is calculated using higher tax rates than the 25 tax rate used for calculation of the closing  
2011 deferred tax balances
7 dividends 
amounts recognised as distributions to equity holders in the year
     2011  2010  
     £m £m
second interim dividend for the year ended 31 december 2010 of 300p  
 2009 second interim dividend 300p per share     127  127  
interim dividend for the year ended 31 december 2011 of 120p  
 2010 120p per share     51  51 
     178  178 
proposed dividend
     £m £m
proposed ﬁnal dividend for the year ended 31 december 2011 of 300p  
 2010 second interim dividend of 300p per share     128  128 
the proposed ﬁnal dividend of 300p 2010 second interim dividend of 300p per share is subject to approval by shareholders at the 
annual general meeting and has not been included as a liability in these ﬁnancial statements the proposed ﬁnal dividend will be paid  
on 18 may 2012 to shareholders on the register at 27 april 2012 the exdividend date will be 25 april 2012
8 earnings per share
there are no discontinued operations in either the current or comparative years
the calculation of the basic and diluted earnings per share is based on the following data
     2011  2010  
    notes £m £m
earnings  
earnings before tax     400  407  
deduct tax expense per the income statement    6 72 109 
noncontrolling interests     01  01 
earnings for the purposes of basic and dilutive earnings per share  
 being net proﬁt attributable to owners of the company     329  299  
add back 
 amortisation expense    2  9 39  55  
nonrecurring items after tax    2 10  40  
deduct 
 nonrecurring credit to tax charge    6 28 – 
earnings for the purposes of adjusted basic and dilutive earnings  
 per share being net proﬁt attributable to owners of the company  
 adjusted for amortisation expense and nonrecurring items     350  394 
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
86
8 earnings per share continued
     2011  2010  
     no ‘000s no ‘000s
number of shares 
weighted average number of ordinary shares for the purposes  
 of basic earnings per share     42442  42391  
effect of dilutive potential ordinary shares 
 share options     204  93  
 conditional shares not vested     357  389 
weighted average number of ordinary shares for the purposes  
 of diluted earnings per share     43003  42873 
the average market value of the company’s shares for the purpose of calculating the dilutive effect of share options and longterm 
incentive plan shares was based on quoted market prices for the year that the options were outstanding the weighted average share 
price for the year was £630 2010 £593
earnings per share as calculated in accordance with ias 33 ‘earnings per share’ are disclosed below
     2011  2010 
basic earnings per share     775p 705p 
diluted earnings per share     765p 697p
 
earnings per share adjusted for amortisation expense and nonrecurring items
     2011  2010 
basic earnings per share adjusted for amortisation  
expense and nonrecurring items     825p 929p 
diluted earnings per share adjusted for amortisation  
expense and nonrecurring items     814p 919p
a total of 2311976 share options that could potentially dilute earnings per share in the future were excluded from the above calculations 
because they were antidilutive at 31 december 2011 2010 2246025
9 goodwill and other intangible assets
 other intangible assets 
  
  other 
 secured contracts   total other 
 customer and related  noncompete intangible restated 
 contracts relationships software agreements assets goodwill 
 £m £m £m £m £m £m
cost or valuation 
balance at 1 january 2010 42  269  09  50  370  1934  
additions in the year –  58  –  08  66  302  
disposals during the year –  20 –  –  20 03
balance at 31 december 2010 42  307  09  58  416  2233 
balance at 1 january 2011 42  307  09  58  416  2233  
additions in the year note 25 –  09  –  –  09  –  
disposals during the year note 25 –  16 –  –  16 02 
expired –  –  –  50 50 – 
balance at 31 december 2011 42  300  09  08  359  2231 
accumulated amortisation 
balance at 1 january 2010 39 115 09 41 204 90 
amortisation charge for the year 03 41 –  11 55 –  
disposals during the year –  09  –  –  09  – 
balance at 31 december 2010 42 147 09 52 250 90
balance at 1 january 2011 42 147 09 52 250 90 
amortisation charge for the year –  36 –  03 39 –  
disposals during the year –  05  –  –  05  –  
expired –  –  –  50  50  – 
balance at 31 december 2011 42 178 09 05 234 90
carrying amount 
carrying amount at 31 december 2011 –  122  –  03  125  2141  
carrying amount at 31 december 2010 –  160  –  06  166  2143  9 goodwill and other intangible assets continued
in the course of the year fair values on the acquisition of the business obligations and certain assets from the administrators of 
connaught partnerships limited in 2010 were ﬁnalised leading to a restatement of the 2010 comparative balance sheet details are 
included in note 25
other contracts and related relationships arise from valuing the relationship with a number of clients where there is a secured pipeline  
of work or historic experience of a relationship and the real prospective opportunity of repeat work following a review of estimated 
useful lives other contracts and related relationships will be fully amortised by 2019
secured customer contracts were fully amortised by 31 december 2010
the group acquired a noncompete agreement with a cost of £08m as a result of the acquisition of powerminster gleeson services 
limited on 30 june 2010 note 25 this is of three years duration and is being amortised on a straightline basis
goodwill represents the value of people track record and expertise acquired within acquisitions that are not capable of being 
individually identiﬁed and separately recognised
included within goodwill is goodwill not deductible for tax purposes of £259m 2010 £268m
segmentation of goodwill and other intangible assets is disclosed in note 1
note 25 provides further details in respect of the fair value of intangible assets identiﬁed on acquisition and for the determination of 
goodwill arising on acquisition amortisation charges in respect of intangible assets with a ﬁnite life are recorded within administrative 
expenses in the income statement the amortisation rates are given in the signiﬁcant accounting policies
in testing goodwill and other intangible assets for impairment the carrying value of goodwill and other intangible assets in each 
cashgenerating unit has been compared against value in use value in use has been determined by using forecast pretax cash ﬂows 
from board approved budgets for the next three years and extrapolating future growth and applying riskadjusted discount rates that 
are speciﬁc to the cashgenerating unit in question
cash ﬂows beyond three years have been extrapolated using an estimated growth rate of 230 2010 250 which is equal to the  
hm treasury’s november 2011 mediumterm forecast for the uk economy the riskadjusted nominal discount rates used are 12  
2010 12 for construction and infrastructure 13 2010 13 for affordable housing and 15 2010 15 for urban regeneration 
the directors have reviewed the rates used and believe they are still appropriate
the key assumptions in forecasting pretax cash ﬂows relate to future budgeted revenue margin likely to be achieved and likely rates  
of longterm growth by market sector budgeted revenue and margin are based on views on past performance secured workload and 
workload likely to be achievable in the short to mediumterm given trends in the relevant market sector as well as macroeconomic 
factors in carrying out this exercise no impairment of goodwill or other intangible assets has been identiﬁed
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
87
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
88
10 property plant and equipment
  owned plant leased plant  
  machinery  machinery freehold  
  and  and property leased 
  equipment equipment and land property total 
  £m £m £m £m £m
cost 
balance at 1 january 2010  440  132  24  86  682  
additions in the year  28  07  –  10  45  
additions through acquisitions  14  –  –  –  14  
transfers  08  08 –  –  –  
disposals during the year  27 03 –  02 32
balance at 31 december 2010  463  128  24  94  709 
balance at 1 january 2011  463  128  24  94  709  
additions in the year  54  –  –  12  66  
transfers  01  01 –  –  –  
disposals during the year  136 48 –  06 190
balance at 31 december 2011  382  79  24  100  585 
accumulated depreciation 
balance at 1 january 2010  288 35 –  46 369 
depreciation charge for the year  59 15 –  14 88 
transfers  06 06  –  –  –  
disposals during the year  22  02  –  02  26 
balance at 31 december 2010  331 42 –  58 431
balance at 1 january 2011  331 42 –  58 431 
depreciation charge for the year  71 12 –  12 95  
transfers  01 01  –  –  –  
disposals during the year  118  33  –  06  157 
balance at 31 december 2011  285 20 –  64 369
net book value 
net book value at 31 december 2011  97  59  24  36  216  
net book value at 31 december 2010  132  86  24  36  278 
within the carrying value of property plant and equipment there are no assets under construction 2010 £nil
contractual commitments for the acquisition of property plant and equipment are £nil 2010 £01m
11 investment property
     2011  2010  
     £m £m
valuation 
at 1 january     43  18  
additions in the year     70  25  
revaluation in the year     02 – 
at 31 december     111  43 
investment properties comprise certain residential properties constructed by the group as part of larger mixedtenure projects for 
rental to social or private residential clients
the fair value of the group’s investment property at 31 december 2011 is based on a valuation carried out at that date by the directors 
the valuation which conforms to international valuation standards was determined by reference to market evidence of transaction 
proceeds for similar properties
the property rental income earned by the group from its investment property which is leased out under operating leases amounted to 
£04m 2010 £01m direct operating expenses arising on the investment property in the year amounted to £02m 2010 £01m 12 investments in equity accounted joint ventures
the group has the following interests in signiﬁcant joint ventures
access for wigan holdings limited 50 share
access for wigan holdings limited is a joint venture with hochtief ppp solutions uk ltd and is developing the wigan life centre
ashton moss developments limited 50 share
ashton moss developments limited is a joint venture with stayley developments and has developed a mixeduse site in manchester
blue light holdings limited 50 share
blue light holdings limited is a joint venture with infrastructure investments limited partnership set up to hold the investment in a joint 
venture with carden croft for the dorset emergency services pfi scheme on 15 february 2012 the group disposed of its interest in 
blhl see note 30
bromley park limited 50 share
bromley park limited is a joint venture with taylor wimpey and has developed a site for housing in kent acquired from the ministry of 
defence
claymore roads holdings limited 50 share
claymore roads holdings limited is a joint venture with infrastructure investments portal limited partnership and is responsible for 
the upgrade and operation of the a92 between dundee and arbroath in scotland
community solutions investment partners limited 50 share
community solutions investment partners limited is a joint venture with barclays european infrastructure fund ii limited partnership 
and carries out strategic development and regeneration projects in the health sector
english cities fund 125 equity participation
english cities fund is a limited partnership with english partnerships and legal  general to develop mixeduse regeneration schemes 
in assisted areas joint control is exercised through the board of the general partner at which each partner is represented by two 
directors and no decision can be taken without the agreement of a director representing each partner
hull esteem consortium psp limited 33⅓ share
hull esteem consortium psp limited is the private sector investor in the hull bsf scheme with three schools currently in operation  
six under construction and with a pipeline of a further six the other investors in this company are robertson capital projects limited 
sewell education hull bsf limited and hull city council
isis waterside regeneration 25 equity participation
isis waterside regeneration is a limited partnership between british waterways and warp 4 limited partnership itself a joint venture 
between aviva fund management and muse developments to undertake regeneration of waterside sites joint control is exercised 
through the board of the general partner at which each of british waterways and warp 4 limited partnership is represented by three 
directors and no decision can be taken without the agreement of a director representing each partner
lewisham gateway developments limited 50 share
lewisham gateway developments limited is a joint venture with taylor wimpey and is redeveloping a mixeduse site comprising retail 
office hotel residential education health and leisure space
lingley mere business park development company limited 50 share
lingley mere business park development company limited is a joint venture with united utilities and is developing new office space 
and ancillary facilities at warrington in cheshire
morganvinci limited 50 share
morganvinci limited is a joint venture with vinci newport dbfo ltd and is responsible for the construction and operation of the 
newport southern distributor road
north shore development partnership limited
north shore development partnership limited was a joint venture with urban splash and is creating a high quality extension to 
stocktonontees’ town centre in partnership with tees valley regeneration stockton council and english partnerships on 24 january 
2011 this joint venture became a wholly owned subsidiary of the group note 25
renaissance miles platting limited 33⅓ share
renaissance miles platting limited is a joint venture with iic miles platting equity limited and adactus housing association to refurbish 
existing homes and build new homes on a mixedtenure development under a pfi arrangement for manchester city council
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
89
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
90
12 investments in equity accounted joint ventures continued
st andrews brae developments limited 50 share
st andrews brae developments limited is a joint venture with miller homes and is securing planning permission for residential 
development
taycare health holdings limited 50 share
taycare health holdings limited is a joint venture with robertson capital projects investments limited and has invested 50 in a 
nonproﬁt distributing project to develop two mental health hospitals for tayside health board
the bournemouth development company llp 50 share
the bournemouth development company llp is a partnership with bournemouth borough council to operate a local asset backed 
vehicle labv developing a series of sites in bournemouth over a twenty year period
the compendium group limited 50 share
the compendium group limited is a joint venture with the riverside group limited and is a company formed to carry out strategic 
development and regeneration projects of a primarily residential nature
investments in equity accounted joint ventures are as follows
     2011  2010 
     £m £m
at 1 january     454  502  
equity accounted share of net proﬁts for the year     03  01  
increase in investment     60  43  
disposals note 25     09 58 
dividends received     03 20 
movement on cash ﬂow hedges     07 14
at 31 december     498  454 
the increase in investments in joint ventures during the year was mainly due to equity and loan investment in access for wigan 
holdings limited cash investment in st andrews brae developments limited and loan investment in community solutions investment 
partners limited
of the dividends received in the year £03m 2010 £08m were paid in cash and £nil 2010 £12m through settlement of amounts 
owing to joint ventures
financial information related to equity accounted joint ventures
     2011  2010  
     £m £m
noncurrent assets 100     4762  2968  
current assets 100     3637  3769  
current liabilities 100     1342 923 
noncurrent liabilities 100     5745 4584
net assets reported by equity accounted joint ventures 100     1312  1230 
revenue 100     969  1489  
expenses 100     966 1485
net proﬁt 100     03  04 
 
results of equity accounted joint ventures
     2011  2010  
     £m £m
group share of proﬁt before tax     18  06  
group share of income tax expense     15 05 
group share of proﬁt after tax     03  01 
 
commitments in respect of interests in joint ventures
     2011  2010  
     £m £m
commitment to provide further equity to urban regeneration joint ventures     –  08  
commitment to provide further equity and subordinated debt  
 to pfippp joint ventures     74  120 
     74  128  morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
91
13 shared equity loan receivable
     2011  2010  
     £m £m
balance at 1 january     139  90  
additions arising from the sale of properties     49  40  
additions through acquisitions     –  06  
movement in fair value     09 03  
repayments     03 – 
balance at 31 december     176  139 
the group has elected to recognise the shared equity loan receivables at fair value through proﬁt or loss under ias 39 this is an 
irrevocable election and results in all movements in the fair value of the loans being recognised in proﬁt or loss
all of the shared equity loan receivables are secured by way of a second charge over the property during the year there were no 
defaults on any of the shared equity loans 2010 £nil and there were repayments of shared equity loan receivables in the year of £03m 
2010 £nil all repayments were at values at or above the values held in the accounts the group’s maximum credit exposure is limited 
to the carrying value of the shared equity loan receivables granted
basis of valuation and assumptions made
because there is no directly observable fair value for individual loans arising from the sale of speciﬁc properties under the scheme  
the group has developed a model for determining the fair value of the portfolio of loans based on national property prices expected 
property price increases expected loan defaults and a discount factor which reﬂects the interest rate expected on an instrument  
of similar risk and duration in the market details of the key assumptions made in this valuation are as follows
     2011  2010 
assumption 
period over which shared equity loan receivables are discounted     7 years 7 years 
weighted average annual property price increase assumed     25 38 
nominal discount rate applied to initial shared equity receivable     58 66 
rate of delinquency assumed in valuation of shared equity loan portfolio     00 00
at 31 december 2011 a total of 618 2010 462 properties had been sold under the shared equity scheme for which a loan was 
outstanding at the year end
at 31 december 2011 the weighted average shared equity loan contribution being the group’s weighted average loan as a proportion 
of the selling price of a property was 24 2010 25 the maximum loan contribution by the group under the shared equity scheme 
is 25 2010 25
the fair value measurement for shared equity loan receivables is classiﬁed as level 3 as deﬁned by ifrs 7 ‘financial instruments 
disclosures’
sensitivity analysis
at 31 december 2011 if the nominal interest rate had been 12 higher at 70 and all other variables were held constant the group’s 
house price linked ﬁnancial assets and liabilities which are solely shared equity loan receivables would decrease in value excluding the 
effects of tax by £09m with a corresponding reduction in both the result for the year and equity
at 31 december 2011 if the period over which the shared equity loan receivables are discounted had been 10 years and all other 
variables were held constant the group’s house price linked ﬁnancial assets and liabilities which are solely shared equity loan 
receivables would decrease in value excluding the effects of tax by £15m with a corresponding reduction in both the result for  
the year and equity
14 inventories
     2011  2010  
     £m £m
raw materials     –  22  
development work in progress     1460  1389 
     1460  1411 
work in progress comprises land and housing commercial and mixed developments in the course of construction
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
92
15 trade and other receivables
     2011  2010  
     £m £m
trade receivables note 29     1682  2097  
provision for impairment losses note 29     09 20
     1673  2077  
amounts owed by joint ventures note 28     36  98  
prepayments and accrued income     64  55  
other receivables     92  62 
     1865  2292 
the directors consider that the carrying amount of trade and other receivables approximates to their fair value
the average credit period on revenue is 15 days 2010 23 days no interest is charged on the trade receivables outstanding balance 
trade receivables overdue are provided for based on estimated irrecoverable amounts
included in the group’s trade receivable balance are debtors with a carrying amount of £470m 2010 £500m which are past due at 
the reporting date for which the group has not provided as there has not been a signiﬁcant change in credit quality and the group 
considers that the amounts are still recoverable the average age of these receivables is 161 days 2010 120 days
the group’s exposure to credit risks and impairment losses related to trade and other receivables are disclosed in note 29 financial 
instruments
in determining the recoverability of trade receivables the group considers any change in the credit quality of the trade receivable from 
the date credit was initially granted up to the reporting date the concentration of credit risk is limited due to the customer base being 
large and spread across the group’s operating segments accordingly the directors believe that there is no further credit provision 
required in excess of the provision for impairment losses no collateral is held by the group as security
within the provision for impairment losses there are no speciﬁc trade receivables 2010 £nil from debtors which have been placed into 
liquidation or administration
at the reporting date there were no trade and other receivables which have had renegotiated terms that would otherwise have been 
past due
16 construction contracts
     2011  2010  
     £m £m
amounts due from construction contract customers     2286  1784  
amounts due to construction contract customers     788 707
carrying amount at the end of the year     1498  1077  
contract costs incurred plus recognised proﬁts  
less recognised losses to date     92277  74977  
less progress billings     90779 73900
     1498  1077 
contract costs incurred plus recognised proﬁts less recognised losses to date and progress billings include contract activity which the 
group has not recognised in the income statement as it occurred prior to historic acquisitions
amounts recoverable on construction contracts are stated at cost plus the proﬁt attributable to that contract less any impairment 
losses progress payments for construction contracts are deducted from amounts recoverable amounts due to construction contract 
customers represent amounts received in excess of revenue recognised on construction contracts
at 31 december 2011 retentions held by customers for contract work amounted to £584m 2010 £571m morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
93
17 trade and other payables
     2011  2010  
     £m £m
trade payables note 29     1823  1499  
amounts owed to joint ventures note 28     08  08  
other tax and social security     113  204  
accruals and deferred income     4096  4807  
other payables     169  154 
     6209  6672 
trade payables are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate 
method
the directors consider that the carrying amount of trade payables approximates to their fair value the average credit period taken for 
trade purchases is 28 days 2010 25 days no interest was incurred on outstanding balances the group has ﬁnancial risk management 
policies in place to ensure that all payables are paid when due except in cases of genuine dispute
noncurrent liabilities include trade and other payables of £03m 2010 £nil that fall due between two and ﬁve years
18 finance lease liabilities
 minimum lease capital element  
 payments of lease payments
 
 
 
 
   2011  2010  2011  2010  
   £m £m £m £m
amounts payable under ﬁnance leases 
within one year   10  21  08  17  
in the second to ﬁfth years inclusive   41  50  35  42  
after more than ﬁve years   08  19  08  18 
   59  90  51  77 
less future ﬁnance charges   08 13 na na
present value of lease obligations   51  77  51  77 
current lease liability     08  17  
noncurrent lease liability     43  60 
     51  77 
it is the group’s policy to lease certain of its property plant and equipment under ﬁnance leases the average lease term is six years 
2010 six years for the year ended 31 december 2011 the average effective borrowing rate was 5 2010 5 interest rates are ﬁxed 
at the contract date all leases are on a ﬁxed repayment basis and no arrangements have been entered into for contingent rental 
payments
all lease obligations are denominated in sterling the fair value of the group’s lease obligations approximates to their carrying amount 
the group’s obligations under ﬁnance leases are secured on the assets to which the leases relate
19 retirement beneﬁt schemes
deﬁned contribution plans
i the morgan sindall retirement beneﬁts plan
the morgan sindall retirement beneﬁts plan ‘the plan’ was established on 31 may 1995 and currently operates on deﬁned contribution 
principles for employees of the group the assets of the plan are held separately from those of the group in funds under the control of 
the trustees of the plan the total cost charged to the income statement of £92m 2010 £92m represents contributions payable to 
the deﬁned contribution section of the plan by the group
as at 31 december 2011 contributions of £09m 2010 £10m were due in respect of december’s contribution not paid over to the plan 
the company with the consent of the trustees can decide how to use monies held in a deﬁned contribution general account
ii local government pension schemes
the group makes contributions on deﬁned contribution principles to a number of local government pension schemes ‘lgps’ for 
employees who have transferred to the group from other employers the assets of these plans are held separately from those of the 
group under the control of the trustees of the lgps the total cost charged to the income statement of £03m 2010 £01m represents 
contributions payable to these lgps by the group
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
94
19 retirement beneﬁt schemes continued
deﬁned beneﬁt plans
the plan includes a deﬁned beneﬁt section comprising liabilities and transfers of funds representing the accrued beneﬁt rights of active 
and deferred members and pensioners of pension plans of companies which are now part of the group these include salary related 
beneﬁts for members in respect of beneﬁts accrued before 31 may 1995 and beneﬁts transferred in from the snape group limited 
retirement beneﬁts scheme include accruals up to 1 august 1997 no further deﬁned beneﬁt membership rights can accrue after 
those dates
the most recent valuation of the plan assets and the present value of the deﬁned beneﬁt liabilities was prepared at 31 december 2011 
the present value of the deﬁned beneﬁt liabilities the related current service cost and past service cost were measured using the 
projected unit credit method
     2011  2010  
      
key assumptions used 
discount rate     47  54  
expected return on the plan assets     38  48  
expected rate of salary increases     41  46  
future pension increases
a
     35  35  
inﬂation increases     31  36 
a
 depending on their date of joining members receive ﬁxed pension increases of 30 or 35
life expectancy
for the disclosures as at 31 december 2011 the s1nxa series of tables 31 december 2010 the s1nxa series of tables from the 
continuous mortality investigation were adopted appropriate to members’ actual years of birth and with a 95 scaling factor for males 
and 100 for females medium cohort projections with a minimum underpin of 15 were adopted for future improvements in life 
expectancy
the average life expectancy in years of a pensioner retiring at age 65 on the balance sheet date is as follows
     2011  2010 
male     871  871  
female     896  896 
the average life expectancy in years of a pensioner retiring at age 65 20 years after the balance sheet date is as follows
     2011  2010 
male     900  900  
female     925  925 
an increase of one year to the average life expectancy at 65 would increase the present value of the plan liabilities by around 30
the amount included in the balance sheet arising from the group’s liabilities in respect of the plan is as follows
     2011  2010  
     £m £m
present value of the plan liabilities     94 85 
fair value of the plan assets     81  66 
deﬁcit in the plan liability recognised in the balance sheet     13 19
amounts recognised in the income statement in respect of the plan are as follows
     2011  2010  
     £m £m
interest cost     04 05 
expected return on the plan assets     03  03 
net periodic cost     01 02
the charge for the year has been included in administrative expenses actuarial gains and losses have been reported in the statement of 
comprehensive income the actual return on the plan assets was a gain of £08m 2010 £02m morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
95
19 retirement beneﬁt schemes continued
movements in the present value of the plan liabilities were as follows
     2011  2010  
     £m £m
liabilities at 1 january     85 89 
interest cost     04 05 
actuarial lossgain     07 06  
beneﬁts paid     02  03 
liabilities at 31 december     94 85
the liabilities in respect of pensions in payment account for around 35 of the total liabilities 2010 35 the average term to retirement 
is 74 years for active members ie members who are still employed by the group and whose past service beneﬁts are linked to their 
ﬁnal salary but are no longer accruing ﬁnal salary beneﬁts 2010 75 years and 63 years 2010 64 years for deferred members
movements in the value of the plan assets were as follows
     2011  2010  
     £m £m
assets at 1 january     66  57  
expected return on the plan assets     03  03  
actuarial gain     07  02  
contributions from sponsoring company     07  07  
beneﬁts paid     02 03
assets at 31 december     81  66 
 
the effect of a 1 movement in the key ﬁnancial assumptions is set out below
     increase decrease 
     of 1 of 1 
     £m £m
discount rate 
effect on interest cost     –  –  
effect on the deﬁned beneﬁt obligation     16 19 
inﬂation rate 
effect on interest cost     –  –  
effect on the deﬁned beneﬁt obligation     05  05
expected rate of return on assets 
effect on the expected return on the plan assets     01  01
the sensitivities to the interest cost and expected return on assets shown above relate to the calendar year ending 31 december 2012 
the sensitivities to the deﬁned beneﬁt obligation relate to the liability as at 31 december 2011
     2011  2010  
     £m £m
actuarial loss recognised in the statement of comprehensive income     –  08 
cumulative actuarial loss recognised in the statement  
of comprehensive income     30  30 
the plan assets and the expected rate of return at the balance sheet date were as follows
 fair value of assets expected return
 
 
 
 
   2011  2010  2011  2010  
   £m £m  
fixed interest gilts   41  33  30  42  
corporate bonds   40  33  47  54 
   81  66 
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
96
19 retirement beneﬁt schemes continued
the expected return on the plan assets is determined by considering the expected returns available on the assets underlying the current 
investment policy expected yields on ﬁxed interest investments are based on gross redemption yields as at the balance sheet date
the plan does not hold any ﬁnancial instruments issued by morgan sindall group plc and does not hold any property or other assets 
used by morgan sindall group plc
the history of experience adjustments is as follows
  2011  2010  2009  2008  2007 
  £m £m £m £m £m
present value of the plan liabilities  94 85 89 80 80 
fair value of the plan assets  81  66  57  50  47 
deﬁcit in the plan  13 19 32 30 33
experience adjustments on the plan liabilities 
amount  07 06  08 02  04 
percentage of the plan liabilities  77 67 89 19 44 
experience adjustments on the plan assets 
amount  07  02  02  03 05 
percentage of the plan assets  93 36 26 66 110
the amount of contributions expected to be paid to the plan during 2012 is £07m 2011 £07m
local government pension schemes
the group has liabilities to deﬁned beneﬁt schemes for employees who have transferred to the group under tupe arrangements the 
amount of any liabilities to fund these deﬁcits on termination of the contractor admission agreement is capped at £02m 2010 £01m 
these liabilities are not included in any of the disclosures above
20 deferred tax
  noncurrent  shortterm retirement share 
  asset  timing beneﬁt based 
  amortisation differences obligation payments total 
  £m £m £m £m £m
at 1 january 2010  17  06  09  06  38  
creditcharge to income statement  02  07 01 01  05 
chargecredit to equity  –  –  03 06  03  
acquisition of subsidiary  03 –  –  –  03 
effect of change in tax rate 
income statement  01 –  –  –  01
at 31 december 2010  15  01 05  13  32 
at 1 january 2011  15  01 05  13  32  
charge to income statement  234 03 01 –  238 
charge to equity  –  –  01 05 06 
effect of change in tax rate 
 income statement  15  –  –  –  15  
 equity  –  –  –  01 01
at 31 december 2011  204 04 03  07  198
certain deferred tax assets and liabilities have been offset the following is the analysis of the deferred tax balances after offset for 
ﬁnancial reporting purposes
     2011  2010  
     £m £m
deferred tax within noncurrent assets     –  32  
deferred tax within provisions     198 – 
at 31 december 2011 the group had unused tax losses of £06m 2010 £06m available for offset against future proﬁts no deferred 
tax asset has been recognised in respect of such losses due to the unpredictability of future proﬁt streams against which these losses 
may be utilised losses may be carried forward indeﬁnitely
the uk corporation tax rate is set to reduce to 25 in april 2012 affecting the closing deferred tax balances as shown above further 
reductions in the uk corporation tax rate to 23 are expected but not yet legislated the closing net deferred tax liability would reduce 
by £16m to £182m if these further expected changes were taken into account morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
97
21 provisions
current liabilities
    contract employee  
    provisions provisions total 
    £m £m £m
at 1 january 2010    –  –  –  
additions restated note 25    118  157  275  
utilised    75 123 198
at 31 december 2010 restated note 25    43  34  77 
at 1 january 2011    43  34  77  
utilised    31 –  31
at 31 december 2011    12  34  46 
in the course of the year fair values on an acquisition in 2010 were ﬁnalised leading to a restatement of the 2010 comparative balance 
sheet details are included in note 25
the contract provisions were established on acquisition to reﬂect the fair value of novated contracts employee provisions relate to 
redundancy and other costs associated with contracts that did not novate
noncurrent liabilities
   employee insurance 
   provisions provisions other total 
   £m £m £m £m
at 1 january 2010   17  100  51  168  
utilised   20 17 25 62 
additions   18  30  18  66 
released   08 –  10 18
at 31 december 2010   07  113  34  154 
at 1 january 2011   07  113  34  154  
utilised   –  18 08 26 
additions   –  32  66  98  
released   –  05 01 06
at 31 december 2011   07  122  91  220 
employee provisions comprise obligations to former employees other than retirement or postretirement obligations insurance 
provisions include £19m 2010 £19m held in the group’s captive insurance company newman insurance company limited and 
comprise the group’s self insurance of certain risks other provisions include onerous lease commitments and legal claims
the majority of the provisions are expected to be utilised within ﬁve years
22 operating lease commitments
     2011  2010  
     £m £m
minimum lease payments under operating leases recognised as an expense for the year    110  172 
at 31 december 2011 the group had outstanding commitments for minimum lease payments under noncancellable operating leases 
which fall due as follows
 2011  2010 
 
 
 
 
 land and   land and 
 buildings other total buildings other total 
 £m £m £m £m £m £m
within one year 60  16  76  69  27  96  
within two to ﬁve years 152  15  167  175  28  203  
after more than ﬁve years 19  –  19  52  –  52 
at 31 december 231  31  262  296  55  351 
operating lease payments represent rentals payable by the group for certain properties and other items leases are negotiated for an 
average term of ﬁve years 2010 three years and rentals are ﬁxed for an average of four years 2010 two years
the total of future minimum sublease payments expected to be received under noncancellable subleases at 31 december 2011 is £04m 
2010 £09m
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
98
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
23 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 surety bond facilities guarantees and claims under contracting  
and other arrangements including joint arrangements and joint ventures entered into in the normal course of business
as at 31 december 2011 contract bonds in issue under uncommitted facilities covered £2041m 2010 £1718m of contract 
commitments of the group
24 share capital
 2011   2010 
 
 
 
 
   no ‘000s £’000s no ‘000s £’000s
issued and fully paid 
at the beginning of the year   43188  2159  43160  2158  
exercise of share options   27  1  28  1 
at the end of the year   43215  2160  43188  2159 
the company has one class of ordinary shares of 5p each ‘shares’ which carry no rights to ﬁxed income all ordinary shares are 
entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company  
all shares rank equally with regard to the company’s residual assets
no member shall however be entitled to vote at any general meeting in respect of any share held by the member if any call or other 
sum then payable by the member in respect of that share remains unpaid or if a member has been served with a restriction notice  
as deﬁned in the articles after failure to provide the company with information concerning interests in those shares required to be 
provided under the companies act 2006
shares
27019 shares were issued during 2011 in respect of options exercised under the company’s 1995 scheme as deﬁned below for a total 
consideration of £1351 2010 27870 shares for a total consideration of £1394 all options exercised under the 1995 scheme during  
the year were settled on a net basis
no other shares were issued during the year
share options
the company has four share option schemes
  the morgan sindall employee share option plan 2007 ‘the esop 2007’ received approval from the board on 7 june 2007  
all options granted and to be granted under the esop 2007 will be settled with market purchased shares and are exercisable 
between three and 10 years from the date of grant the period for granting options under the esop 2007 expires on 6 june 2017
  the morgan sindall executive remuneration plan 2005 ‘the 2005 plan’ details of which are disclosed in the directors’ remuneration 
report on pages 53 to 61
  the morgan sindall savings related share option scheme ‘the saye scheme’ was approved by shareholders on 22 april 2008  
and by hmrc on 9 may 2008 1607119 options were granted during the year 2010 nil the options are exercisable after three  
years for six months from the date of grant the period for granting options under the saye scheme expires on 21 april 2018
  the morgan sindall 1995 executive share option scheme ‘the 1995 scheme’ received shareholders’ approval on 24 may 1995  
all options outstanding at the beginning of the year were exercised or have lapsed during the year
further details of the employee share option schemes are given in note 27
own shares
own shares at cost represent 766714 2010 781444 shares in the company held in the morgan sindall employee beneﬁt trust  
‘the trust’ in connection with the esop 2007 and the 2005 plan the trustees of the trust purchase the company’s shares in the  
open market with ﬁnancing provided by the company on the basis of regular reviews of the share liabilities of the relevant schemes  
all of the shares held by the trust were unallocated at the year end and dividends on these shares have been waived the cost of  
shares expected to be awarded by the trust is charged over the three year period to which the award relates based on the company’s 
share price at 31 december 2011 of £594 2010 £705 the market value of the shares was £4554281 2010 £5509180 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
99
25 acquisition of subsidiaries
final valuation of the business obligations and certain assets acquired from the administrators of connaught partnerships limited
on 9 september 2010 the group acquired the business obligations and certain assets from the administrators of connaught 
partnerships limited ‘connaught’ on pages 104 and 105 of the group’s 2010 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 this led to  
further adjustments of £11m the goodwill arising and fair values are as follows
      £m
total purchase consideration cash      280  
net assets acquired      45 
goodwill      235 
goodwill arising on this acquisition represents the value of people track record expertise and opportunity to access new markets 
acquired within acquisitions that are not capable of being individually identiﬁed and separately recognised
    provisional final 
    fair value fair value 
   acquiree’s adjustments adjustments 
   carrying made  made  fair value 
   amount 31 dec 2010 31 dec 2011 31 dec 2011 
   £m £m £m £m
intangible asset   –  40  –  40  
trade receivables and amounts on construction contracts  
recorded by connaught   724  444 –  280  
provisions   –  264 11 275
net assets acquired   724  668 11 45 
the ﬁnal fair value of certain provisions reﬂects the directors’ best assessment of redundancy and other costs associated with contracts 
that did not novate and currently there remains some inherent uncertainty over the ﬁnal determination of these liabilities
      £m
purchase consideration settled in cash      280  
cash and cash equivalents acquired      – 
cash outﬂow on acquisition      280 
acquisition of investment from partner in a joint venture
during the year the group through its subsidiary muse developments limited acquired from urban splash yorkshire limited its 50 
interest in the jointly owned north shore development partnership limited as a result of the transaction muse developments limited 
now owns the entire issued share capital of north shore development partnership limited the total amount payable to urban splash 
yorkshire limited for the purchase was £04m which was paid in cash this transaction has been accounted for as a step acquisition 
under ifrs 3 ‘business combinations’
the fair value of the group’s existing 50 interest in north shore development partnership limited was £15m comprising equity 
£09m goodwill of £02m and an intangible asset of £04m the directors determined that the fair value of the preexisting interest in 
the joint venture was different from its carrying value of £22m the total consideration due to urban splash yorkshire limited for the 
remaining 50 interest was £04m and the fair values of the identiﬁable net assets of the whole of north shore development 
partnership limited were as follows
      fair value 
      £m
intangible asset      09  
inventories      18 
identiﬁable net assets      27 
on disposal of original interest
     intangible 
   equity goodwill asset 
   £m £m £m £m
fair value   09  02  04  15  
book value   09 02 11 22
loss on disposal of original interest      07
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
100
25 acquisition of subsidiaries continued
on acquisition of controlling interest 
      £m
fair value of original interest      16  
cash paid      04
      20 
fair value acquired      27
negative goodwill      07
the net effect on result for the year is as follows
      £m
loss on disposal of original interest      07 
negative goodwill      07 
      – 
the cash outﬂow in respect of this acquisition during the year ended 31 december 2011 was £04m being £04m paid to urban splash 
yorkshire limited net of £nil cash acquired
26 cash ﬂow from operating activities
     2011  2010 
    notes £m £m
proﬁt from operations for the year     408  418  
adjusted for 
 amortisation of ﬁxed life intangible assets    2 39  55  
 share of net proﬁt of equity accounted joint ventures    12 03 01 
 depreciation of property plant and equipment    2 95  88  
 expense in respect of share options     05  07  
 deﬁned beneﬁt obligation payment    19 07 07 
 deﬁned beneﬁt obligation charge    19 01  02  
 net gain from bargain purchase of subsidiary previously held as equity interest    –  20 
 gain on disposal of property plant and equipment     10 05 
 increase in investment properties    11 70 25 
 revaluation of investment properties     02  –  
 increase in shared equity loan receivables    13 49 40 
 movement in fair value of shared equity loan receivables     09  03 
 increasedecrease in provisions    21 66  14
operating cash ﬂows before movements in working capital     486  455 
increasedecrease in inventories     32 128  
increase in receivables     73 668 
decreaseincrease in payables and shortterm provisions     411 1077 
movements in working capital     516 537 
cash utilised ingenerated from operations     30 992 
income taxes paid     68 64 
interest paid     20 22
net cash outﬂowinﬂow from operating activities     118 906 
additions to leased property plant and equipment during the year amounting to £12m 2010 £17m were ﬁnanced by new ﬁnance 
leases 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 shortterm highly liquid investments with a maturity of three months or less 27 sharebased payments
a description of the group’s employee share option schemes is set out in note 24
the company’s 2005 plan and the esop 2007 provide for a grant price equal to the average of the middle market price of the 
company’s shares at close of business on the ﬁve dealing days preceding the date of grant details of the esop 2007 option vesting 
periods are given in note 24 no performance criteria are applied to options granted under this scheme the vesting periods and 
performance conditions for options and share awards granted under the 2005 plan are given in the directors’ remuneration report  
on pages 53 to 61
under the saye scheme employees are granted an option to purchase shares at a discount of up to 20 of the market price at  
grant exercisable after three years from date of grant for a six month period from the proceeds of a monthly savings contract over  
the relevant period the scheme is open to all employees with six months’ continuous service at the invitation date no performance 
criteria are applied to the exercise of saye options
the weighted average share price at the date of exercise for share options exercised during the year was £708 2010 £647  
the options outstanding at 31 december 2011 had a weighted average exercise price of £609 2010 £712 and a weighted average 
remaining contractual life of 21 years 2010 12 years in 2011 options under the esop 2007 were granted on 2 march 30 march  
21 april and 16 may and the estimated fair value of the options granted on those dates was £03m 2010 £01m options and share 
awards under the 2005 plan were granted on 30 march and 16 may the estimated fair value of the options granted on those dates was 
£08m 2010 £06m and the estimated fair value of the share awards granted on those dates was £15m 2010 £10m 1607119 options 
were granted under the saye scheme in 2011 2010 nil the estimated fair value of options granted under the saye scheme on  
27 september 2011 was £10m 2010 £nil
a modiﬁed blackscholes model has been used to value the options and awards set out below none of the options or awards granted 
was subject to a share price related performance condition
   2 mar 2011 30 mar 2011 21 apr 2011 16 may 2011
2007 esop options 
number of options granted   195000  10000  30000  20000  
weighted average fair value at date of grant per option   £129 £141 £135 £154 
weighted average share price at date of grant   £635 £657 £658 £694 
weighted average exercise price   £658 £657 £686 £690 
expected term from date of grant
b
   6 years 6 years 6 years 6 years 
expected volatility
c
   4100 4100 4100 4100 
expected dividend yield
d
   660 640 640 610 
riskfree rate   280 270 270 250
    share  share 
   options awards options awards 
   mar 2011 mar 2011
e
 may 2011 may 2011 
e
2005 plan shares and options 
number of optionsshares granted
a
    325570   189384  224536  21460 
weighted average fair value at date of grant per optionshare   £141 £657 £154 £694 
weighted average share price at date of grant   £657 £657 £694 £694 
weighted average exercise price   £657 na £690 na 
expected term from date of grant
b
   6 years 3 years 6 years 3 years 
expected volatility
c
   4100 4800 4100 4800 
expected dividend yield
d
   640 000 610 000 
riskfree rate   270 130 250 140
a
 in march and may 550106 options and 210844 share awards were granted to executives of the group under the 2005 plan
b
  adjusted from maximum term based on management’s best estimate for the effects of nontransferability exercise restrictions 
vesting conditions and behavioural considerations
c
  assumed to be equal to historic volatility of the company’s share price over the period prior to grant equal in length to the expected 
term
d
  set as equal to dividend yield prevailing at date of grant with the exception of share awards granted to executives of the group which 
are subject to performance conditions
e
  at the end of the vesting period award holders may receive the value of any dividends paid during the vesting period in respect of 
their vested shares consequently the fair value is not discounted for value lost in respect of dividends
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
101
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
27 sharebased payments continued
the group recognised total remuneration expenses of £05m and £07m related to equitysettled sharebased payment transactions  
in 2011 and 2010 respectively
the following tables provide a summary of the options granted under the group’s employee share option schemes during the current 
and comparative year
2011 
 balance at end of year
     
 
     balance 
     at the       proceeds 
  exercise  exercise beginning options options options options   received £ 
  date on expiry price of year granted lapsed forfeited exercised in issue exercisable net of 
 grant date or after date £ no no no no no no no settlements
1995 scheme 
 25 feb 04 25 feb 09 24 feb 11 420  10000  –  5819  –  4181  –  –  209  
 14 sep 04 14 sep 09 13 sep 11 438  60000  –  37162  –  22838  –  –  1142 
2007 scheme 
  13 aug 07 13 aug 10 12 aug 17 1676  23000  –  –  –  –  23000  23000  –  
 24 sep 07 24 sep 10 23 sep 17 1581  37000  –  5000  –  –  32000  32000  –  
 20 dec 07 20 dec 10 19 dec 17 1051  94000  –  40000  –  –  54000  54000  –  
 15 apr 08 15 apr 11 14 apr 18 1003  50000  –  –  –  –  50000  50000  –  
 27 may 08 27 may 11 26 may 18 992  50000  –  –  –  –  50000  50000  –  
 28 oct 08 28 oct 11 27 oct 18 436  42500  –  3998  –  1002  37500  37500  4365  
 26 nov 08 26 nov 11 25 nov 18 475  25000  –  15159  –  9841  –  –  46755  
 3 mar 09 3 mar 12 2 mar 19 535  94000  –  –  –  –  94000  –  – 
 28 may 09 28 may 12 27 may 19 636  90000  –  10003  –  3887  76110  –  24733  
 17 mar 10 17 mar 13 16 mar 20 555  63000  –  5000  –  –  58000  –  –  
 24 may 10 24 may 13 23 may 20 529  50000  –  –  –  –  50000  –  –  
 2 mar 11 2 mar 14 1 mar 21 658  –  195000  –  –  –  195000  –  –  
 30 mar 11 30 mar 14 29 mar 21 657  –  10000  –  –  –  10000  –  –  
 21 apr 11 21 apr 14 20 apr 21 686  –  30000  –  –  –  30000  –  –  
 24 may 11 24 may 14 23 may 21 690  –  20000  –  –  –  20000  –  – 
2005 plan 
 20 may 05 20 may 08 19 may 15 724  318024  –  –  –  –  318024  318024  –  
 5 apr 06 5 apr 09 4 apr 16 1259  228752  –  –  –  –  228752  228752  –  
 9 apr 08 9 apr 11 8 apr 18 1039  309582  –  309582  –  –  –  –  –  
 16 jun 08 16 jun 11 15 jun 18 742  25048  –  25048  –  –  –  –  –  
 30 mar 09 30 mar 12 29 mar 19 5 80  503018  –  –  –  –  503018  –  –  
 17 mar 10 17 mar 13 16 mar 20 555  630776  –  –  –  –  630776  –  –  
 30 mar 11 30 mar 14 29 mar 21 657  –  325570  – – – 325570  –  –  
 16 may 11 16 may 14 15 may 21 690  –  224536  –  –  –  224536  –  – 
2008 saye scheme  
 1 jul 08 1 sep 11 29 feb 12 702  1020619  –  –  133184  –  887435  887435  –  
 27 sep 11 1 nov 14 1 may 15 496  –  1607119  –  27777  –  1579342  1814  – 
total     3724319  2412225 456771  160961  41749  5477063 1682525 77204 
the 14730 options exercised in the year 2007 scheme were settled by a distribution from the morgan sindall employee beneﬁt trust
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
102 27 sharebased payments continued
2010 
 balance at end of year
     
 
     balance 
     at the       proceeds 
  exercise  exercise beginning options options options options   received £ 
  date on expiry price of year granted lapsed forfeited exercised in issue exercisable net of 
 grant date or after date £ no no no no no no no settlements
1995 scheme 
 25 feb 04 25 feb 09 24 feb 11 420  90000  –  52130  –  27870  10000  10000  1394  
 14 sep 04 14 sep 09 13 sep 11 438  60000  –  –  –  –  60000  60000  – 
2007 scheme 
 13 aug 07 13 aug 10 12 aug 17 1676  23000  –  –  –  –  23000  23000  –  
 24 sep 07 24 sep 10 23 sep 17 1581  37000  –  –  –  –  37000  37000  –  
 20 dec 07 20 dec 10 19 dec 17 1051  100000  –  6000  –  –  94000  94000  –  
 15 apr 08 15 apr 11 14 apr 18 1003  50000  –  –  –  –  50000  –  –  
 27 may 08 27 may 11 26 may 18 992  50000  –  –  –  –  50000  –  –  
 28 oct 08 28 oct 11 27 oct 18 436  42500  –  –  –  –  42500  –  –  
 26 nov 08 26 nov 11 25 nov 18 475  25000 –  –  –  –  25000  –  –  
 3 mar 09 3 mar 12 2 mar 19 535  94000  –  –  –  –  94000  –  –  
 28 may 09 28 may 12 27 may 19 636  90000  –  –  –  –  90000  –  –  
 17 mar 10 17 mar 13 16 mar 20 555  –  63000  –  –  –  63000  –  –  
 24 may 10 24 may 13 23 may 20 529  –  50000  –  –  –  50000  –  – 
2005 plan 
 20 may 05 20 may 08 19 may 15 724  318024  –  –  –  –  318024  318024  –  
 5 apr 06 5 apr 09 4 apr 16 1259  246624  –  17872  –  –  228752  228752  –  
 6 mar 07 6 mar 10 5 mar 17 1215  258024  –  258024  –  –  –  –  –  
 9 apr 08 9 apr 11 8 apr 18 1039  342066  –  32484  –  –  309582  –  –  
 16 jun 08 16 jun 11 15 jun 18 742  25048  –  –  –  –  25048  –  –  
 30 mar 09 30 mar 12 29 mar 19 580  503018  –  –  –  –  503018  –  –  
 17 mar 10 17 mar 13 16 mar 20 555  –  630776  –  –  –  630776  –  – 
2008 saye scheme 
 1 jul 08 1 sep 11 29 feb 12 702  1280380  –  –  259761  –  1020619  19819  – 
total     3634684  743776  366510  259761  27870  3724319 790595  1394 
cashsettled sharebased payments
the group grants to certain employees share appreciation rights ‘phantoms’ that require the group to pay the intrinsic value of the 
phantoms to the employee at the date of exercise as cashsettled sharebased payment awards the phantoms are revalued at the end 
of each reporting year there were no phantoms granted during the year 2010 nil phantoms are exercisable between three and eight 
years from the date of grant of the phantom the total intrinsic value at 31 december 2011 was £nil 2010 £nil the group had recorded 
no liabilities at 31 december 2011 in respect of phantoms 2010 £01m
at the reporting date the fair value and number of phantom awards outstanding was
  balance at phantom phantom balance at 
 exercise beginning of options options end of fair value 
 price the year lapsed  exercised the year per award 
date of grant £ no no no no £
17 aug 2005 665  68000  –  –  68000  026  
11 oct 2005 849  51000  –  –  51000  005  
5 dec 2005 831  60000  10000  –  50000  006  
5 apr 2006 1259  50000  –  –  50000  –  
5 apr 2006
a
 1259  50000  –  –  50000  –  
18 may 2006 1109  30000  10000  –  20000  001  
10 aug 2006 1086  10000  –  –  10000  001 
 967
b
 319000  20000  –  299000 008 
b 
a
 the performance condition attached to this grant has been satisﬁed no performance criteria are applied to other phantom awards
b 
weighted average
the market price of a share on 31 december 2011 was £594 2010 £705
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
103
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the consolidated ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
104
27 sharebased payments continued
the fair value of the phantoms was determined by the use of a modiﬁed blackscholes model using the assumptions noted in the table 
below
   31 dec 2011 31 dec 2010
expected term from date of grant
a
   46–56 years 46–56 years 
expected remaining term   1 year 1 year 
share price at valuation date   £594 £705 
expected volatility of return
b
   28 29 
expected dividend yield
c
   71 60 
riskfree rate   03 07
a
  adjusted from maximum term based on management’s best estimate for the effects of nontransferability exercise restrictions 
vesting conditions and behavioural considerations
b
  assumed to be equal to historical volatility of the company’s share price over the prior year to grant equal in length to the expected 
term
c
 set as equal to dividend yield prevailing at date of grant
the group recorded a credit to proﬁt of £01m during the year in respect of phantoms 2010 £nil credit
28 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
trading transactions
during the year group companies entered into transactions to provide construction and property development services with related 
parties all of which were joint ventures not members of the group transactions and amounts owed at the year end are as follows
 provision of goods amounts owed byto 
 and services related parties
 
 
 
 
   2011  2010  2011  2010  
   £m £m £m £m
claymore roads holdings limited   –  –  04  –  
community solutions investment partners limited   21  195  03  05  
renaissance miles platting limited   01  01  –  –  
blue light holdings limited   03  03  –  01  
ashton moss developments limited   –  –  02 02 
bromley park limited   –  –  06 06 
chatham place building 1 limited
a
   na 01  na na 
ecf general partner limited   20  17  –  –  
eurocentral partnership limited
a
   na 19  na na 
lewisham gateway developments limited   –  –  02  02  
north shore development partnership limited
b
   na –  na 01  
the compendium group limited   37  05  06  01  
access for wigan holdings limited   195  01  03  –  
hull esteem consortium psp limited   467  502  12  48  
st andrews brae developments limited   28  40  01  40  
taycare health holdings limited   –  18  –  –  
the bournemouth development company llp   01  –  05  –
   773  802  28  90 
a
  in 2010 chatham place building1 limited and eurocentral partnership limited became wholly owned subsidiaries of the group
b  
in the course of the year north shore development partnership limited became a wholly owned subsidiary of the group morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
105
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
28 related party transactions continued
  amounts owed byto 
  related parties
  
 
     2011  2010  
     £m £m
amounts owed by related parties     36  98  
amounts owed to related parties     08 08
     28  90 
all transactions with related parties were made on an arm’s length basis
the amounts outstanding are unsecured and will be settled in cash other than construction related performance guarantees given in 
the ordinary course of business no guarantees have been given to or received from related parties no provisions have been made for 
doubtful debts in respect of amounts owed by related parties all amounts owed to or owing by related parties are noninterest bearing
remuneration of key management personnel
the remuneration of the directors who are key management personnel of the group is set out below in aggregate for each of the 
categories speciﬁed in ias 24 ‘related party disclosures’
further information about the remuneration of individual directors is provided in the audited part of the remuneration report on pages 
59 to 61
     2011  2010  
     £m £m
emoluments     32  22  
social security contributions     04  03  
other longterm beneﬁts     –  02  
postemployment beneﬁts     02  04 
     38  31 
directors’ transactions
during 2011 eurocentral partnership limited a wholly owned subsidiary of the group sold some land and buildings in the ordinary 
course of business to a syndicate of investors on arm’s length terms certain senior employees and directors of muse developments 
limited together with john morgan £06m and paul smith £04m participated in the syndicate their investments were carried out 
on an arm’s length basis and on the same terms as other investors in the syndicate and there are no amounts outstanding
there have been no related party transactions with any director in the subsequent period to 21 february 2012
directors’ material interests in contracts with the company
no director held any material interest in any contract with the company or any group company in the year or in the subsequent period 
to 21 february 2012 notes to the consolidated ﬁnancial statements
continued
29 financial instruments
cash and cash equivalents
cash and cash equivalents comprise cash in hand demand deposits and other shortterm highly liquid investments that are readily 
convertible to a known amount of cash and are subject to an insigniﬁcant risk of changes in value the carrying amount of these assets 
approximates to their fair value
included within cash and cash equivalents is £354m 2010 £267m which is the group’s share of cash held within jointly controlled 
operations
general risk management principles
the board has overall responsibility for the establishment and oversight of the group’s risk management framework a formal risk 
assessment and management framework for assessing monitoring and managing the strategic operational and ﬁnancial risks of the 
group is in place to ensure appropriate risk management of its operations internal control and risk management systems are 
embedded in the operations of the divisions
the key business risks identiﬁed are discussed in detail in the risk review on pages 18 to 21 and the corporate governance statement  
on pages 48 to 52
financial risks and management
the group has exposure to a variety of ﬁnancial risks through the conduct of its operations risk management is governed by the 
group’s operational policies which are subject to periodic review by the group’s internal audit team and twice yearly review by 
management the policies include written principles for the group’s risk management as well as speciﬁc policies guidelines and 
authorisation procedures in respect of speciﬁc risk mitigation techniques such as the use of derivative ﬁnancial instruments  
the group does not enter into derivative ﬁnancial instruments for speculative purposes
the following represent the key ﬁnancial risks resulting from the group’s use of ﬁnancial instruments
  credit risk
  liquidity risk
  market risk
a credit risk
credit risk is the risk of ﬁnancial loss to the group if a customer or counterparty to a ﬁnancial instrument fails to meet its contractual 
obligations and results primarily from the group’s trade receivables and amounts due from construction contract customers
amounts due from construction contract customers and trade receivables
the group’s primary exposure to credit risk arises from the potential for nonpayment or default from construction contract debtors 
and trade receivables the degree to which the group is exposed to this credit risk depends on the individual characteristics of the 
contract counterparty and the nature of the project the group’s credit risk is also inﬂuenced by general macroeconomic conditions 
the group primarily operates in one geographical segment being the uk the group does not have any signiﬁcant concentration  
risk in respect of amounts due from construction contract customers or trade receivable balances at the reporting date with receivables 
spread across a wide range of customers due to the nature of the group’s operations it is normal practice for customers to hold 
retentions in respect of contracts completed retentions held by customers at 31 december 2011 were £584m 2010 £571m
the group manages its exposure to credit risk through the application of its credit risk management policies which specify the minimum 
requirements in respect of the creditworthiness of potential customers assessed through reports from credit agencies and the timing 
and extent of progress payments in respect of contracts
the risk management policies of the group also specify procedures in respect of obtaining parent company guarantees or in certain 
circumstances use of escrow accounts which in the event of default mean that the group may have a secure claim the group does 
not require collateral in respect of amounts due from construction contract customers or trade receivables
the group manages the collection of retentions through its postcompletion project monitoring procedures and ongoing contact  
with customers to ensure that potential issues that could lead to the nonpayment of retentions are identiﬁed and addressed promptly 
the group assesses amounts due from construction contract customers and trade receivable balances for impairment and establishes 
a provision for impairment losses that represents its estimate of incurred losses
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
106 morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
107
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
29 financial instruments continued
the ageing of trade receivables at the reporting date was as follows
 2011  2010 
 
 
 
 
   gross provision for gross provision for 
   trade impairment trade impairment 
   receivables losses receivables  losses 
   £m £m £m £m
not past due   1203  –  1577  04  
past due 1 to 30 days   191  –  153  01  
past due 31 to 120 days   76  02  168  01  
past due 121 to 365 days   38  01  102  05  
past due greater than one year   174  06  97  09 
   1682  09  2097  20 
the movement in the provision for impairment losses on trade receivables during the year was as follows
     2011  2010  
     £m £m
balance at beginning of the year     20  29  
amounts written off during the year     –  02 
amounts recovered during the year     08 01 
decrease in provision recognised in the income statement     03 06
balance at 31 december     09  20 
b liquidity risk
liquidity risk is the risk that the group will not be able to meet its ﬁnancial obligations as and when they fall due the ultimate 
responsibility for liquidity risk rests with the board
the group aims to manage liquidity by ensuring that it will always have sufficient liquidity to meet its liabilities when due under  
both normal and stress conditions without incurring unacceptable losses or risking damage to the group’s reputation
the group actively manages its liquidity proﬁle whilst ensuring that the return achieved on cash and investments is maximised  
the group had no drawn down debt facilities as at 31 december 2011 2010 £nil
as discussed below under capital management the group does not have any derivative or nonderivative ﬁnancial liabilities with  
the exception of ﬁnance lease liabilities trade and other payables current tax liabilities and retirement beneﬁt obligations current tax 
liabilities and trade and other payables are generally noninterest bearing and therefore have no weighted average effective interest 
rates retirement beneﬁt obligations are measured at the net of the present value of retirement beneﬁt obligations and the fair value  
of the plan assets finance lease liabilities are carried at the present value of the minimum lease payments an analysis of the maturity 
proﬁle for ﬁnance lease liabilities is contained in note 18
the group reports cash balances daily and invests surplus cash to maximise income whilst preserving credit quality the group 
prepares weekly shortterm and monthly longterm cash forecasts which are used to assess the group’s expected cash performance 
and compare with the facilities available to the group and the group’s covenants
in addition to its cash balances the group has £100m of committed loan facilities available until september 2015
key risks to liquidity and cash balances are a downturn in contracting volumes a decrease in the value of open market sales 
deterioration in credit terms obtainable in the market from suppliers and subcontractors a downturn in the proﬁtability of work  
delayed receipt of cash from customers and the risk that major clients or suppliers suffer ﬁnancial distress leading to nonpayment  
of debts or costly and time consuming reallocation and rescheduling of work certain measures and kpis are continually monitored 
throughout the group and used to quickly identify issues as they arise enabling the group to address them promptly 108
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
notes to the consolidated ﬁnancial statements
continued
29 financial instruments continued
key amongst these are continual monitoring of the forward order book including the status of orders and likely timescales for 
realisation so that contracting volumes are well understood monitoring of overhead levels to ensure they remain appropriate to 
contracting volumes weekly monitoring of open market house sales volumes and prices continual monitoring of working capital 
exceptions overdue debts and conversion of work performed into certiﬁcates and invoices continual review of levels of current  
and forecast proﬁtability on contracts review of client and supplier credit references and approval of credit terms with clients and 
suppliers to ensure they are appropriate
the ageing of trade payables at the reporting date was as follows
     2011  2010  
     £m £m
not past due     1621  1239  
past due 1 to 30 days     146  120  
past due 31 to 120 days     31  74  
past due 121 to 365 days     25  66  
past due greater than one year     03  – 
     1826  1499 
c market risk
market risk is the risk that changes in market prices such as foreign exchange rates interest rates or equity prices will affect the group’s 
income or the carrying amount of its holdings of ﬁnancial instruments the objective of market risk management is to achieve a level of 
market risk that is within acceptable parameters as set out in the group risk management framework
interest rate risk
the group is not exposed to signiﬁcant interest rate risk as it does not have signiﬁcant interest bearing liabilities and its only interest 
bearing asset is cash invested on a shortterm basis
certain of the group’s equity accounted joint ventures enter into interest rate swaps to manage their exposure to interest rate risk 
arising on ﬂoating rate bank borrowings
the group’s share of joint ventures’ interest rate and retail prices index swap contracts with nominal values of £1544m 2010 £1290m 
have ﬁxed interest payments at an average rate of 455 2010 483 for periods up until 2041
the group’s share of the fair value of swaps entered into at 31 december 2011 by joint ventures is estimated at a £40m liability 2010 
£31m liability these amounts are based on market values of equivalent instruments at the balance sheet date all interest rate swaps 
are designated as hedging instruments and are effective as cash ﬂow hedges the fair value thereof has been taken to the hedging 
reserve
currency risk
the majority of the group’s operations are carried out in the uk and the group has an insigniﬁcant level of exposure to currency risk  
on sales and purchases given the insigniﬁcant exposure to foreign currency movements the group’s policy is not to hedge foreign 
currency transactions unless they are material at which point derivative ﬁnancial instruments are entered into so as to hedge forecast  
or actual foreign currency exposures
during the year a uk construction project joint venture in which the group participates entered into forward foreign exchange 
contracts in order to hedge uk project costs incurred in euros the group’s share of the fair value of these forward foreign exchange 
contracts as at the year end is immaterial accordingly no value for these contracts is shown upon the balance sheet the group’s share 
of the value of project costs which have been hedged is £53m
the forward foreign exchange contracts have been treated as cash ﬂow hedges all of the hedges have been treated as fully effective  
it is expected that the project costs will be incurred in the same periods as the hedges will mature at which time any amount deferred in 
equity will be reclassiﬁed to proﬁt or loss the fair values of the contracts have been calculated using level 2 – inputs that are observable 
for the asset or liability either directly that is as prices or indirectly that is derived from prices
a 5 reduction in the value of the euro against sterling would result in a £03m reduction in the fair value of the contracts which would 
be shown in cash ﬂow hedging reserve 109
morgan sindall group plc annual report and accounts 2011
consolidated ﬁnancial statements
29 financial instruments continued
capital management
the board aims to maintain a strong capital base so as to maintain investor creditor and market conﬁdence and to sustain the future 
development of the business and its approach to capital management is explained fully in the ﬁnance review on page 14
the capital structure of the group consists of cash and cash equivalents and equity attributable to equity holders of the company 
comprising issued capital reserves and retained earnings as disclosed in note 24 and the consolidated statement of changes in equity 
the cash and cash equivalents are supplemented by the £100m of bank facilities which are committed until september 2015
there were no changes in the group’s approach to capital management during the year and the group is not subject to any capital 
requirements imposed by regulatory authorities
30 subsequent events
on 15 february 2012 the group disposed of its 33 interest in the dorset fire  rescue pfi for cash consideration of £38m  
this represents a discount on the directors’ valuation cash ﬂows of 7
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
110
independent auditor’s report
to the members of morgan sindall group plc
we have audited the parent company ﬁnancial statements of 
morgan sindall group plc for the year ended 31 december 2011 
which comprise the parent company balance sheet the parent 
company statement of movements in reserves and shareholders’ 
funds signiﬁcant accounting policies and the related notes 1 to 14 
the ﬁnancial reporting framework that has been applied in their 
preparation is applicable law and united kingdom accounting 
standards united kingdom generally accepted accounting 
practice
this report is made solely to the company’s members as a body 
in accordance with chapter 3 of part 16 of the companies act 
2006 our audit work has been undertaken so that we might state 
to the company’s members those matters we are required to 
state to them in an auditor’s report and for no other purpose  
to the fullest extent permitted by law we do not accept or 
assume responsibility to anyone other than the company and  
the company’s members as a body for our audit work for this 
report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities statement 
the directors are responsible for the preparation of the parent 
company ﬁnancial statements and for being satisﬁed that they 
give a true and fair view our responsibility is to audit and express 
an opinion on the parent company ﬁnancial statements in 
accordance with applicable law and international standards on 
auditing uk and ireland those standards require us to comply 
with the auditing practices board’s ethical standards for auditors
scope of the audit of the ﬁnancial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the ﬁnancial statements sufficient to give 
reasonable assurance that the ﬁnancial statements are free from 
material misstatement whether caused by fraud or error this 
includes an assessment of whether the accounting policies are 
appropriate to the parent company’s circumstances and have 
been consistently applied and adequately disclosed the 
reasonableness of signiﬁcant accounting estimates made by the 
directors and the overall presentation of the ﬁnancial statements 
in addition we read all the ﬁnancial and nonﬁnancial information 
in the annual report to identify material inconsistencies with the 
audited ﬁnancial statements if we become aware of any apparent 
material misstatements or inconsistencies we consider the 
implications for our report
opinion on ﬁnancial statements
in our opinion the parent company ﬁnancial statements
  give a true and fair view of the state of the company’s affairs  
as at 31 december 2011 and of its loss for the year then ended
  have been properly prepared in accordance with united 
kingdom generally accepted accounting practice and
  have been prepared in accordance with the requirements  
of the companies act 2006
opinion on other matters prescribed by the  
companies act 2006
in our opinion
  the part of the directors’ remuneration report to be audited has 
been properly prepared in accordance with the companies act 
2006 and
  the information given in the directors’ report for the ﬁnancial 
year for which the ﬁnancial statements are prepared is 
consistent with the parent company ﬁnancial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters 
where the companies act 2006 requires us to report to you if  
in our opinion
  adequate accounting records have not been kept by the parent 
company or returns adequate for our audit have not been 
received from branches not visited by us or
  the parent company ﬁnancial statements and the part of the 
directors’ remuneration report to be audited are not in 
agreement with the accounting records and returns or
  certain disclosures of directors’ remuneration speciﬁed by law 
are not made or
  we have not received all the information and explanations we 
require for our audit
other matter
we have reported separately on the group ﬁnancial statements  
of morgan sindall group plc for the year ended 31 december 2011
ian krieger
senior statutory auditor 
for and on behalf of deloitte llp 
chartered accountants and statutory auditor 
london united kingdom 
21 february 2012 111
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
company balance sheet
at 31 december 2011
     2011  2010  
    notes £m £m
fixed assets 
tangible assets    4 08  08  
investments    5 3741  3721 
     3749  3729 
current assets 
trade debtors     01  01  
amounts owed by subsidiary undertakings     657  662  
other debtors     11  03  
prepayments and accrued income     15  09  
deferred tax asset    6 11  17  
cash at bank and in hand     602  1097
     1297  1789 
creditors amounts falling due within one year 
bank overdraft     1287 1582 
trade creditors     19 06 
amounts owed to subsidiary undertakings     2266 2013 
corporation tax payable     28 225 
other tax and social security     08 03 
other creditors     07 11 
accruals     62 78
     3677 3918
net current liabilities     2380 2129
total assets less current liabilities     1369  1600  
provision for liabilities    10 111 101
net assets excluding retirement beneﬁt obligation     1258  1499  
retirement beneﬁt obligation    7 10 14
net assets including retirement beneﬁt obligation     1248  1485 
shareholders’ funds 
share capital    8  22  22  
share premium account     267  267  
capital redemption reserve     06  06 
own shares     58 59 
special reserve     137  137  
proﬁt and loss account     874  1112 
shareholders’ funds     1248  1485 
the ﬁnancial statements of the company company number 00521970 were approved by the board and authorised for issue on  
21 february 2012 and signed on its behalf by
paul smith david mulligan
chief executive  finance director
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 company combined statement of movements  
in reserves and shareholders’ funds
for the year ended 31 december 2011
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
112
  share capital   proﬁt  
 share premium redemption own special and loss shareholders’ 
 capital account reserve shares reserve account funds 
 £m £m £m £m £m £m £m
balance at 1 january 2011 22  267  06  59 137  1112  1485  
loss for the year –  –  –  –  –  59 59 
recognition of sharebased payments –  –  –  –  –  05  05  
second interim dividend for 2010 –  –  –  –  –  127 127 
interim dividend for 2011 –  –  –  –  –  51 51 
exercise of share options –  –  –  01  –  –  01  
deferred tax charge arising on recognition  
of sharebased payments –  –  –  –  –  05 05 
deferred tax charge arising on actuarial gain  
on retirement beneﬁt obligation –  –  –  –  –  01 01
balance at 31 december 2011 22  267  06  58 137  874  1248  morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
113
signiﬁcant accounting policies
for the year ended 31 december 2011
basis of accounting
the separate ﬁnancial statements of the company are presented 
as required by the companies act 2006 these ﬁnancial 
statements have been prepared on a going concern basis as 
discussed in the ﬁnance review on page 14 under the historic cost 
convention in accordance with the applicable united kingdom 
accounting standards the ﬁnancial statements are presented in 
pounds sterling which is the company’s functional currency and 
unless otherwise stated have been rounded to the nearest £01m
under financial reporting standard ‘frs’ 1 revised 1996 ‘cash 
flow statements’ the company is exempt from the requirement 
to prepare a cash ﬂow statement on the basis that its consolidated 
ﬁnancial statements which include the company and present a 
consolidated cash ﬂow statement are publicly available
under frs 8 ‘related party disclosures’ the company is exempt 
from the requirement to disclose related party transactions with 
entities within the group where the company’s interest is 100
the company’s accounting policies have been applied on a 
consistent basis throughout the year
signiﬁcant estimates and judgments
the preparation of ﬁnancial statements requires management  
to make judgments estimates and assumptions that affect the 
application of accounting policies and the reported amounts of 
assets liabilities income and expense actual results may differ 
from these estimates
estimates and assumptions are reviewed on an ongoing basis  
and any revision to estimates or assumptions are recognised  
in the period in which revised and in any future periods affected
the estimates and judgments concerning the future at 31 
december 2011 and that have a signiﬁcant risk of causing a 
material adjustment to the carrying value of assets and liabilities 
within the next ﬁnancial year are as follows
a taxation
judgments are required in establishing the company’s liability to 
pay taxes where tax positions are uncertain details of deferred 
tax assets and liabilities are set out in note 6
b accounting for the company’s deﬁned beneﬁt plan
the directors engage an independent and qualiﬁed actuary to 
calculate the company’s liability in respect of the deﬁned beneﬁt 
plan in order to arrive at this valuation certain assumptions in 
respect of discount rates salary escalations expected return on 
the plan’s assets and future pension increases have been made 
assumptions regarding future mortality are based on published 
statistics and mortality tables as the actual rates of increase and 
mortality may differ from those assumed the actual pension 
liability may differ from that recognised in these ﬁnancial 
statements assumptions used and full details of the company’s 
liability are set out in full in note 7
accounting policies
fixed asset investments
investments held as ﬁxed assets are stated at cost less provision 
for any impairment in value investments are reviewed for 
impairment at the earlier of the company’s reporting date or 
where an indicator of impairment is identiﬁed
tangible ﬁxed assets and depreciation
no depreciation is provided on freehold land on other assets 
depreciation is provided at rates calculated to write off the cost  
of ﬁxed assets over their estimated useful lives as follows
freehold property 2 per annum
plant machinery  
and equipment between 10 and 33 per annum
taxation
the tax expense represents the current tax and deferred tax 
charges tax is recognised in the proﬁt and loss account except  
to the extent that it relates to items recognised directly in 
shareholders’ funds
  current tax
current tax is the company’s expected tax liability on taxable 
proﬁt for the year using tax rates enacted or substantively 
enacted at the reporting date and any adjustments to tax payable 
in respect of previous years taxable proﬁt differs from that 
reported in the proﬁt and loss account because it is adjusted for 
items of income or expense that are assessable or deductible in 
other years and is adjusted for items that are never assessable  
or deductible
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
114
  deferred tax
deferred tax is provided in full on timing differences which result 
in an obligation at the balance sheet date to pay more tax or a 
right to pay less tax at a future date at rates expected to apply 
when they crystallise based on tax rates and laws that have been 
enacted or substantively enacted by the balance sheet date 
timing differences arise from the inclusion of items of income and 
expenditure in tax computations in periods different from those in 
which they are included in the ﬁnancial statements deferred tax is 
not provided on timing differences arising from the revaluation of 
ﬁxed assets where there is no commitment to sell the asset or on 
unremitted earnings of subsidiaries and associates where there is 
no commitment to remit these earnings deferred tax assets are 
recognised to the extent that it is regarded as more likely than not 
that there will be future taxable proﬁts against which to recover 
carried forward future tax losses and from which the reversal of 
underlying timing differences can be deducted deferred tax 
assets and liabilities are not discounted
retirement beneﬁt schemes
the company has two retirement beneﬁt plans
a deﬁned contribution plan
a deﬁned contribution plan is a postretirement beneﬁt plan 
under which the company pays ﬁxed contributions to a separate 
entity and has no legal or constructive obligation to pay further 
amounts the company recognises payments to deﬁned 
contribution pension plans as an employee expense in the proﬁt 
and loss account as and when they are due
b deﬁned beneﬁt plan
a deﬁned beneﬁt plan is a postretirement plan other than a 
deﬁned contribution plan the company’s net liability is 
recognised in the balance sheet and is calculated by estimating 
the amount of future beneﬁt that employees have earned in return 
for their service in the current and prior periods and discounting 
this to its present value any unrecognised past service costs and 
the fair value of the plan’s assets are deducted
the calculation is performed by a qualiﬁed actuary on an annual 
basis using the projected unit credit method the cost of the plan 
is charged to the proﬁt and loss account based on actuarial 
assumptions at the beginning of the ﬁnancial year where the 
calculation results in a beneﬁt to the company the asset 
recognised is limited to the net of the total unrecognised past 
service costs and the present value of any future refunds from  
the plan or reductions in future contributions to the plan
when the beneﬁts of the plan are improved the portion of 
increased beneﬁt relating to past service by employees is 
recognised in the proﬁt and loss account on a straightline basis 
over the average period until the beneﬁts are vested where the 
beneﬁts vest immediately the expense is recognised in the proﬁt 
and loss account immediately
actuarial gains and losses are recognised in full in the combined 
statement of movements in reserves and shareholders’ funds in 
the period in which they occur net pension obligations are 
included in the balance sheet at the present value of the plan 
liabilities less the fair value of the plan assets and any related 
deferred tax asset
provisions
provisions are recognised when the company has a present legal 
or constructive obligation as a result of a past event it is probable 
that an outﬂow of resources will be required to settle the 
obligation and the amount of the obligation can be estimated 
reliably
sharebased payments
the company has applied the requirements of frs 20 ‘share
based payment’ in accordance with the transitional provisions 
frs 20 has been applied to all grants of equity instruments after  
7 november 2002 that had not vested as of 1 january 2005
the company grants equitysettled and cashsettled sharebased 
payments share awards or share options to certain employees 
equitysettled sharebased payments are measured at fair value 
at the date of grant and are recognised as an employee expense 
with a corresponding increase in shareholders’ funds over the 
period from date of grant to the date on which the employees 
become unconditionally entitled to the awards or options
cashsettled sharebased payments are measured at fair value  
at each balance sheet date and recognised as an expense with  
a corresponding increase in liabilities over the period from  
date of grant to the date on which the employees become 
unconditionally entitled to the payment any changes in the fair 
value of the liability are recognised as an employee expense or 
income in the proﬁt and loss account fair value is measured by 
use of a modiﬁed blackscholes model
none of these awards when granted was subject to a share price 
related performance condition
related national insurance contributions are accrued on the basis 
of the intrinsic value of outstanding sharebased payments and 
are remeasured at each reporting date
leased assets
rentals payable under operating leases are charged to the proﬁt 
and loss account on a straightline basis over the term of the 
relevant lease
finance income and expense
finance income comprises bank and other interest interest 
income is recognised in the proﬁt and loss account using the 
effective interest rate method finance expense comprises 
interest on bank overdrafts amortisation of prepaid bank facility 
arrangement fees and commitment fees charged by lenders on 
the undrawn portion of available bank facilities
signiﬁcant accounting policies
for the year ended 31 december 2011 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
115
borrowing costs are recognised in the proﬁt and loss account  
on an effective interest method in the period in which they  
are incurred
financial guarantees
the company provides certain guarantees in respect of the 
indebtedness of its subsidiary undertakings and in respect of 
bonds and claims under contracting and other arrangements 
which include joint arrangements and joint ventures entered  
into in the ordinary course of business
the company considers such agreements to be indemnity 
arrangements and as such accounts for them as contingent 
liabilities unless it becomes probable that the company will be 
required to make a payment under the guarantee
dividends
the company has adopted frs 21 ‘events after the balance sheet 
date’ and accordingly only recognises a liability once there is an 
obligation to pay as a result a dividend will only be recognised 
once the shareholders approve it
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
116
notes to the company ﬁnancial statements
1 employees
the average monthly number of people employed by the company including directors during the year was 23 2010 19
2 staff costs
     2011  2010  
     £m £m
wages and salaries     53  49  
social security costs
a
      –  11  
other pension costs     05  06 
     58  66 
a
  included within this amount is £07m 2010 £nil relating to the release of national insurance accrual recognised on sharebased 
payments the accrual is remeasured at each reporting period on the basis of the period end share price
3 proﬁtloss of the parent company
the company has taken advantage of section 408 of the companies act 2006 and consequently the proﬁt and loss account of the 
parent company is not presented as part of these accounts the loss of the parent company for the ﬁnancial year amounted to £59m 
2010 loss of £42m
4 tangible assets
    owned plant 
    machinery freehold 
    and equipment property total 
    £m £m £m
cost 
balance at 1 january 2011    33  01  34  
additions in the year    06  –  06 
balance at 31 december 2011    39  01  40 
accumulated depreciation 
balance at 1 january 2011    26 –  26 
depreciation charge for the year    06 –  06
balance at 31 december 2011    32 –  32
net book value 
net book value at 31 december 2011    07  01  08  
net book value at 31 december 2010    07  01  08 
5 investments
    subsidiary 
    undertakings other 
    shares investments total 
    £m £m £m
cost 
balance at 1 january 2011    3756  –  3756  
additions during the year 
transfers from subsidiary undertakings during the year    08  –  08  
additions    09  –  09  
investment in preference shares carried at amortised cost    –  03  03 
at 31 december 2011    3773  03  3776 
provisions 
balance at 1 january 2011    35 –  35
balance at 31 december 2011    35 –  35
net book value 
net book value at 31 december 2011    3738 03  3741 
net book value at 31 december 2010    3721  –  3721 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
117
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
5 investments continued
notes
the following transactions occurred during the year and refer to the registered company names at 31 december 2011
on 15 march 2011 the ownership of lovell respond limited was transferred from the company’s wholly owned subsidiary lovell 
partnerships limited to the company through the purchase of all of the £100 fully paid ordinary shares a total of £271857  
on 15 march 2011 on completion of the acquisition of the issued ordinary shares in lovell respond limited morgan sindall group plc 
increased its investment in lovell respond limited through the purchase of one £100 ordinary share for a consideration of £911332
on 8 september 2011 the ownership of electrack installations limited was transferred from the company’s wholly owned subsidiary 
overbury plc to the company through the purchase of all of the £100 fully paid ordinary shares a total of £1000
on 8 september 2011 the ownership of morgan lovell london limited was transferred from the company’s wholly owned subsidiary 
morgan lovell plc to the company through the purchase of all of the £100 fully paid ordinary shares a total of £525000
on 3 december 2011 the company purchased 300000 8 cumulative preference shares in cornerstone property assets limited  
for a purchase consideration of £300000 the preference shares are not convertible into ordinary shares and represent one third  
of the issued preference shares
6 deferred tax
   accelerated 
   allowances 
   and other retirement 
   shortterm beneﬁt sharebased 
   timing differences obligation payments total 
   £m £m £m £m
at 1 january 2010   04  09  06  19  
chargecredit to income   –  01 02  01  
chargecredit to equity   –  03 05  02 
at 31 december 2010   04  05  13  22 
at 1 january 2011   04  05  13  22  
charge to income   01 01 –  02 
charge to equity   –  01 05 06
at 31 december 2011   03  03  08  14 
certain deferred tax assets and liabilities have been offset the following is the analysis of the deferred tax balances after offset for 
ﬁnancial reporting purposes
     2011  2010  
     £m £m
deferred tax within current assets     11  17  
deferred tax within retirement beneﬁt obligation     03  05 
     14  22 
at 31 december 2011 the company had unused tax losses of £06m 2010 £06m available for offset against future proﬁts no deferred 
tax asset has been recognised in respect of such losses due to the unpredictability of future proﬁt streams against which these losses 
may be utilised losses may be carried forward indeﬁnitely
the uk corporation tax rate is set to reduce to 25 in april 2012 affecting the closing deferred tax balance as shown above further 
reductions in the corporation tax rate to 23 are expected but not yet legislated the closing deferred tax asset would reduce by a 
further £01m to £12m if these changes were taken into account notes to the company ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
118
7 retirement beneﬁt schemes
deﬁned contribution plan
the morgan sindall retirement beneﬁts plan ‘the plan’ was established on 31 may 1995 and operates on deﬁned contribution ‘dc’ 
principles for employees of the group the assets of the plan are held separately from those of the group in funds under the control of 
the trustees the total cost charged to the proﬁt and loss account of £04m 2010 £04m represents contributions payable to the dc 
section of the plan by the company at rates speciﬁed in the plan rules
as at 31 december 2011 contributions of £01m 2010 £01m were due in respect of december’s contribution not paid over to the plan 
the company with the consent of the trustee directors can decide how to use monies held in a “dc general account”
deﬁned beneﬁt plan
the plan includes some deﬁned beneﬁt liabilities and transfers of funds representing the accrued beneﬁt rights of former active and 
deferred members and pensioners of pension plans of companies which are now part of the group these include salary related 
beneﬁts for members in respect of beneﬁts accrued before 31 may 1995 and beneﬁts transferred in from the snape group limited 
retirement beneﬁts scheme include accruals up to 1 august 1997 no further deﬁned beneﬁt membership rights can accrue after  
that date
under the plan employees are entitled to retirement beneﬁts at a retirement age of 65 no other retirement beneﬁts are provided  
the plan is currently being funded by the company
the last triennial valuation of the plan was undertaken on 5 april 2010 and was prepared using assumptions of a rate of investment 
return of 48 per annum in the period before retirement and 49 in the period after retirement a rate of earnings escalation of 53 
per annum and a rate of inﬂation of 38 per annum the ongoing liabilities of the plan were assessed using the projected unit credit 
method and the assets were taken at realisable market value the actuarial valuation also showed that the deﬁned beneﬁt liabilities were 
partly funded and the value of the assets of £59m represented 64 of the value of these liabilities on an ongoing funding basis the 
next triennial valuation will be carried out as at 5 april 2013 when the funding position will be reappraised
the most recent valuation of the plan assets and the present value of the deﬁned beneﬁt liabilities was prepared as at 31 december 2011 
the present value of the deﬁned beneﬁt liabilities the related current service cost and past service cost were measured using the 
projected unit credit method
    2011  2010  2009  
      
key assumptions used 
discount rate    47  54  56  
expected rate of salary increases    41  46  48  
expected return on plan assets    38  48  49  
rate of inﬂation    31  36  38  
future pension increases – members who left before 1 june 1995
a
     35  35  35  
future pension increases – members who left after 31 may 1995    30  30  30  
future pension increases – nonguaranteed deferred pensions    35  35  35 
a
 depending on their date of joining members receive ﬁxed pension increases of 30 or 35
life expectancy
for the disclosures as at 31 december 2011 the s1nxa series of tables from the continuous mortality investigation were adopted 
appropriate to members’ actual years of birth and with a 95 scaling factor for males and 100 for females medium cohort projections 
with a minimum underpin of 15 were adopted for future improvements in life expectancy
the average life expectancy in years of a pensioner retiring at age 65 on the balance sheet date is as follows
     2011  2010 
male     871  871  
female     896  896 
the average life expectancy in years of a pensioner retiring at age 65 20 years after the balance sheet date is as follows
     2011  2010 
male     900  900  
female     925  925 
an increase of one year to the average life expectancy at 65 would increase the present value of the plan liabilities by around 30 
2010 30 morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
119
7 retirement beneﬁt schemes continued
the amount included in the balance sheet arising from the company’s liabilities in respect of the plan is as follows
    2011  2010  2009  
    £m £m £m
present value of the plan liabilities
a
     94 85 89 
fair value of the plan assets
b
     81  66  57 
deﬁcit in the plan    13 19 32 
related deferred taxation at 25 2010 27    03  05  09 
liability recognised in the balance sheet    10 14 23
a
  any pension which accrues in respect of service after 6 april 1997 will increase in line with inﬂation subject to a maximum of 5 per 
annum
b
  represents the ongoing value of assets invested in managed funds operated by aegon 69 formerly scottish equitable and 
legal  general 31 at the valuation date the assets and liabilities relating to deﬁned contribution members are in addition to  
these ﬁgures 
amounts recognised in the proﬁt and loss account of the company in respect of the plan
     2011  2010  
     £m £m
interest cost     04 05 
expected return on the plan assets     03  03 
net return     01 02
total amount charged to proﬁt and loss total operating charge less net return
a
     01  02 
a
  there are no amounts to be included within the operating proﬁt for current or past service costs in 2011 and 2010
analysis of the movement in the plan deﬁcit during the year
     2011  2010  
     £m £m
deﬁcit at 1 january     19 32 
interest cost     04 05 
actuarial gainlosses     –  08 
expected return on the plan assets     03  03  
contributions from sponsoring company
a
      07  07 
deﬁcit at 31 december     13 19
a
 the minimum amount of contributions the company expects to be paid to the deﬁned beneﬁt section of the plan in 2012 is £07m
liabilities in respect of pensions in payment account for 35 of the total 2010 32 the average term to retirement is 74 years 2010 
75 years for active members ie members who are still employed by the company and whose past service beneﬁts are linked to their 
ﬁnal salary but are no longer accruing ﬁnal salary beneﬁts and 63 years 2010 64 years for deferred members
the plan assets and the expected rate of return at the balance sheet date were as follows
 fair value of assets  expected return 
 
 
 
 
 2011  2010  2009  2011  2010  2009  
 £m £m £m   
fixed interest gilts 41  33  32  30  42  44  
corporate bonds 40  33  25  47  54  56  
cash –  –  –  20  20  20 
 81  66  57 
the expected return on plan assets is determined by considering the expected returns available on the assets underlying the current 
investment policy expected yields on ﬁxed interest investments are based on gross redemption yields as at the balance sheet date
the plan does not hold any ﬁnancial instruments issued by the company and does not hold any property or other assets used by  
the group
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122 notes to the company ﬁnancial statements
continued
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
120
7 retirement beneﬁt schemes continued
history of experience adjustments is as follows
 2011  2010  2009 2008 2007
 
 
 
 
 
 
 
 
 
 
   asset or    asset or   asset or   asset or   asset or 
 £m liability value £m liability value £m liability value £m liability value £m liability value
difference between  
 the expected and  
 actual return on  
 the plan assets 07  86  02  25  02  35 04 66 05 110 
experience gainloss 
 arising on the plan 
 liabilities 07 74 06  64  08 90 02  19  04 44
total actuarial 
 gainloss –    08  06  02  09
actuarial gainslosses recognised in the combined statement of movements in reserves and shareholders’ funds
    2011  2010  2009  
    £m £m £m
actuarial gainslosses recognised during the year    –  08  06 
cumulative actuarial losses recognised during the year    30 30 38
8 share capital
 2011  2010 
 
 
 
 
   no ‘000s £’000s no ‘000s £’000s
issued and fully paid 
at the beginning of the year   43188  2159  43160  2158  
exercise of share options   27  1  28  1 
at the end of the year   43215  2160  43188  2159 
the company has one class of ordinary shares of 5p each ‘shares’ which carry no rights to ﬁxed income all ordinary shares are 
entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the company  
all shares rank equally with regard to the company’s residual assets
no member shall however be entitled to vote at any general meeting in respect of any share held by the member if any call or other 
sum then payable by the member in respect of that share remains unpaid or if a member has been served with a restriction notice  
as deﬁned in the articles after failure to provide the company with information concerning interests in those shares required to be 
provided under the companies act 2006
shares
share options
the weighted average share price at the date of exercise for share options exercised during the year was £708 2010 £647  
the options outstanding at 31 december 2011 had a weighted average exercise price of £609 2010 £712 and a weighted average 
remaining contractual life of 21 years 2010 12 years in 2011 options under the esop 2007 were granted on 2 march 30 march  
21 april and 16 may and the estimated fair value of the options granted on those dates was £03m 2010 £01m options and share 
awards under the 2005 plan were granted on 30 march and 16 may the estimated fair value of the options granted on those dates  
was £08m 2010 £06m and the estimated fair value of the share awards granted on those dates was £15m 2010 £10m 1607119 
options were granted under the saye scheme in 2011 2010 nil the estimated fair value of options granted under the saye scheme  
on 27 september 2011 was £10m 2010 £nil
own shares
own shares at cost represent 766714 2010 781444 shares in the company held in the morgan sindall employee beneﬁt trust  
‘the trust’ in connection with the esop 2007 and the 2005 plan the trustees of the trust purchase the company’s shares in the  
open market with ﬁnancing provided by the company on the basis of regular reviews of the share liabilities of the relevant schemes  
all of the shares held by the trust were unallocated at the year end and dividends on these shares have been waived the cost of  
shares expected to be awarded by the trust is charged over the threeyear period to which the award relates based on the company’s 
share price at 31 december 2011 of £594 2010 £705 the market value of the shares was £4554281 2010 £5509180 directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
121
9 dividends
for details of dividends paid during the year and proposed but not approved by shareholders at the balance sheet date refer to note 7 
of the consolidated ﬁnancial statements
10 provisions
     employee  insurance  
    provisions  provisions total 
    £m £m £m
at 1 january 2011    07  94  101  
utilised    –  18 18 
additions    –  28  28 
at 31 december 2011    07  104  111 
the company has provisions for self insurance in respect of claims incurred but not yet received and employee provisions which 
comprise obligations to former employees that are not related to retirement or postretirement obligations the majority of the 
provisions are expected to be utilised within ﬁve years
11 operating lease commitments
the company has an operating lease commitment in respect of land and buildings expiring in less than one year for £01m  
2010 £02m lease payments recognised as an expense in the year amounted to £02m 2010 £02m
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 surety bond facilities guarantees and claims under contracting  
and other arrangements including joint arrangements and joint ventures entered into in the normal course of business
as at 31 december 2011 contract bonds in issue under uncommitted facilities covered £2041m 2010 £1718m of contract 
commitments of the group
13 subsequent events
there were no subsequent events that affected the ﬁnancial statements of the company 122
morgan sindall group plc annual report and accounts 2011
company ﬁnancial statements
notes to the company ﬁnancial statements
continued
14 additional information on subsidiary undertakings and joint ventures
the company acts as a holding company for the group and has the following principal subsidiary undertakings and signiﬁcant interests 
in joint ventures which affected the group’s results or net assets
subsidiary undertakings activity 
lovell partnerships limited affordable housing 
magnor plant hire limited construction plant hire 
morgan sindall plc construction and infrastructure 
morgan lovell plc specialist in office design and build 
morgan sindall professional services ltd design services 
morgan sindall investments limited project investments 
muse developments limited urban regeneration 
newman insurance company limited insurance 
overbury plc fitting out and refurbishment specialists 
morgan sindall underground professional services ltd infrastructure design services 
 
joint ventures 
access for wigan holdings limited 50 investment in public services centre 
ashton moss developments limited 50 inner city regeneration 
blue light holdings limited 50 investment in t he development of emergency services facilities 
bromley park limited 50 residential development 
claymore roads holdings limited 50 infrastructure services 
community solutions investment partners limited 
 previously called community solutions for  
 primary care holdings limited 50 strategic development and regeneration projects in the health sector 
english cities fund 125 inner city regeneration 
hull esteem consortium psp limited 33⅓ investment in the development of education facilities 
isis waterside regeneration 25 waterside regeneration 
lewisham gateway developments limited 50 mixeduse regeneration 
lingley mere business park development  
 company limited 50 new commercial office space development 
morganvinci limited 50 infrastructure services 
renaissance miles platting limited 33⅓ mixedtenure development 
st andrews brae developments limited 50  residential development 
taycare health holdings limited 50 investment in primary healthcare 
the compendium group limited 50 investment in affordable housing
all subsidiary undertakings are wholly owned unless shown otherwise and with the exception of companies marked  all shareholdings 
are in the name of morgan sindall group plc the proportion of ownership interest is the same as the proportion of voting power held 
except for english cities fund and isis waterside regeneration details of which are shown in the consolidated ﬁnancial statements note 
12 with the exception of newman insurance company limited registered and operating in guernsey and taycare health holdings 
limited registered and operating in scotland all undertakings are registered in england and wales and the principal place of business  
is the uk newman insurance company limited has a year end of 30 november coterminous with the renewal date for the insurance 
arrangements in which it participates
on 15 february 2012 the company disposed of its interest in blue light holdings limited directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
shareholder information
financial calendar 2012
financial year end 31 december 2011 
preliminary results announcement 21 february 2012 
annual general meeting 3 may 2012 
interim management statement 3 may 2012 
final dividend 
exdividend date 25 april 2012 
record date 27 april 2012 
payment date 18 may 2012 
half year results announcement august 2012 
interim dividend payable september 2012 
interim management statement november 2012
registrar
all administrative enquiries relating to shareholdings such as lost 
certiﬁcates changes of address change of ownership or dividend 
payments and requests to receive corporate documents by email 
should in the ﬁrst instance be directed to the company’s 
registrar and clearly state the shareholder’s registered address 
and if available the full shareholder reference number
by post capita registrars the registry 34 beckenham road 
beckenham kent br3 4tu
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registering on the registrar’s website enables you to view your 
shareholding in morgan sindall group plc including an indicative 
share price and valuation a transaction audit trail and dividend 
payment history if you wish to view your shareholding please  
log on to wwwcapitashareportalcom and click on the link 
‘shareholder services’ then follow the instructions
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shareholders who do not currently have their dividends paid 
directly to a bank or building society account and wish to do  
so should complete a mandate instruction available from the 
registrar on request or at wwwcapitashareportalcom
website and electronic communications
the 2011 annual report and other information about the company 
are available on its website wwwmorgansindallcom the 
company operates a service whereby you can register to receive 
notice by email of all announcements released by the company
the company’s share price 15 minutes delay is displayed on the 
company’s website
shareholder documents are now following changes in company 
law and shareholder approval primarily made available via the 
company’s website at wwwmorgansindallcominvestors unless  
a shareholder has requested to continue to receive hard copies  
of such documents if a shareholder has registered their upto
date email address an email will be sent to that address when 
such documents are available on the website if shareholders have 
not provided an uptodate email address and have not elected  
to receive documents in hard copy a letter will be posted to  
their address on the register notifying them that the documents 
are available on the website shareholders can continue to  
receive hard copies of shareholder documents by contacting  
the registrar
if you have not already registered your current email address  
you can do so at wwwcapitashareportalcom
investors who hold their shares via an intermediary should contact 
the intermediary regarding the receipt of shareholder documents 
from the company
multiple accounts
shareholders who receive more than one copy of communications 
from the company may have more than one account in their 
name on the company’s register of members any shareholder 
wishing to amalgamate such holdings should write to the 
registrar giving details of the accounts concerned and 
instructions on how they should be amalgamated
shareholder alerts
unsolicited mail investment advice and fraud
the company is obliged by law to make its share register publicly 
available and as a consequence some shareholders may receive 
unsolicited mail in addition many companies have become aware 
that their shareholders have received unsolicited phone calls or 
correspondence typically from overseas ‘brokers’ concerning 
investment matters 
these callers can be very persistent and extremely persuasive  
and their activities have resulted in considerable losses for some 
investors it is not just the novice investor that has been deceived 
in this way many of the victims have been successfully investing 
for several years shareholders are advised to be very wary of any 
unsolicited advice offers to buy shares at a discount or offers of 
free company reports
morgan sindall group plc annual report and accounts 2011
shareholder information
123 morgan sindall group plc annual report and accounts 2011
shareholder information
124
shareholder information
continued
if you receive any unsolicited mail or investment advice
  make sure you get the correct name of the person and 
organisation
  check that the organisation is properly authorised by the fsa 
before getting involved by visiting httpwwwfsagovuk
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report the matter to the fsa either by calling 0845 606 1234 or 
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lon20771 london w1e 0zt or visit the website at www
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if you deal with an unauthorised ﬁrm you will not be eligible to 
receive payment under the financial services compensation 
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more detailed information on this or similar activity can be found 
on the consumer financial education body website www
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share dealing services
you can buy shares through any authorised stockbroker or bank 
that offers a share dealing service in the uk or in your country of 
residence if outside the uk
a telephone dealing service has been arranged with stocktrade 
which provides a simple way for buying or selling morgan sindall 
group plc shares basic commission is 05 up to £10000 
reducing to 02 thereafter subject to a minimum commission  
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information please call 0845 601 0995 and quote reference low 
co140
analysis of shareholdings at 31 december 2011
 number of  of total  number of  of total 
 accounts accounts shares shares
holding of shares 
up to 1000 863 5295 419803 097 
1001 to 5000 463 2840 1086008 251 
5001 to 100000 233 1430 5758689 1333 
100001 to 1000000 62 380 18518870 4284 
over 1000000 9 055 17431935 4034
 1630 10000 43215305 10000
shareholder communication
email enquiriesmorgansindallcom 
telephone 020 7307 9200
registered office
kent house 1417 market place london w1w 8aj 
registered in england and wales no 00521970
advisers
brokers  jefferies hoare govett 
numis securities limited
solicitors  slaughter and may 
wragge  co llp
bankers  lloyds tsb bank plc 
the royal bank of scotland plc 
santander uk plc 
yorkshire bank
independent auditors deloitte llp forward looking statements
this document may include certain 
forward looking statements beliefs  
or opinions that are based on current 
expectations or beliefs as well as 
assumptions about future events  
these forward looking statements  
can be identiﬁed by the fact that they  
do not relate only to historical or current 
facts forward looking statements  
often use words such as anticipate 
target expect estimate intend plan 
goal believe will may should would 
could or other words of similar meaning  
undue reliance should not be placed on 
any such statements because by their 
very nature they are subject to known 
and unknown risks and uncertainties  
and can be affected by other factors  
that could cause actual results and the 
group’s plans and objectives to differ 
materially from those expressed or 
implied in the forward looking 
statements
there are several factors that could 
cause actual results to differ materially 
from those expressed or implied in 
forward looking statements among  
the factors that could cause actual 
results to differ materially from those 
described in forward looking statements 
are changes in the global political 
economic business competitive market 
and regulatory forces future exchange 
and interest rates changes in tax rates 
and future business combinations  
or disposals
the group undertakes no obligation  
to revise or update any forward  
looking statement contained within  
this document regardless of whether 
those statements are affected as a  
result of new information future  
events or otherwise
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bostock and pollitt limited london
copywriting provided by
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photography
directors photography by  
george brooks and natalie lawrence 
heathrow airport courtesy of 
wwwbaacomphotolibrary page 24 
bbc headquarters by will pryce  
page 27
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with its production have been recycled morgan sindall group plc 
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t witter morgansindall
morgansindallcom


Summary:
 10
the group delivered in 2011 in the face 
of challenging economic conditions 
and ongoing constraints in public 
spending we remain in a strong 
ﬁnancial position and have strategically 
positioned the group to take advantage 
of the signiﬁcant opportunities that 
exist in the uk
revenue was up by 6 to £2227m 2010 
£2102m with proﬁt before tax amortisation  
and nonrecurring items of £453m 2010 
£513m reﬂecting the challenging market 
conditions £14m 2010 £32m of nonrecurring 
items arose as expected relating to it costs 
following the merger of the construction and 
infrastructure services divisions in 2010 proﬁt 
before tax was £400m 2010 £407m an 
analysis of other prior year nonrecurring items  
is included in note 2 adjusted earnings per  
share before amortisation of intangible assets 
nonrecurring items and oneoff tax beneﬁt 
were 825p 2010 929p the group’s 
continuing investment in regeneration increase 
in investment properties and use of shared 
equity to support open market house sales has 
been reﬂected in our average cash† for 2011 
being lower than in 2010 at £23m 2010 £63m
success across the board
each division has achieved wideranging success 
throughout the year demonstrating not only its 
specialist skills but also the strength and the 
value of the group’s integrated capability 2011 
saw higher levels of collaboration between the 
group’s divisions than ever before projects that 
demonstrate the success and value of divisions 
working together include the completion on 
time and on budget of the basildon sporting 
village working within a 25year agreement 
with basildon borough council our investments 
division provided a funding solution and 
development expertise whilst design and 
construction services were provided by our 
construction and infrastructure division another 
example of our integrated approach is urban 
regeneration’s 56acre £300m northshore 
development in stocktonontees which will 
“we have strategically 
positioned the group to 
adapt to the challenging 
business environment 
we are conﬁdent that 
our increased investment 
in regeneration and our 
focus on growth sectors 
of the market will lead to 
higher quality medium
term returns”
transform stockton’s riverside by delivering 
18m sq ft of offices leisure and retail 
accommodation in addition to high quality 
housing the ﬁrst phase is currently on site with 
our affordable housing division working with 
colleagues in urban regeneration to build 50 
energyefficient affordable houses
construction and infrastructure has performed 
in line with our expectations despite operating 
within a very competitive and challenging 
market place with revenue slightly increased  
at £1268m 2010 £1250m and operating 
proﬁt of £211m 2010 £269m it has further 
reinforced its marketleading positions in 
tunnelling and aviation and substantially 
strengthened its leading reputation in the  
rail highways and energy markets notable 
achievements include securing major contracts 
in each of these growth infrastructure sectors as 
well as considerable success in being awarded 
new and renewed positions on some of the  
uk’s major construction frameworks an 
example of which is the division’s appointment 
as preferred bidder in joint venture for an 
electricity transmission overhead line partnership 
worth up to £500m to deliver national grid’s 
overhead line construction programme for the 
next ﬁve years it entered the new ﬁnancial year 
with a healthy pipeline of opportunities in key 
sectors of the infrastructure market
fit out has delivered another consistent 
performance for the group the division has 
grown market share in tough trading conditions 
with revenue increasing to £438m 2010 £415m 
with work secured via frameworks doubling 
operating proﬁt was £124m 2010 £148m  
it has responded to market constraints by 
launching a new technology division to capitalise 
on existing skill sets and to respond to the needs 
of clients who are actively seeking an extended 
service to deliver infrastructure data centre  
and technologyled projects growth markets 
identiﬁed for the new ﬁnancial year include retail 
banking technology and the education sector 
where the division continues to work with 
universities under pressure to improve facilities 
to attract students
chief executive’s review
paul smith
chief executive
morgan sindall group plc annual report and accounts 2011
chief executive’s review 11
affordable housing has swiftly capitalised on 
the wider business opportunities resulting from 
the successful integration of the connaught 
business it has exploited its full service capability 
with revenue increasing signiﬁcantly to £462m 
2010 £387m and secured growth in operating 
proﬁt to £185m 2010 £161m its strengthened 
service offering has led to an agreement with 
barnet homes worth approximately £103m over 
10 years to deliver planned refurbishment and 
electrical work across the london borough of 
barnet’s 15000home portfolio its increased 
capability to provide nationwide reactive 
maintenance services alongside its planned 
maintenance and design and build of mixed
tenure affordable housing has provided a strong 
platform for continuing success in 2012
urban regeneration has increased its 
contribution to the group this year with 
operating proﬁt almost doubling to £39m 
2010 £20m underpinning our conﬁdence in 
the regeneration market it has secured ﬁve 
major new schemes substantially increased its 
regeneration pipeline to £16bn 2010 £14bn 
with a further £06bn at preferred developer 
stage and has increased its level of on site 
activity the division is successfully positioning 
schemes to capitalise on opportunities as market 
conditions improve
investments has achieved notable success in 
2011 facilitating project development primarily  
in the public sector by providing ﬂexible ﬁnancial 
solutions and development expertise despite 
limited opportunities the division has been 
successful in securing a £500m 20year 
development agreement with bournemouth 
borough council and commenced the second 
tranche of schools within hull city council’s 
building schools for the future programme the 
directors’ valuation of its investment portfolio 
has increased signiﬁcantly to £49m 2010 £41m 
providing sustained longterm value for the 
group we will recycle capital from maturing 
investments from time to time and recently sold 
our interest in the dorset fire  rescue pfi for 
£38m which was above our directors’ valuation
an increased focus on regeneration
we are already leading a number of complex 
regeneration programmes across the country 
through our investments urban regeneration 
and affordable housing divisions they are all 
working in longterm partnerships with the 
private and public sectors unlocking land values 
for our clients and helping to regenerate 
deprived neighbourhoods across the country
the ability of the group to maximise 
regeneration opportunities today was 
strengthened by the acquisition of the amec 
construction business and developments 
division in 2007 at the time we stated that the 
acquisition would open up signiﬁcant growth 
opportunities having strategically shaped the 
group since then and with signiﬁcant growth 
achieved in our regeneration pipeline currently 
standing at £18bn we are now in a strong 
position to capitalise on future opportunities  
and secure organic growth in this market
we intend to build on successes achieved to 
date and increase our focus on this market 
allowing the group to beneﬁt from the quality of 
returns available through medium to longterm 
urban and residential regeneration programmes 
the continuing reluctance of banks to lend has 
led to the forced withdrawal of many players 
from the marketplace resulting in a less 
competitive environment barriers to entry are 
high and the skill sets required are a perfect ﬁt 
with the group’s specialist expertise
the decision to invest more signiﬁcantly in 
regeneration will create opportunities for all 
group divisions it will have an impact on our 
level of cash reserves but we are conﬁdent that 
our business model which limits open market 
site acquisition and uses working capital more 
efficiently in phased developments will ensure 
that the group and its shareholders will beneﬁt 
from the opportunity to secure healthy long
term and sustainable proﬁt streams

proﬁt before tax amortisation 
and nonrecurring items £m
£453m
2011 453
2010 513
2009 515
proﬁt before tax £m
£400m
2011 400
2010 407
2009 447
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
chief executive’s review
revenue £m
£2227m
2011 2227
2010 2102
2009 2214 12
chief executive’s review
continued
how we differentiate ourselves
today’s challenging environment requires 
organisations to be insightful and agile  
two distinctive values of the group are its 
decentralised structure and its culture of 
empowerment which permeates each division 
this culture is a real strength it stimulates 
innovation and creativity minimises bureaucracy 
and provides each division with a signiﬁcant 
competitive advantage it requires divisions to 
acquire a deep understanding of their markets 
to develop specialist skills to provide an exact ﬁt 
with market requirements and allows swift 
decision making this means our clients work 
with empowered local teams who offer a 
richness of local knowledge an awareness of 
client needs and are able to provide a highly 
responsive service using local supply chains
we aim to deliver an exceptional and consistent 
quality service to our construction clients and 
regeneration partners throughout the group 
we continue to differentiate our service offering 
through our relentless pursuit of perfect delivery 
across all construction activity and through the 
provision of marketleading client experiences 
clients have demonstrated the value of this 
investment in quality through longterm 
relationships and the award of new and  
renewed framework positions
clients are demanding a wider range of skills 
increasingly aggregated into larger and more 
complex contracts and a more sophisticated 
service we have continued to broaden and 
deepen our range of services to meet these 
requirements to ensure that we are able to take 
on the most challenging schemes and reduce 
complexity for our clients
committed to providing a safe working 
environment
providing a safe working environment for 
everyone remains our number one priority  
this commitment stretches from the workplace 
through to construction sites and beyond  
into the communities where we operate  
we endeavour to ensure that through proper 
training and education our staff are fully 
engaged and involved in improving safety and 
that everyone understands the part they play  
in their own safety and that of their coworkers 
our supply chains and the wider community 
we are disappointed to report that the total 
number of incidents being reported under the 
reporting of injuries diseases and dangerous 
occurrences regulations ‘riddor’ has risen 
to 96 from 82 in 2010 these are incidents over 
three days which is measured by the time that  
an injury prevents a person performing their 
normal work duties ten of these incidents 
related to former connaught employees  
in the past we have experienced similar trends 
following an acquisition we expect health and 
safety to improve as we have made a signiﬁcant 
investment in health and safety training for all 
staff that joined us from connaught we have 
introduced an additional health and safety  
key performance indicator ‘kpi’ within our 
roadmap for sustainability which is all incidents 
over one day 2011 has been the ﬁrst year we 
have collected this data and there were 81 
onetothree day incidents and we will use  
this ﬁgure as our baseline for future reporting  
of this kpi
deﬁning our business through sustainability 
as a leading construction and regeneration 
group we play a signiﬁcant role in creating and 
improving the built environment that we live in 
with this role comes responsibility for the 
people who work with us the communities  
we operate within and the impact we have  
on the environment
for many years our divisions have entrenched 
sustainability into their individual operations  
2011 has been marked by the group further 
reinforcing our pledge to provide positive and 
lasting economic environmental and social  
gain through the launch of our roadmap  
for sustainability
the roadmap outlines key areas of strategic 
improvement where we believe we can make  
a real difference and equally importantly 
identiﬁes targets milestones and longterm 
objectives together with key performance 
indicators the board and each of the  
group’s ﬁve divisions are fully committed  
to the roadmap 
riddor incidents no
96
2011 96
2010 82
2009 113
perfect delivery scores 
84
2011 84
2010 83
2009 84
morgan sindall group plc annual report and accounts 2011
chief executive’s review 13
the roadmap has given us a clear sense of 
direction and will drive improvement across  
the group with the built environment 
responsible for over half of the uk’s carbon 
emissions construction has a unique role to  
play in combating climate change our more 
strategic approach to sustainability will further 
strengthen our ability to contribute and innovate 
in today’s fastchanging environment
our ﬁrst dedicated sustainability report can be 
viewed at wwwmorgansindallcomsustainability 
and we look forward to sharing our progress 
over time
key risks to success 
the group’s ability to successfully implement  
its strategy and achieve its goals can be  
affected by a number of key risks rigorous  
risk management processes are in place to 
continuously identify new risks to understand 
their impacts and to implement effective 
mitigating actions in particular we are 
addressing the following
an intelligent approach
the market sectors in which the group  
operates are affected by general 
macroeconomic conditions and changes in 
government spending policy we are particularly 
focused on managing the impact on the group 
of the current economic environment and are 
proactively investing in the long term to ensure 
the group is in a position of strength today and 
for when market conditions improve with 
increased competition in many sectors it is vital 
in today’s market to be selective in the contracts 
we bid for and to be intelligent in our bidding 
process avoidance of competing on price alone 
and differentiating the group’s offering on 
service and quality through our perfect delivery 
standard will help secure higher margins 
a responsible attitude
the group’s health safety and environmental 
performance affects our staff subcontractors 
and the public as well as our reputation and 
commercial performance this area of our 
business continues to be a priority for the group 
and stringent policy frameworks and systems 
are embedded within each division and are 
regularly reviewed to minimise risk
a greater level of scrutiny
we are applying even higher levels of  
scrutiny to the management of working capital 
to implement our strategy of investing cash 
generated from construction activities into 
regeneration and to ensure the longterm 
success of the group regular monitoring of 
cash levels stress testing longerterm forecasts 
and closely monitoring overdue work in 
progress debtors and retentions are all 
meticulously undertaken to ensure we  
continue to grow proﬁtably 
rigorous credit checks and due diligence are 
undertaken to assess the ﬁnancial health of 
clients to avoid ﬁnancial loss through bad debt 
and equal rigour is applied to subcontractors 
and suppliers our approach to supply chain 
management is based on working with suppliers 
and subcontractors to build longterm 
relationships so that together we provide our 
clients with a superior quality service
outlook
our outlook is sound with a strong balance 
sheet a steady forward order book of £34bn 
2010 £36bn and a signiﬁcant and growing 
regeneration pipeline of £18bn 2010 £14bn 
with a further £06bn at preferred developer  
all providing a level of resilience to economic 
ﬂuctuations whilst we acknowledge the 
challenges that lie ahead we are conﬁdent that 
the investment in regeneration and focus on 
opportunities in growing sectors of the market 
will lead to higher quality and sustained  
mediumterm returns
paul smith 
chief executive 
21 february 2012
forward order book £bn
£34bn
2011 34
2010 36
2009 32 
regeneration pipeline £bn
£18bn
2011 18
2010 14
2009 14
directors’ report business review 02–44 directors’ report governance 45–66 shareholder information 123–124 financial statements 67–122
morgan sindall group plc annual report and accounts 2011
chief executive’s review
  operating proﬁt is proﬁt from operations before amortisation  
of intangible assets and nonrecurring items
 † average cash is the average of the daily treasury balances for 
the year