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construction
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annual report and accounts 2012 user guide
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morgan sindall group plc annual report and accounts 201 2 
user guide morgan sindall group plc annual report and accounts 201 2 
contents
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
01
contents
directors’ report governance
information about our board of directors  
and corporate governance
44 board of directors
46 corporate governance statement
52 directors’ remuneration report
62 other statutory and regulatory information
66 directors’ responsibilities statement
group consolidated financial statements
the group’s consolidated financial statements  
for the financial year ended 31 december 2012
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
82 notes to the consolidated financial statements
company financial statements
the company’s financial statements for  
the financial year ended 31 december 2012
110 independent auditor’s report
111 balance sheet
112 combined statement of movement  
in reserves and shareholders’ funds
113 significant accounting policies
115 notes to the company financial statements
121 shareholder information
directors’ report business review
all about morgan sindall group and how we  
performed in 2012
04 group at a glance
06 group highlights
08 our business model
14 case studies
18 chairman’s statement
20 chief executive’s review
32 finance review
34 risk review
40 sustainability review
welcome to our  
201 2 annual report and accounts
from construction and infrastructure to fit out affordable 
housing urban regeneration and investments we deliver 
complex projects that create a real difference
we call it perfect delivery
it’s not just about measurement it’s who we are and how  
we work
it’s about inspiring our teams to go that extra mile 
it’s about using our dependable expertise to secure projects 
it’s about delivering projects on time and on budget 
it’s about aspiring to a safety record second to none group at a glance
construction and infrastructure
offers national design construction and infrastructure  
services to private and public sector clients the division  
works on projects and frameworks of all sizes across a  
broad range of markets including commercial defence 
education energy healthcare industrial leisure retail  
transport and water
revenue
£1 168m
2011 £1268m
operating profit
£197m
2011 £21 1m
fit out
specialises in fit out and refurbishment projects in the 
commercial and government office education retail 
technology and leisure markets overbury operates as  
a national fit out company through multiple procurement 
routes and morgan lovell specialises in the design and  
build of offices
revenue
£427m
2011 £438m
operating profit
£113m
201 1 £1 24m
affordable housing 
specialises in the design and build refurbishment and 
maintenance of homes and the regeneration of communities 
across the uk the division operates a full mixedtenure  
model creating homes for rent shared ownership and  
open market sale
revenue
£386m
2011 £462m
operating profit
£1 15m
2011 £185m
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
revenue
£62m
2011 £57m
operating profit
£27m
2011 £39m
investments
facilitates project development primarily in the public  
sector by providing flexible financing solutions and 
development expertise the division covers a wide range  
of markets including urban regeneration education  
healthcare housing emergency services defence  
and infrastructure 
directors’ portfoliovaluation
£32m
2011 £49m
investments carrying value
£182m
2011 £232m
 operating profit is profit from operations before amortisation of intangible assets and nonrecurring items
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
morgan sindall group plc annual report and accounts 201 2 
group at a glance
02 we offer opportunities to circa 360 
apprentices each year
we have over 382 considerate 
constructors awards
we are a market leader in 
regenerating estates and 
communities
we complete over 200000 home 
repairs every year
we partner with local authorities  
to deliver positive change and 
economic growth
we develop enough commercial  
and residential space to cover more 
than 250 football pitches
we relocated 16000 staff to new 
offices without a single  
day’s downtime
we revitalise derelict dockyards into 
vibrant waterside residential districts
we fit out office environments for 
18 of the top 20 uk law firms and 
fit out offices for the nine largest uk 
accountancy firms
we complete fit outs for half the 
ftse 100 including the 10 largest 
companies
we fit out whilst our clients continue 
to work in the same environment on 
50 of projects to date
we work in the education market 
including the fit out of higher 
education facilities
we keep traffic flowing on the uk’s 
highways
we operate in nine of the uk’s top  
15 airports
we deliver projects to make water 
safer and cleaner
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
morgan sindall group plc annual report and accounts 201 2 
group at a glance
03
annual report and accounts 201 2 
group at a glance
03
it’s about 
everything
that we do it’s about 
the services 
we deliver
group at a glance
morgan sindall group plc annual report and accounts 201 2 
group at a glance
04
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 05
morgan sindall group plc annual report and accounts 201 2 
group at a glance
morgan sindall group is a leading 
uk construction and regeneration 
group employing circa 6400 people 
by focusing on delivery  the group 
is able to offer innovative and 
costeffective solutions to clients 
construction is offered through 
a network of 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 
working in longterm trusted 
partnerships the group’s expertise 
in mixeduse and housingled 
regeneration is creating large
scale economic and social renewal 
throughout the country
revenue
£2047m
2011 £2227m
profit before tax 
and amortisation
£37 1m
2011 £439m
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
group highlights
group highlights
the group has delivered a solid performance against a background of 
challenging market conditions the group’s track record and integrated 
offer of design construction development and financing services has 
enabled it to win some of the uk’s most significant construction and 
regeneration projects and longterm frameworks this year  
revenue £m
 
£2047m 
12 2047
11 2227
10 2102
comment
revenue fell 8 as 
construction and affordable 
housing markets remained 
under pressure
8
adjusted eps pence
 
793p 
12 793
11 867
10 835
comment
the fall in adjusted eps reflects 
the fall in profit before tax 
offset by a decrease in the 
effective tax rate
 adjusted eps is basic earnings 
per share adjusted for 
amortisation expense note 3
9
profit before tax
and amortisation £m
 
£37 1m 
12 37 1
11 439
10 462
comment
profit has fallen reflecting the 
challenging market conditions 
and their impact on margin 
along with nonrecurring items 
of £100m 2011 £14m
15
basic eps pence
 
725p 
12 725
11 77 5
10 705
7
profit before tax £m
 
£342m 
12 342
11 400
10 407
15
forward order book £bn
 
£31bn 
12 31
11 34
10 36
comment
sound forward order book 
gives confidence despite 
caution over the short term 
market outlook
9
regeneration pipeline £bn
 
£21bn 
12 21
11 18
10 14
comment
the pipeline shows the group’s 
share of forward development 
values further schemes 
secured in the year reflect the 
group’s growing investment in 
regeneration there is a further 
£04bn 2011 £06bn of 
opportunities at preferred 
developer stage
17
total dividend pence
 
27 0p 
12 270
11 420
10 420
comment
the dividend has been rebased 
to achieve a dividend cover of 
between 25 and 30 times in 
line with the group’s longterm 
dividend policy
36
06
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 group highlights
 i strategy remains to achieve leading positions 
in the group’s chosen markets and to invest 
cash generated from constructionrelated 
activities into regeneration opportunities
 i continuing to target growth infrastructure 
markets where the group is increasing  
market share significant contract wins  
include a potential 1 5year £1 1 bn framework 
in joint venture to develop sellafield
 i maintained rigorous contract selectivity  
across the group
 i maintained a tight control on overheads and 
costs across the group
 i fit out increased market share in commercial 
office market
 i focus on large complex regeneration 
schemes which draw on specialist capabilities 
across the group such as the t owcester 
regeneration and civic accommodation 
project
 i increased investment in isis waterside 
regeneration joint venture from 25  
to 50
 i appointed preferred partner on  
slough labv
 i achieved a 26 reduction in the  
group’s carbon emissions
 i achieved a 7 increase in waste  
diverted from landfill to 92
 i third consecutive year in which the  
group had less than 100 reportable  
safety incidents
 i group wellpositioned to come out  
of the downturn in a strong position  
having realigned resources
it’s about longterm 
investment
the group’s strategy is to build leading  
positions in its chosen markets 
to read more about our strategy 
see pages 9 to 1 1
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
group highlights
07
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 our business model
the group is a leading construction and 
regeneration group operating within the uk 
the group works in committed partnerships 
to help its clients and partners to create 
renew and maintain their land property and 
infrastructure assets the specialist divisions 
provide design construction development and 
financing services the group has strength in 
its breadth of capabilities and has the ability 
to integrate skills to create value and simplify 
procurement for its clients and to deliver 
effectively the most complex largescale 
projects in construction and regeneration 
the group’s strategy is to achieve leading positions in its chosen markets 
and to use the cash generated from its construction activities to invest in 
and grow its regenerationrelated activities it does this by developing its 
capabilities and building demonstrable expertise and a track record in 
those markets where there are clear barriers to entry and where quality 
and consistency of service delivery are valued at a premium
the group creates value through having capable teams selecting the 
right construction and regeneration opportunities applying a distinctive 
approach and achieving a successful outcome to any project or 
development 
the principal risks to the group achieving its strategic  
objectives include
 i adverse macroeconomic conditions impacting the overall market
 i failure to attract develop and retain capable teams to deliver projects 
 i failure to perform or deliver contracts effectively thereby incurring 
potential financial loss and reputation impact 
 i failure to build a sustainable resilient business whereby a major event 
could adversely impact the group’s reputation
to read more about our risk review  
see pages 34 to 39
ultimately it is through the excellent delivery of projects of all sizes that 
the group generates the returns on its financial capital enabling it to pay 
regular dividends to shareholders and reinvest in the business
at the heart of the group’s operations is its philosophy of perfect 
delivery it drives the quality of its service to clients and partners  
and motivates the group to achieve continuous improvement in  
how it conducts itself and does business
01
markets
06
successful
outcomes
03
capable
teams
02
strategy
05
distinctive
approach
04
select right
opportunities
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
0ur business model
08
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 markets and 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 activities the 
group has increased its focus on the growing 
infrastructure markets and regeneration to 
secure medium to longterm opportunities 
and superior returns 
the total value of construction industry output in the uk was forecast  
to be circa £97bn in 201 2 a reduction of 9 on the previous year 
construction is split into three sectors public regulated and private 
within these sectors the group targets key markets valued at circa 
£58bn in 201 2 also down from the previous year the size and forecast 
movements of these targeted key markets are as follows
market conditions have remained tough over the past 1 2 months and 
will continue to be challenging in 201 3 the public sector which accounts 
for onethird of total construction continues to be adversely affected by 
continuing fiscal constraints market recovery is expected from 2014 
driven primarily by infrastructure and private sector construction 
growth and the group has the flexibility to benefit from emerging 
opportunities
due to the breadth of markets covered the group is well placed to  
steer a path through the mediumterm forecasts for the next three 
years show the group’s targeted key markets outperforming the 
construction market as a whole with growth in highways and rail output 
alone expected to be 30 by 201 5 the group has realigned resources 
to take full advantage of these opportunities maintaining its ability to 
invest in regeneration where it has an increasing number of potential 
schemes local authorities and landowners continue to value both the 
group’s integrated expertise in mixedtenure affordable housing and 
mixeduse urban development and its ability to provide affordable 
financing solutions the group works in longterm partnerships with 
clients and partners utilising their land assets to achieve largescale 
social and economic renewal
construction market group revenue
targeted key markets
201112 
growth
2012 
market 
£bn
201316 
growth
 of 
2012 
revenue
construction 
and  
infrastructure fit out
affordable 
housing
 
regeneration investments
social housing 36 16 
education 75 15
healthcare 30 3
community defence other 21 3
public 37
transport 53 12
energy 31 7
water 22 8
regulated 27
commercial 57 25
open market housing 136 4
retail 44 2
leisure 39 2
industrial pharmachem other 33 3
private 36
total 577 100
source ons construction products association winter 201 21 3 edition – 2005 prices
directors’ report business review
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0ur business model
09
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 our business model 
the group sets strategic priorities for each of 
the construction markets in which it operates 
and across its regeneration activities these 
priorities are reviewed regularly to assess the 
progress that has been made and identify any 
additional actions that may be required of 
the key markets that the group targets there 
are six that each contribute more than 5 of 
its annual revenue social housing education 
transport energy water and commercial  
there has been significant progress in 201 2 
with a greatly increased presence in the growth 
infrastructure markets a number of new 
and renewed framework awards and further 
development agreements signed
it’s about growing our market share
the group has increased its focus on  
the growing infrastructure markets and 
regeneration to secure medium to long 
term opportunities and superior returns
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
0ur business model
10
targeted key markets
social housing
housing will remain a challenging market through 201 3 as lending 
restrictions continue to constrain demand despite the introduction  
of the government’s firstbuy scheme the funding for lending 
scheme should encourage increased mortgage lending by the banks
education
affected by public sector austerity measures and the cancellation  
of the building schools for the future programme additional funding 
is now being made available through the academies framework and 
priority schools programme in england the 21st century schools 
programme in wales and the schools for the future programme  
in scotland
transport
rail output will grow more than 30 over the next three years 
driven by crossrail and network rail frameworks investment in 
airports will continue particularly at heathrow highways fell sharply 
in 201 2 but will benefit from additional funding as announced in  
the autumn statement and the national infrastructure plan
energy
the power generation market remained buoyant despite  
investment uncertainty whilst awaiting the announcement  
of pf2 and is expected to grow as the energy gap looms  
growth is particularly expected in energy transmission
water
little market growth is expected until the renewal of the fiveyear 
asset management plan amp 6 in 201 5 and the commencement 
of the £42bn thames tunnel in 2016 
commercial
the market has been hard hit by the lack of confidence in the global 
economy and the uncertainty across the euro zone the market is 
expected to further contract in 201 3 before recovering from 2014 
and beyond 
regeneration
challenging market conditions continue due to economic uncertainty 
but the market should be helped by government regeneration 
initiatives such as the funding for lending scheme and the ‘get britain 
building’ programme the commercial office market will remain 
subdued but there is increased potential for preletting opportunities 
there will be regional variations in the housing market with growth 
expected to return to london the south east and the south west 
during 2014
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 value strategic priorities progress in 201 2
market size 
£36bn
201 1 £44bn
revenue
£400m
2011 £497m
 i focus on larger longterm regeneration projects
 i increased collaboration across the group
 i capitalise on nationwide service in the response 
maintenance market
 i target alternative financing solutions such as the 
government’s funding for lending scheme
 i investments in major mixedtenure housingled 
regeneration projects
 i yearonyear increase in the number of open market 
sales despite contraction of firsttime buyer market
 i secured £1 10m of response maintenance contracts 
market size 
£75bn
201 1 £93bn
revenue
£304m
2011 £373m
 i continue to build on our strong track record
 i extend number of frameworks
 i further develop approach to model schools
 i find funding solutions to otherwise nonviable  
projects
 i launched community plus a range of standard  
school designs supported by funding options
 i now on 35 education frameworks with 1 2 being 
awarded or renewed in the year
 i maintained market share
market size 
£53bn
2011 £65bn
revenue
£254m
2011 £240m
 i expand scope of works and market share in rail
 i use track record of working in airport environments to 
increase market share
 i leverage strength of successful highways jvs to secure 
additional opportunities following the autumn 
statement
 i continued progress on crossrail and network  
rail projects
 i operating at nine of the uk’s top 1 5 airports
 i established presence as a key player in highways
 i awarded managed motorways m62 by the  
highways agency along with further work on the a1
market size 
£31bn
2011 £32bn
revenue
£1 30m
2011 £1 37m
 i grow presence and increase capability in nuclear sector
 i increase order book in generation transmission and 
substations
 i further develop extra high voltage cabling and overhead 
lines capabilities
 i awarded in joint venture framework for sellafield ltd
 i awarded a number of extra high voltage projects by 
national grid
 i awarded in joint venture additional overhead line work 
by national grid
market size 
£22bn
2011 £29bn
revenue
£166m
2011 £1 51m
 i work with clients to deliver both clean and waste  
water projects
 i strengthen client relationships ahead of amp 6 
frameworks
 i work continues in joint venture on lee tunnel  
the main driver of current output in the market
 i new contract awards with yorkshire water at 
scarborough and bridlington
 i successful delivery of key projects for thames water 
severn trent water and welsh water
market size 
£57bn
2011 £63bn
revenue
£516m
2011 £455m
 i utilise expertise and track record of fit out in this 
market to further develop the group’s construction 
offering
 i target construction opportunities in larger conurbations
 i market share increased to circa 30 in office fit out 
and refurbishment
 i growth in london manchester leeds and midlands
 i completed £65m development for legal and general 
property and appointed to deliver £70m longbridge 
town centre in birmingham
pipeline 
£21bn
2011 £18bn
preferred  
developer
£03bn
2011 £06bn
 i continue to unlock value from underdeveloped assets
 i recycle assets when appropriate
 i focus on commercial residential retail and light 
industrial markets
 i development agreements worth £340m signed  
at stockport and basingstoke
 i planning consents granted for over 700000 sq ft  
of new development
 i increased investment in isis waterside regeneration  
to 50
 i £45m funding secured across seven development 
projects under the ‘get britain building’ programme 
directors’ report business review
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11
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 our business model  
the key components that define the group’s 
business model and reflect its philosophy of 
perfect delivery are applied consistently across 
the group and permeate each division t ogether 
they provide the framework for each division 
to create and deliver value each component is 
measurable through relevant and meaningful 
key performance indicators ‘kpis’
it’s about having capable teams who select 
the right construction and regeneration 
opportunities and apply our distinctive  
approach to achieve successful outcomes
directors’ report business review
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0ur business model
12
capable teams
the group is focused on attracting and retaining talented  
people from diverse backgrounds to successfully deliver its 
strategy and projects for its clients in order to ensure that it  
has the right skills for future growth the group offers a variety  
of training and development opportunities for all employees 
these include specific on the job skills training trainee apprentice 
and graduate development and professional development 
schemes the group actively encourages personal and 
professional growth to develop leadership and management  
skills amongst its employees 
the group is committed to providing a safe working environment 
for all employees subcontractors and partners that work on  
or visit its sites it has adopted a health and safety framework 
supported by various programmes to maintain this focus such  
as 100 safe within the construction and infrastructure division
the group spent 84 201 1 85 of its cost of sales on goods 
and services and it is therefore vital that it selects supply chain 
partners who are committed to working with it in longterm 
relationships and that share the group’s commitment to 
sustainability and its philosophy of perfect delivery
how we create value
ensuring that the group has capable teams enables it to broaden 
its capabilities and service offering to meet changing market 
conditions and client demands it leads to greater productivity 
and industryleading performance as well as ensuring that the 
group is able to offer innovative solutions to clients developing 
expertise across the group enables it to identify and manage  
risk effectively 
key performance indicators 
average number of training 
days per employee
 
12 61
11 58
10 20
accident incident rate
 
12 399
11 472
10 429
6 1 5
399 15
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 select the right opportunities distinctive approach successful outcomes
the group ensures that there are clear 
guidelines in place to allow its teams to bid  
and manage projects and development 
opportunities that will prove profitable for  
the group and will offer efficient and effective 
solutions to clients
through its process of delegated authorities 
the group ensures that its divisions only take 
on projects where they have sufficient skills 
and resources the group seeks opportunities 
whereby it can reduce complexity and solve 
problems for its clients offering a single 
solution through integrated working across  
its divisions where appropriate
the group undertakes a careful vetting of  
all its clients supply chain and joint venture 
partners to ensure that they are financially 
robust and that they will be able to deliver 
projects to the group’s service standards
the group’s distinctive approach is rooted in  
its philosophy of perfect delivery that drives 
continuous improvement and ever higher 
standards of quality and service delivery this 
approach combined with its ability to provide 
integrated design construction development 
and financing services enables the group to 
identify innovative solutions and reduce cost 
for its clients and partners 
the group’s breadth of capabilities and 
expertise enables it to offer the widest range 
of services and expertise to meet the changing 
requirements of its clients through sharing 
best practice across all divisions and markets 
the group constantly seeks to improve its 
overall offering the group’s teams are 
encouraged and empowered to challenge 
accepted norms and to be flexible in their 
approach to challenging projects this culture 
encourages innovation a cando attitude and 
enhances the group’s reputation 
the group’s business model ensures that it 
remains a sustainable business and allows it to 
generate cash for shareholder dividends and 
for investment in future opportunities that 
underpin the group’s prosperity its unrelenting 
focus on perfect delivery results in delighted 
clients and enduring and trusted client 
relationships the value the group brings to 
projects encourages clients to consider it as 
their partner of choice and to recommend  
it to others 
how we create value
by carefully selecting the right opportunities 
with the right clients the group is able to 
reduce the risk of project failure or the risk of a 
failure within its supply chain that could lead to 
project delays and therefore additional costs 
the group’s rigorous approach to contract 
selectivity minimises exposure to high bidding 
costs low margins and the potential for poor 
delivery the group’s selection of its supply 
chain ensures it is able to use its scale to 
procure as effectively as possible
how we create value
the group’s focus on perfect delivery leads to 
higher levels of work secured within 
frameworks and repeat business as well as 
minimising unnecessary delays and costs on 
projects its integrated capability allows it to 
align its resources and provide the best fit to 
meet client requirements and deliver projects 
of all sizes through a focus on innovation the 
group is consistently able to deliver efficiencies 
for clients in both the construction of their 
projects and the life cycle of their assets 
how we create value
the group’s ability to successfully deliver 
projects enables it to focus on bidding 
frameworks and repeat business where the 
costs and the associated risks of bidding are 
reduced working together across divisions 
enables the group to reduce the number of 
project interfaces for clients and therefore 
reduces complexity 
 
operating profit 
per employee £
 
£7 498
12 7498
11 6836
10 6839
10
regeneration pipeline £bn
 
£21bn
12 21
11 18
10 14
17
 
perfect delivery scores 
 
12 77
11 76
10 79
77 1
 
adjusted eps before amortisation 
of intangible assets pence
 
793p
12 793
11 867
10 835
9
forward order book £bn
 
£31bn
12 31
11 34
10 36
9
directors’ report business review
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 14 directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
case studies
it’s about working 
collaboratively 
lee tunnel east london
work continues for thames water on east 
london’s lee tunnel the capital’s deepest  
ever tunnel the four mile tunnelling project  
is set for completion in 201 5 and will help  
prevent more than 16m tonnes of sewage  
mixed with rainwater overflowing into the  
river lee each year the construction and 
infrastructure division is delivering the  
£422m project as part of the mvb joint  
venture the project is worth over  
£208m to the group over five years 
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 15 directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
case studies
it’s about putting 
the client first 
royal borough of kensington and chelsea
with 50 of projects carried out in live working 
environments the fit out division always goes 
the extra mile to ensure projects are perfectly 
delivered with minimal disruption to clients and 
building users at royal borough of kensington 
and chelsea 40000 sq ft of office space was 
fitted out with any noisy work undertaken during 
agreed periods so that the client could continue 
with business as usual 
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 it’s about being safe  
in all that we do 
new foxfield wythenshawe manchester
with over 40 years’ experience of building 
affordable housing safety is of paramount 
importance to the affordable housing division 
their rospa gold awardwinning health  
and safety system is certified to ohsas  
18001 and its teams work on both a  
corporate and regional level to ensure  
the highest standards are met this scheme 
combines traditional masonry methods with  
cuttingedge technology to deliver 68 new 
residential units
16 directors’ report business review
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case studies
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 it’s about inspiring  
a generation 
rathbone market canning town london
through english cities fund the urban 
regeneration division has created a sustainable 
mixeduse scheme at rathbone market which  
is helping to transform the canning town area 
physically socially and economically through  
full and open engagement with the local job 
centre and community representatives the 
scheme provided employment opportunities 
that consistently exceeded targets set by  
the london borough of newham 
17 directors’ report business review
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case studies
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 chairman’s statement
it’s about the culture that drives  
our business at every level
“  i am encouraged by the solid performance 
we have achieved in 201 2”
statement in summary
 i solid performance in 201 2
 i core strategy remains the same
 i dividend realigned with stated policy
 i number of changes to the board
 i mediumterm prospects of the group improving
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
chairman’s statement
18
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 i am pleased to present my first statement as chairman of morgan 
sindall group plc having previously served on the board as senior 
independent director
against the background of economic conditions which over the past 
four years have led to our uk construction markets declining by around 
a quarter i am encouraged by the solid performance we have achieved 
in 2012
our clients are facing their own challenges and are placing a greater 
emphasis on capital cost speed of delivery quality and safety across  
the group we are responding by identifying and achieving costeffective 
solutions whilst continually raising the bar on the service we provide 
to read more about our chosen markets and strategy 
see pages 9 to 1 1
strategy
our strategy remains the same 
 i increasing our focus on the uk construction and regeneration market 
choosing those segments where we can achieve a marketleading 
position
 i targeting markets that offer the best potential for growth and provide 
medium to longerterm opportunities with superior returns
 i utilising the cash generated across our constructionrelated activities 
to invest in and grow our two regenerationrelated divisions 
affordable housing and urban regeneration
as part of our ongoing objective to manage the impact on the group of 
the industry downturn we are constantly working to shape the business 
to fit the trading environment we have maintained a tight control on 
overheads and costs we have recently reorganised our construction  
and affordable housing capabilities we have changed the board structure 
to improve efficiency and we are focusing on greater coordination 
across all divisions
dividend
the board is proposing a final dividend of 1 50p 201 1 300p giving  
a total dividend for the year of 27 0p 201 1 420p this change to the 
dividend will bring it back into line with our stated policy of covering the 
dividend by adjusted earnings by between 25 and 30 times we have 
been operating below this level of dividend cover for a number of years 
and the board has now decided that it is appropriate to realign the 
dividend with this policy 
board changes
there have been a number of changes to the board over the past year
in november the board asked john morgan founder and former 
executive chairman to return to the position of chief executive following 
the resignation of paul smith in this role john is already bringing his 
extensive knowledge of the group and our clients to drive increased 
collaboration across the group and to develop new and emerging 
opportunities for our business 
as announced in january 201 3 david mulligan is stepping down from  
his position of finance director at the end of february and will leave the 
group in april we are delighted to have secured the services of steve 
crummett as the group’s new finance director formerly finance director 
at filtrona plc steve’s wideranging skills will be of considerable value to 
the board and the group
i am pleased that liz peace chief executive of the british property 
federation agreed to join the board as a nonexecutive director in 
november her public sector background and understanding of the  
uk property industry will further strengthen the expertise of our board
i would like to take this opportunity to thank paul and david for their 
commitment and valuable contribution to the group over the past  
10 and 1 5 years respectively we wish them well with their future plans
our people
i would like to thank our dedicated employees and capable teams who 
continue to strive for and achieve a high level of service for our partners 
and clients their enthusiasm and commitment through another difficult 
year for the industry and at a time of significant change for the group is 
very much appreciated
looking forward
i am sure we are not alone in expecting 201 3 to be another difficult year 
for the construction and regeneration market whilst we remain cautious 
over the outlook in the shortterm the mediumterm prospects for the 
group are improving with the key projects we have already secured and 
some early signs of further opportunities from 2014 
we see further mediumterm potential driven by the government’s 
pledge to improve the uk’s infrastructure an increasing number of lease 
renewals a number of largescale housing regeneration schemes and  
a stream of response maintenance opportunities where demand has 
been resilient in addition any modest improvement in the economy will 
also help regeneration more broadly this potential along with a sound 
forward order book of £3 1bn means that we believe the group is 
wellpositioned to emerge from the downturn in a stronger place
i look forward to working with the board in the next phase of the group’s 
development as we seize the exciting opportunities that lie ahead of us
adrian martin
chairman 
19 february 201 3
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chairman’s statement
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 chief executive’s review
it’s about an enduring 
strategy for the long term
“  i am fortunate in the broad base of 
expertise that i can call upon within  
the board and senior management 
there are undoubtedly some very  
exciting opportunities ahead for the  
group and i look forward to ensuring 
we are in the best shape to leverage  
our expertise and track record”
statement in summary
 i group made steady progress despite tough market conditions
 i increased our focus on growth sectors of infrastructure 
markets
 i investment in regeneration to drive growth from 2014
 i continue tight management of working capital and overheads
 i 201 3 to remain challenging 2014 outlook improving
 i sound forward order book and regeneration pipeline
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
chief executive’s review
20
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 i am delighted to return to the position of chief executive as a founder 
of the business i have steered the group through prosperous years and 
through downturns and i intend to draw on this experience to lead the 
group through the current challenging market conditions and ensure we 
are positioned to take advantage of the opportunities that lie ahead we 
have made progress in 201 2 but there is always scope for improvement
i believe our strategy is robust and our aim is to remain focused on those 
uk markets where we can develop a leadership position my priorities are 
on improving margins focusing on our strengths in delivering complex 
projects appropriate capital allocation driving increased collaboration 
across the group and developing new and emerging opportunities 
i am fortunate in the broad base of expertise i can call upon within  
the board and senior management there are undoubtedly some very 
exciting opportunities ahead for the group and i am looking forward  
to ensuring we are in the best shape to leverage our expertise and  
track record
managing market conditions
revenue £m
 
£2047m
12 2047
11 2227
8
profit before tax amortisation 
and nonrecurring items £m
 
£47 1m
12 471
11 453
4
profit before tax and amortisation £m
 
£37 1m
12 371
11 439
15
profit before tax £m
 
£342m
12 342
11 400
15
the group has made steady progress throughout 201 2 despite market 
conditions remaining tough revenue fell to £20bn 201 1 £22bn and 
profit before tax and amortisation reduced to £37  1m 201 1 £439m  
a £100m charge for reorganisation costs has been incurred during the 
year as we refocused our construction and affordable housing activities 
and these are shown as nonrecurring items profit before tax 
amortisation and nonrecurring items was £47  1m 201 1 £453m 
which includes a £7 0m gain on the disposal of our medical properties 
investment in july 201 2
adjusted earnings per share before amortisation of intangible assets 
were 793p 201 1 867p the group’s constructionrelated revenue  
fell in 201 2 which led to an increase in working capital this coupled  
with a modest increase in the level of investment in our regeneration 
businesses meant that average net debt was as expected £40m 
201 1 £23m average net cash the year end cash balance was  
£504m 201 1 £1089m
we continue to face challenges including reductions in public spending 
deferred investment decisions and higher levels of competition rigorous 
risk management processes are in place to identify monitor and where 
possible mitigate potential risks our strategy remains to invest the cash 
generated from our constructionrelated activities in our regeneration
related activities namely affordable housing and urban regeneration 
this strategy is being tested by a drop in construction revenues and 
tighter payment terms from clients we are therefore being more 
selective in the regeneration schemes we invest in and are identifying 
construction opportunities that best suit our market knowledge and 
specialist skills this includes our exposure to growth infrastructure 
markets where we already have a proven track record
we are positioning the group to come out of the downturn stronger  
by realigning resources we have reshaped the construction business 
within the construction and infrastructure division as we have become 
increasingly selective in our contract bidding we are also focused  
on growing its infrastructure business where there are market 
opportunities in noninfrastructure sectors including the education  
and commercial sectors we are increasing our focus on longterm 
frameworks changes have also been made to the affordable housing 
division to improve its operational efficiency and to match the level  
of resources with its current and mediumterm workload
growing market share in infrastructure
we have increased our focus on growth sectors of the infrastructure 
market in particular the energy and transport markets which offer 
longerterm opportunities and enhanced returns due to the complexity 
and scale of projects our reputation within these markets is improving 
significantly as we have established the required track record scale and 
expertise we are increasingly working on larger infrastructure projects 
as our integrated approach enables us to reduce complexity for our 
clients we are also enhancing our ability to deliver more complex 
projects through joint ventures as demonstrated by our appointment  
in joint venture by sellafield ltd as its delivery partner for a potential 
1 5 year £1 1bn contract 
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unlocking land values for regeneration partners
our growing investment in regeneration is closely aligned with the 
government’s agenda to release underutilised land assets to stimulate 
local economies and create jobs this approach allows local authorities 
and landowners to unlock land values and create opportunities at no 
significant upfront cost to the public sector land is often retained by  
our partners allowing us to use our capital efficiently and avoid the risk  
of buying land on the open market our growing expertise in complex 
local asset backed vehicles ‘labvs’ driven by public sector land 
release has led to our investments division being appointed as the 
preferred joint venture partner for slough borough council’s labv  
this longterm joint venture is expected to deliver one of the country’s 
most ambitious regeneration schemes completing developments up  
to a total value of £10bn over a 1 5year period
there are high barriers to entry in regeneration as success lies in 
experience expertise commitment and trust it is these credentials 
which take years to develop that have enabled our regenerationrelated 
divisions to embed themselves deeply within this market this year our 
urban regeneration division has demonstrated its expertise by securing 
£45m of government funding that will play a critical role in kickstarting 
seven projects for our clients as tightening fiscal constraints persist  
our collaborative approach will remain in strong demand as local 
authorities continue to seek partners with a track record financial 
strength and the ability to provide funding solutions to regenerate 
worndown communities
it’s about our  
track record
in june 201 2 the construction and infrastructure division completed work on the  
new £75m stateoftheart mental health facilities on the murray royal hospital site 
in perth undertaken for nhs tayside the development provides integrated healthcare 
facilities for general adult psychiatry psychiatry of old age and medium secure 
patients the division’s extensive healthcare experience was instrumental in ensuring 
the safety of patients as well as visitors and resulted in a delighted client
construction and infrastructure
murray royal hospital nhs tayside 
scotland
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morgan sindall group plc annual report and accounts 201 2 
chief executive’s review
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 in 201 2 we increased our interest in a key joint venture isis waterside 
regeneration from 25 to 50 which will underpin mediumterm 
growth and we are excited about the opportunities that this brings  
we anticipate returns from our investment in regeneration to drive 
growth from 2014 as urban regeneration increases the level of 
construction activity onsite in 201 3
honing our competitive advantage
the uk construction industry output is forecast to show a drop of 9  
in 201 2 and is forecast to contract further by around 5 in 201 3 with 
output shrinking bidding is more aggressive and pressure on margins has 
increased we continue to carefully select the contracts we bid for and 
maintain a tight control of resources we also continue to focus on the 
areas where we can secure competitive advantage and on improving 
what we offer to clients our unique and differentiating approach is 
rooted in our philosophy of perfect delivery which lies at the heart of 
our operations driving us to achieve ever higher standards of quality
the group aims to develop competitive advantage through its integrated 
capabilities increasingly we are maximising our offering through 
packaging together our capabilities and providing clients with the added 
value of two or more of our specialist divisions working together we 
have strength in our breadth of capabilities and in our ability to integrate 
different skills to provide excellent service as demonstrated within south 
northamptonshire council’s £38m towcester regeneration and civic 
accommodation project the investments division will deliver the project 
in partnership with affordable housing who will deliver the residential 
development and construction and infrastructure who will build the 
commercial development
revenue £m
 
£1 1 68m
12 1168
11 1268
8
operating profit £m
 
£1 97m
12 197
11 211
7
margin 
 
17
12 17
11 17
0
forward order book £bn
 
£15bn
12 15
11 16
6
construction and infrastructure
as expected construction and infrastructure’s revenue fell by 8 to 
£1 168m 201 1 £1268m with a corresponding fall in operating profit 
to £197m 201 1 £21 1m this was a creditable performance given the 
market pressures with margin steady at 17 201 1 17
falling public sector and weak private sector demand will inevitably 
impact on construction volumes going forward however in line with  
the group’s strategy the division has successfully implemented a shift  
in the balance of its work as it increases its focus on the growing 
infrastructure markets this is significantly offsetting the anticipated  
drop in demand and has enabled the division to largely maintain its  
order book despite the overall market decline
through the division’s commitment to perfect delivery it sets the 
highest standards of service and consistently delivers against them  
it innovates by bringing a fresh approach to challenging projects driving 
down client costs in many different ways including identifying cutting 
edge building techniques or through its expertise in value engineering 
the division’s project team working on the £1 36m joint venture to 
deliver the m62 managed motorway contract clearly demonstrated its 
expertise when it identified £48m of value engineering and efficiency 
savings for its client before work commenced
nine of the uk’s top 1 5 airports have benefited 
from the division’s specialist skills this year and the 
sector especially values its integrated design and 
construction approach to complex projects
shaping the uk’s infrastructure
the highly regulated energy market offers significant potential to  
the group as the division has extensive experience and expertise in 
transmission and distribution and is broadening its capability in power 
generation the division’s reach into the nuclear sector has been 
extended with the award of the contract at sellafield to provide a range 
of essential infrastructure asset services our relationship with national 
grid has deepened further with two awards in joint venture including a 
fiveyear contract extension to deliver major enhancements to the uk’s 
electrical transmission infrastructure
within the rail market significant ongoing work has been undertaken for 
network rail throughout the year as part of the multi asset framework 
agreement which runs until 2014 and is expected to deliver £200m  
of work in joint venture in addition the division has been awarded the 
£20m north doncaster chord project on the east coast main line  
the aviation market has considerable barriers to entry as it demands  
the highest standards in technical expertise consistent delivery security 
and safety nine of the uk’s top 1 5 airports have benefited from the 
division’s specialist skills this year and the market especially values its 
integrated design and construction approach to complex projects major 
projects have been secured under existing frameworks at gatwick and 
heathrow airports including a £31m runway rehabilitation contract at 
heathrow airport 
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the division is wellpositioned within the highways market to benefit 
from the government’s continuing commitment to infrastructure 
investment allocated work from the highways agency frameworks  
is expected to start in 201 3 and approval has been provided to 
commence work in joint venture on upgrading the a1 to motorway 
standard between leeming and barton
within the water market the amp 5 framework agreement with 
yorkshire water services has provided £76m of joint venture contracts 
to improve bathing water quality at both scarborough and bridlington 
drawing on the division’s tunnelling expertise and to design and  
build a pioneering new energy scheme at the esholt waste water 
treatment works
construction and infrastructure is working for uk power networks on  
a £14m cable tunnel project between whitechapel and finsbury market 
in order to strengthen london’s electricity supplies work also continues 
in joint venture for thames water on east london’s lee tunnel the 
capital’s deepest ever tunnel and for crossrail on projects including 
c510 whitechapel and liverpool street station tunnels where the joint 
venture is now two years into the fiveyear £235m contract
performing across a breadth of sectors
the division’s construction profile remains high as it focuses on  
sectors where it can benefit from its respected track record in particular 
education remains an important market 201 2 saw the launch of the 
division’s innovative standard designs for primary and secondary schools 
that are fully supported by funding options to ensure projects are 
financially viable it has also been allocated a further £45m project to 
construct nine new primary schools over the next three years in the 
latest phase of south lanarkshire council’s £1 50m primary school 
modernisation programme
despite the commercial market remaining subdued the division has 
enjoyed success it has been appointed to deliver the £70m longbridge 
town centre development in birmingham and has also successfully 
established a foothold in london including winning £55m of building  
and refurbishment contracts and completing a £65m commercial 
development for legal and general property
encouraging forward order book
with little improvement anticipated in economic and market conditions 
in the shortterm we do expect the division’s revenue operating profit 
and margin to reduce further in 201 3 however we are encouraged by 
the division’s forward order book standing at £15bn 201 1 £16bn  
with projects at preferred bidder stage valued at £05bn 201 1 £03bn 
we are confident that the division’s track record in infrastructure its 
expertise in operating frameworks and its wide range of skills will 
continue to provide it with a level of resilience as it continues to adapt  
to changing market conditions
revenue £m
 
£427m
12 427
11 438
3
operating profit £m
 
£1 13m
12 113
11 124
9
margin 
 
26
12 26
11 28
7
forward order book £m
 
£1 70m
12 170
11 216
21
fit out
fit out’s revenue was marginally down on 201 1 at £427m 201 1 
£438m with operating profit at £1 13m 201 1 £1 24m and margin 
softening slightly to 26 201 1 28 the division has performed 
steadily given it is operating within a highly competitive and price 
sensitive market the division’s consistent delivery and quality is valued 
and has led to 40 of the division’s workload comprising repeat business 
from valued clients 
maintaining its leadership position
the division has made a major contribution to the group’s strategy of 
creating leading positions in its chosen markets it has maintained its 
leadership position in the commercial office market increasing market 
share to 30 and has delivered the year’s largest project in the fit out 
market for a global professional services firm the division has maintained 
its focus on the more resilient sub£1m project market where it expects 
continued growth in 201 3 whilst the market continues to be impacted 
by a significant shortage of major projects the strong trend towards 
refurbishment plays to the division’s strengths as specialists in the 
refurbishment of occupied buildings as demonstrated this year by the 
refurbishment of freshfields bruckhaus deringer llp’s london office 
whilst under occupation 
directors’ report business review
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 broadening capabilities 
in line with our strategy to broaden our capabilities in existing markets 
our design and build fit out business morgan lovell has significantly 
strengthened its offering this year by establishing a new workplace 
consultancy team demand for this extended offering has been proven 
with work already secured with leading organisations including linkedin 
and sas
progress in core markets
the division has made progress in its core growth markets of retail 
banking higher education and leisure securing a further retail banking 
framework appointment means that the division is now working in 
partnership with three of the four largest uk banks in the leisure market 
a major completion includes the fit out of the largest premium gym in 
london owned by american operators equinox current major clients  
in higher education include imperial college london where the division  
is drawing on the group’s integrated capability leading a joint venture 
with construction and infrastructure 
growing regional presence
the division has increased its balance of work outside of london and 
reported a solid regional performance underpinned by a new office 
opening in leeds projects include a 60000 sq ft fit out of itv’s new 
office at mediacity uk in salford and the delivery of the uk’s only 
leadership energy and environmental design ‘leed’ gold and silver 
assessment for sustainable office fit out accredited office building for 
autodesk in farnham major projects are also underway in scotland for 
hewlett packard and scottish power
improving mediumterm outlook
moving into 201 3 the division remains committed to realising its 
ambition to be the trusted property partner of choice and to reaching  
its target of securing 100 of its workload through recommendation  
its objectives include securing more work directly from existing clients 
and frameworks and winning work from international clients its order 
book currently stands at £1 70m 201 1 £216m and we expect similar 
market conditions in 201 3 to those experienced in 201 2 the market is 
expected to improve in the mediumterm driven by an expected surge 
in lease expiries and new office development
it’s about the quality 
of our service
the division transformed 45000 sq ft of the london headquarters of mobile money 
specialists monitise a time lapse video of the site was filmed so that the client could 
show the project build to its stakeholders the project was delivered on time and  
on budget fit out
monitise 
london
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revenue £m
 
£386m
12 386
11 462
17
operating profit £m
 
£1 15m
12 115
11 185
38
margin 
 
30
12 30
11 40
25
forward order book £bn
 
£13bn
12 13
11 15
13
affordable housing
it has been a challenging year for affordable housing with revenue  
falling by 1 7 to £386m 201 1 £462m with operating profit down  
to £1 15m 201 1 £185m and margin at 30 201 1 40 this 
reflects difficult market conditions with newbuild social housing being 
particularly hard hit as well as lower than normal returns from a small 
number of older mixedtenure regeneration projects
consequently we have restructured the business in response to  
tough competition and continuing pressure on margins open market 
house sales have improved and the division has continued to develop  
its marketleading response maintenance offering providing local 
authorities and housing associations with a nationwide service  
this investment has led to over £1 10m of contract awards this year  
and a far greater contribution to the division’s overall performance
affordable housing is responding to the demanding environment by 
focusing on securing major longterm regeneration schemes and more 
work via framework agreements across all its operations as the uk’s 
complete affordable housing solutions specialist its track record and its 
ability to forge strong longterm relationships has enabled the division  
to capitalise on major opportunities
complex regeneration projects
the division is playing a key role in our strategy to focus on major 
regeneration opportunities its expertise allows it to take on highly 
complex housingled regeneration projects either solely or working in 
collaboration with other group divisions in 201 3 it starts construction  
of the £100m castleward urban village regeneration development 
through compendium its joint venture with riverside housing 
association eventually delivering 850 new homes it is working on major 
longterm projects with other group divisions including the potential 
delivery of the first £105m tranche of housing within the £1bn slough 
borough council labv other group regeneration collaborations include 
the £38m towcester regeneration and civic accommodation project 
with the investments division and the second phase of residential 
development at northshore stocktonontees with our urban 
regeneration division
a slowdown in affordable housing starts has had a significant impact on 
the division’s newbuild social housing programme the new affordable 
housing regime introduced gave registered providers until the end of 
march 201 5 to complete their programmes a number of clients are  
yet to commence their building programmes which has resulted in a 
significant slowdown in the market however those with grant funding 
are expected to deliver the targeted homes in time so the division is 
anticipating an increase in activity over the next 18 months as projects 
commence onsite to meet this deadline
open market sales volumes improving
despite the limited mortgage availability subduing the market house  
sale volumes have improved throughout the year with completed  
sales totalling 383 in 201 2 201 1 332 the division’s reputation for 
consistent delivery of highquality sustainable homes is enabling it to win 
significant contracts despite the increasingly competitive environment 
the division is working on one of scotland’s largest newbuild council 
housing sites delivering 1 50 council homes in a £1 2m scheme for west 
lothian council further improvement in its pipeline of opportunities is 
expected next year as the division works with partners to commit 
funding allocations to meet the homes and communities agency’s 
deadline of march 201 5
response and refurbishment markets
the response maintenance market remains steady albeit competitive  
a highlight has been the £50m repairs contract awarded by accord 
group reinforcing the division’s marketleading position there is a 
growing number of opportunities in the south of england with the 
division currently bidding for over £200m of contracts to be awarded  
in early 201 3
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 in the planned refurbishment market the division continues to support 
social landlords upgrading their ageing housing stock it has been 
appointed as one of two contractors to share equally the delivery of  
a £35m decent homes improvement programme in leicestershire  
and has also begun work on the vale of glamorgan framework  
providing a platform to progress further work in wales
national need for affordable housing 
with a forward order book of £13bn 201 1 £15bn the division is  
well placed to continue helping partners and clients meet the uk’s crucial 
need for highquality affordable housing it is also targeting major 
housing regeneration schemes which will drive economic and social 
renewal and enable growth in the mediumterm
revenue £m
 
£62m
12 62
11 57
9
operating profit £m
 
£27m
12 2127
11 39
31
regeneration pipeline £bn
 
£19bn
12 19
11 16
19
urban regeneration
it’s about offering clients 
innovative solutions
the division’s expertise and ability to offer different crosssubsidy funding solutions 
enabled this development to proceed and provided much needed housing for london
affordable housing
finsbury park  
london
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urban regeneration saw a rise in the level of activity in 201 2 with 
revenue increasing to £62m 201 1 £57m operating profit was down 
to £27m 201 1 £39m the operating profit was impacted by the 
subdued market conditions as well as an increased share of the costs  
of the isis waterside regeneration joint venture during the year the 
division increased its interest in isis from 25 to 50 in the shortterm 
the division will recognise a greater share of the operating costs but will 
enjoy 50 of the future profit as opportunities are developed in the 
mediumterm
overcoming barriers to success
overall the division has made solid progress this year the momentum  
it has built up across its portfolio of 35 schemes and the award of new 
development agreements are all significant factors in our confidence  
that returns from our investment in regeneration will start to increase  
in 2014
our confidence is further strengthened by the fact that the division has 
capitalised on its reputation and secured £45m of government funding 
to unlock stalled housing development these funds will help kickstart 
seven projects within the division’s portfolio and funding conditions 
include an accelerated timetable of delivery this will result in a number 
of residential elements within the division’s mixeduse schemes being 
brought forward and delivered over the next two years
sentiment remains subdued
investor and tenant sentiment remains stable but subdued as economic 
recovery continues to stall the lack of speculative development in  
the commercial office market together with tenants exercising lease 
breaks is expected to lead to an uplift in demand for new grade a 
accommodation the division believes it is in a good position to respond 
to this uplift due to its landholdings secured through development 
agreements
new development agreements 
in 201 2 £340m of schemes were converted from preferred developer 
status into contracted agreements the division has entered into two 
development agreements with basingstoke and deane borough council 
to deliver its £200m regeneration project developing in excess of 
700000 sq ft on councilowned land parcels the first planning 
application is targeted for mid201 3 with work onsite expected to 
commence later in the year stockport council has also selected the 
division to deliver its £140m office quarter and the first phase of 
development is due to start onsite early 201 3 progress has also been 
made in finalising development agreements to deliver major mixeduse 
schemes in warrington and hucknall
planning secured
planning consents for new development valued at over £300m have 
been secured in 201 2 these include consent for the second phase of 
residential development at its northshore development to deliver 76 
residential units in partnership with our affordable housing division 
planning has been secured for a 60000 sq ft grade a office building 
prelet to kpmg this development is the first newbuild office in leeds 
city centre since 2006 approximately £95m of construction contracts 
have been awarded on sites this year construction has started on the 
1 1m sq ft £220m mixeduse talbot gateway central business district 
scheme in partnership with blackpool council work is also underway  
on the largescale £350m regeneration of swindon town centre
tentative lettings market 
fragile occupier confidence has meant that the lettings market remains 
subdued in addition to kpmg in leeds significant deals have been 
completed including leasing 140000 sq ft in two major distribution 
centres at eurocentral in scotland and over 14000 sq ft of grade a 
office space to santander at no 4 st paul’s square liverpool
completions include the new £20m civic offices in doncaster an 
element of the city’s £300m civic and cultural quarter the division  
has also delivered 271 new homes as part of the £180m 680000 sq ft 
rathbone market regeneration scheme in canning town east london 
working within the english cities fund partnership with the critical need 
for housing in the capital the first phase of this new development has 
proved successful with only 21 units currently unreserved
maintaining momentum
whilst market constraints will continue in the shortterm an increased 
emphasis on residential especially in the south has served to further 
balance the division’s mixeduse activity through maintaining 
momentum across its portfolio commencing 1 5 further development 
projects with an end value of £190m the division has good visibility of 
how it will contribute to the group’s profitability in 2014 and beyond  
its forward development pipeline stands at £19bn 201 1 £16bn with  
a further £03bn 201 1 £06bn at preferred developer status the 
group’s strong balance sheet and the division’s track record will enable it 
to identify and create new longterm partnership opportunities with the 
public and private sectors enabling the division to continue unlocking 
land values and playing a leading role in regeneration
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 directors’ portfolio valuation £m
 
£32m
12 32
11 49
35
investments carrying value £m
 
£1 82m
12 182
11 232
22
operating profitloss £m
 
£7 4m
12 74
39 11
investments investments’ mandate is to create valuable investments for the group 
and to unlock prime longterm construction opportunities for other 
divisions the division delivered a profit in 201 2 of £7 4m 201 1 
operating loss of £39m this was driven in particular by the £7 0m 
profit from the £24m sale of the division’s medical property investments 
and from a healthy performance from our investments portfolio during 
the year of £57m 201 1 £16m the sale was in line with our strategy 
to realise investments as they mature to redeploy capital into new 
projects
creating opportunities for the group
investments has capitalised on its reputation and experience gained from 
the complex bournemouth town centre labv and has been appointed 
preferred partner by slough borough council for its labv joint venture 
the labv will benefit from the strength of our integrated capability and 
will procure work from our affordable housing and construction and 
infrastructure divisions over the lifetime of the partnership
it’s about having  
capable teams
in doncaster the urban regeneration team worked closely with the council to develop 
efficient new civic offices to breeam excellent rating that would help them reduce 
costs and improve service delivery
urban regeneration
commercial and cultural quarter 
doncaster
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the division has also been appointed preferred developer for south 
northamptonshire council’s £38m towcester regeneration and civic 
accommodation project and has secured planning consents for a 
residential development student accommodation and a multistorey  
car park in the 20year £500m bournemouth council labv scheme
scotland has an extensive public private partnershipbased investment 
programme and is therefore an area of strategic importance for the 
division the western territory hub programme board has recently 
selected an investmentsled joint venture the wellspring partnership  
to deliver a pipeline of £160m public sector health and education 
projects over the next 10 years the wellspring partnership will deliver 
new facilities for a number of public sector bodies in the glasgow area  
in east scotland the £95m tayside acute adult mental health 
development scheme has been completed through the group’s 
integrated capability with design and construction services provided  
by our construction and infrastructure division 
positive pipeline of opportunities
the division has carried out a review of the changes to pfi announced in 
the government’s launch of its successor pf2 in the autumn statement 
whilst clarification is being sought around how particular aspects of the 
announcement will work in practice it is considered to be a positive 
development pf2 will be applied to the £2bn priority schools building 
programme expected to come to the market in spring 201 3 and this  
is a major target for investments as it hopes to leverage its track record 
within the education market and identify further opportunities for our 
construction and infrastructure division it is anticipated that other 
government departments will start to release a pipeline of schemes 
procured under this initiative later in the year providing further 
opportunities for investments and other group divisions
it’s about  
developing talent
three more schools were successfully handed over for the first day of january 2013 
school term and investments in conjunction with their partners are 90 towards 
their target of 200 apprenticeship opportunities across the life of the project
investments
building schools for the future programme 
hull
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 whilst current economic conditions persist local authorities will need 
support from the private sector the division will continue to identify 
innovative ways to structure and finance deals to allow its partners  
to realise the potential of underutilised property assets secure 
efficiencies and promote economic growth and social wellbeing  
the division expects to realise further investments in 201 3 in order  
to recycle capital to create revenue for the group and provide a 
sustainable return on investment
sustainability 
during 201 2 we continued to embed our roadmap for sustainability 
and work towards merging the group’s procurement and sustainability 
functions to create a new team headed by the director of group 
sustainability and procurement this will take effect from february  
201 3 the group spends a significant amount through its supply chain 
each year and a closer alignment of the two functions will drive 
improvements in the group’s sustainability performance the group 
achieved a significant reduction in its carbon emissions and increase in 
the tonnage of waste diverted from landfill during the year the group’s 
total commitment to ensuring that we offer a safe working environment 
for all employees is demonstrated by our health and safety performance 
this is the third consecutive year in which the group achieved its aim of 
less than 100 reportable incidents
measuring success
we measure success in many ways we track our performance using 
traditional indicators including measuring growth in market share and  
in our regeneration pipeline achieving quality margins and maintaining  
a healthy order book in addition in line with our philosophy of perfect 
delivery we place equal importance on measuring success through  
nonfinancial metrics our safety record sustainability performance  
and client satisfaction are all critical to the group’s future prosperity 
to read more about our kpis 
see pages 1 2 and 1 3
managing responsibly
rigorous reviews of the business are undertaken regularly as we 
continue to carefully manage it through challenging times robust 
management of overheads cash and working capital are prioritised  
to ensure we have sufficient cash resources to increase our investment  
in regeneration 
stringent credit checks and due diligence are undertaken to assess  
the financial health of clients to minimise bad debt and our supply chain 
members are also scrutinised to ensure we deliver maximum benefits  
to our clients the supply chain is managed closely and we choose to 
build longterm relationships with suppliers and subcontractors who 
share our values and commitment to sustainability and safety so that 
together we provide a superior quality service
outlook
the market will remain challenging in the shortterm with little sign  
of improvement expected as economic recovery continues to be slow  
we will maintain our focus on careful contract selection perfect delivery 
and tight management of overheads
we have positioned the group to capitalise on growth markets with 
barriers to entry and in the longer term the opportunity for superior 
returns we will continue to pursue opportunities in these markets 
promoting the synergies created by our integrated capabilities
whilst cautious over the shortterm outlook we are encouraged  
by the opportunities that exist in our chosen markets with a sound 
forward order book of £3 1bn 201 1 £34bn with a further £05bn 
201 1 £03bn at preferred bidder stage and a regeneration pipeline  
of £2 1bn 201 1 £18bn we believe the group is wellpositioned  
to maximise opportunities throughout the next year and beyond 
john morgan
chief executive 
19 february 201 3
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it’s about measuring  
financial performance
steady 201 2 performance
2012 2011
revenue £2047m £2227m
operating profit £481m £461m
profit before tax amortisation  
and nonrecurring items
†
£47  1m £453m
profit before tax and amortisation £37  1m £453m
profit before tax £342m £400m
year end cash balance £504m £1089m
basic earnings per share adjusted  
for amortisation
793p 867p
basic earnings per share 725p 775p
total dividend per share 27 0p 420p
 operating profit has been calculated as profit from operations before 
amortisation and nonrecurring items
 
†
nonrecurring items comprise £100m of reorganisation costs in 201 2 
201 1 £14m of integration costs
statement in summary
 i solid set of financial results
 i £10m reorganisation costs incurred
 i year end cash of £50m with banking facilities  
in place of £1 10m
 i dividend realigned to stated policy
 i sale of mature investments for £28m
overview
the challenging macroeconomic conditions continued in 201 2  
this resulted in lower workload and margins in some of the markets  
in which the group operates such as construction and affordable 
housing the group has sought to mitigate this as far as possible by 
bidding selectively for highquality schemes where there is opportunity 
for integrated working focusing on growth sectors of the infrastructure 
market and maintaining tight control on the cost base this has enabled 
the group to deliver a solid set of results
revenue of £2047m and operating profit of £48 1m
revenue declined by 8 to £2047m 201 1 £2227m primarily in  
the construction and infrastructure and affordable housing divisions
operating margins before amortisation and nonrecurring items held 
firm in construction and infrastructure at 17 201 1 17 and 
declined slightly in fit out to 26 201 1 28 the reduction in margin 
in affordable housing to 30 201 1 40 was due to challenging 
market conditions and lower levels of profitability from some older 
regeneration schemes
the investments division completed two disposals during the year 
generating operating gains of £88m these gains are considered to  
be recurring items as they are in accordance with the group’s strategy  
of disposing of its investments as they mature to enable capital to be 
recycled into new schemes
the group continues to manage its cost base resulting in a reduction  
in administrative expenses excluding nonrecurring items of 10  
to £1 537m 201 1 £1 703m 
overall operating profit increased to £48 1m 201 1 £46 1m
nonrecurring items
the group streamlined the management structures in a number of 
divisions and has recognised a nonrecurring restructuring cost of 
£100m this comprises redundancy and property related costs  
and relates principally to the construction and infrastructure and 
affordable housing divisions in 201 1 nonrecurring costs of £14m  
were incurred in relation to merging the construction and infrastructure 
services divisions
tax
the group’s tax charge of £35m 201 1 £7 2m represents an effective 
tax rate of 1 23 201 1 18 1 significantly lower than the standard 
rate of corporation tax the low effective tax rate arises primarily as  
a result of there being no expected tax liabilities upon the gains on 
disposals of investments during the year together with the effect of 
revaluing the deferred tax liabilities to reflect the change in the statutory 
rate of corporation tax from 25 to 23 after adjusting for these two 
items the tax charge is approximately equal to tax at the uk corporation 
tax rate on profit before tax excluding joint venture profit which is 
reported after tax
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adjusted basic earnings per share before amortisation has decreased by 
9 from 867p to 793p due to the decrease in profitability offset by 
the decrease in the effective tax rate basic earnings per share has fallen 
by 6 to 725p from 77 5p
cash and interest
the drop in construction revenues combined with clients requiring longer 
payment terms resulted in a lower cash balance at the year end of £50m 
201 1 £109m the group had average net debt during the year of 
£40m 201 1 net cash £23m principally due to an increase in working 
capital deployed across the group the net finance expense increased  
to £10m 201 1 £08m 
acquisitions and disposals
the group disposed of its mature investments in its nhs lift and 
medical properties portfolio and the dorset fire  rescue pfi for  
total consideration of £27 7m
the group increased its investment in the isis waterside regeneration 
strategic partnership from 25 to 50 for deferred consideration with  
a fair value of £185m payable between 201 3 and 201 7  in addition  
the group purchased the remaining 50 share of lewisham gateway 
developments from its joint venture partner for consideration of £04m 
these schemes are expected to begin generating profits in 2014 
capital management
the board maintains 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
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 the group invests cash generated by  
its construction activities in longterm regeneration projects which 
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 small defined benefit 
pension plan £15m deficit on £104m of gross liabilities that is  
closed to new members and further accruals
banking facilities committed until 2015
the group has £1 10m of committed banking facilities through  
to september 201 5 the banking facilities are subject to financial 
covenants all of which have been met throughout the year these 
committed facilities supplement cash balances in providing financial 
security to the group
dividend
the board recommends a final dividend of 1 50p payable on 24 may 
201 3 to shareholders on the register at the close of business on 3 may 
201 3 this will give a total dividend for the year of 27 0p 201 1 420p
the group has a longterm progressive dividend policy and aims to 
achieve dividend cover based on adjusted earnings of between 25 and 
30 times in recent years the group has maintained the dividend despite 
a reduction in earnings such that dividend cover has been below its 
target range for several years the board has now determined that it is 
appropriate to reduce the dividend in 201 2 such that dividend cover 
increases to 29 times 201 1 20 times which is within its target range
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
some of the group’s joint ventures use interest rate swaps to hedge 
floating interest rate exposures and retail prices index swaps to hedge 
inflation exposure 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 client guarantees ‘bonds’ to provide some 
financial protection in the event that 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 201 2 contract bonds in issue under 
uncommitted facilities covered £1865m 201 1 £204 1m 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
as at 31 december 201 2 the group had cash of £504m and 
committed banking facilities of £1 10m extending to september 201 5
the directors have reviewed the group’s forecasts and projections 
which show that the group will have a sufficient level of headroom  
within facility limits and covenants for the foreseeable future 
after making enquiries 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
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 the group’s strategy is to achieve leading 
positions in its chosen markets and to use 
the cash generated from those construction 
activities to invest in housingled and mixed
use regeneration to generate higher levels  
of return
a risk management framework has been put in place to identify risks  
to the group 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 and project 
the group and divisional risk registers are reviewed and updated at least 
every six months to ensure that risks are properly evaluated and that 
controls remain appropriate project risks are reviewed and updated  
on an ongoing basis the internal audit function reviews the control 
environment to ensure that each of the risks and controls identified are 
tested at least every two years which cover both 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 divisional audit 
committees established separately for construction and infrastructure 
and affordable housing which have larger and more complex  
operations than 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 submissions 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 board has identified the following key risks to the group achieving  
its strategic goals aligned to the different elements of the group’s 
business model
it’s about managing risk
key risks
 i markets the group is particularly focused at present on 
managing the impact of the challenging economic conditions 
changes in government spending priorities and the increasing 
emphasis on infrastructure investment
 i strategy the group’s strategy needs to be clearly articulated 
and understood to ensure successful outcomes are achieved
 i capable teams 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
 i select right opportunities 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
 i distinctive approach if employees are not properly engaged 
with the culture of the business clients are less likely to 
receive exceptional levels of service
 i successful outcomes 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 
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risk review risk category description and impacts mitigation
markets
the markets in which the group 
operates are affected to varying 
degrees by general macroeconomic 
conditions the group is particularly 
focused at present on managing the 
impact of the challenging economic 
conditions changes in government 
spending priorities and the increasing 
emphasis on infrastructure investment
new opportunities
shortage of new opportunities caused by a 
challenging economic environment austerity 
measures reducing public spending and 
reduced or delayed government funding 
schemes
fall in construction activity may result in less 
cash being generated which will reduce the 
capital available to invest in regeneration  
and growth markets
 i market spread and diversification offer  
a degree of protection against decline in 
individual markets
 i scale also gives some protection by 
enabling the group to compete and work  
in areas with higher barriers to entry
 i regular monitoring and reporting of 
financial performance work won 
prospects and pipeline of opportunities
overcapacity in market
this leads to price competition and more 
onerous terms and conditions being sought by 
clients this can also affect the bidding process 
where an increased number of preconditions 
may be put in place by clients through the 
bidding phase
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  
declining gross margins
 i delegated authorities in place require 
approval of tenders by appropriate levels  
of management covering both price and 
terms and conditions
 i delegated authorities stop the business 
knowingly taking on loss making contracts
 i through the development of effective 
client relationships the group seeks to 
differentiate itself through the quality  
of its service and consistency of delivery
 i greater value can be offered to clients 
when where appropriate different divisions 
work together
 i regular review of resource levels against 
anticipated workload
strategy
the group’s strategy needs to be clearly 
articulated and understood to ensure 
successful outcomes are achieved
conflicted decision making
the group’s strategy is not clearly 
communicated to and understood by 
employees
employees may unintentionally make  
decisions that are not wholly aligned  
with the group’s strategic aims
 i strategic aims of the group individual 
divisions and business units are 
communicated as appropriate in business 
cascades or in annual employee reviews 
that seek to align personal and corporate 
objectives
 i delegated authorities ensure that material 
decisions are signed off at an appropriate 
level ensuring that the decisions made are 
in accordance with the group’s strategy 
 i monthly divisional review meetings allow 
the board to assess progress against the 
agreed strategy
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risk category description and impacts mitigation
capable teams
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
in a challenging economic climate  
it can become increasingly difficult  
to retain key employees especially 
those targeted by competitors 
environmental or safety incident
an accident or incident causes harm to  
a community or to an individual leading  
to the potential for legal proceedings  
financial penalties reputational damage  
and delays to a client’s project
consequently the group fails to prequalify  
for contracts due to a poor health safety  
and environmental track record
 i key executives with specific responsibility 
for hse are identified in each division and 
on the board
 i hse policy frameworks are communicated 
and senior managers appointed to manage 
them in each division and at project level 
where appropriate
 i established safety systems site visits 
monitoring and reporting including near 
miss and potential hazard reporting are  
in place across the group
 i investigation and root cause analysis of 
accidents or incidents and near misses
 i regular hse training and updates  
including behavioural training
 i major incident management plans and 
business continuity plans in place that  
are periodically reviewed and tested
failing to attract talented people
risk that the group fails to adapt by not 
ensuring that the best people are employed  
to create the most capable teams possible
the group does not benefit from new  
ideas and experience and could become too 
internally focused without sufficient external 
stimulus to challenge current thinking and 
promote positive change
 i progression planning in place in each 
division to ensure immediate and future 
replacements are identified and developed 
accordingly
 i investment made in graduate trainee  
and apprenticeship schemes to secure  
an annual inflow of new talent
 i monitoring of future skills and capability 
requirements
 i identification of future talent
not developing or retaining capable teams
the business is not able to keep hold of 
employees or improve the performance  
of the teams that they work within
without capable teams it becomes very difficult 
to maintain the high levels of client service that 
the group strives for when employee turnover 
increases it can adversely affect morale within 
the rest of the team
 i annual employee appraisal process in  
place providing two way feedback on 
performance
 i training and development plans seek to 
maximise relevant skills and experience
 i remuneration packages are benchmarked 
where possible
poor project delivery
the quality of workmanship or poor 
commercial and operational delivery of a 
contract whether by the group or a joint 
venture partner does not meet expectations 
of clients
interim cash payments may be withheld 
impacting working capital and issues may  
also impact contract profitability and  
corporate reputation
 i strategic trading arrangements in place 
with key suppliers and subcontractors  
to help ensure consistent quality
 i collation and review of client feedback
 i lessons learned exercises carried  
out on projects
 i employees incentivised on basis  
of contract performance
 i internal peer reviews
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select right opportunities
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 
misprice contract
when pricing a contract the planned works  
are not costed correctly increased commodity 
prices are not factored in 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
 i system of delegated authorities governs 
tenders and the acceptance of work
 i a contract tender is reviewed at three  
key stages prequalification pretender 
and final tender submission
 i contract tender approved by the 
appropriate level of management
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 the group may need to resort to legal 
action to resolve disputes which can prove costly 
and the outcomes can be uncertain
 i work carried out under standard terms 
wherever possible
 i well established systems of measuring and 
reporting project progress and estimated 
outturns including any contract variations
 i contract terms reviewed at tender stage 
and any variations approved by the 
appropriate level of management
 i reviews in place to ensure rigour is  
applied in core processes
 i decision to take legal action based  
on appropriate legal advice
 i suitable provision made for legal costs
poor contract selection
risk that the group accepts a contract outside 
of its core competencies or for which it has 
insufficient resources this can become a 
greater risk when there is a shortage of 
opportunities in the market
this may lead to poor understanding of project 
risks poor project delivery and ultimately result 
in contract losses and reputational damage 
 i business planning identifies markets  
and clients that the group will target
 i system of delegated authorities governs 
tenders and the acceptance of work
 i plans for specific types of work and 
contract size agreed by individual  
business unit
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risk category description and impacts mitigation
distinctive approach
the group has a unique and 
differentiating approach if employees 
are not properly engaged with the 
culture of the business clients are  
less likely to receive exceptional  
levels of service
perfect delivery
the group does not fully adopt the philosophy 
of perfect delivery
likely to incur additional costs that erode  
profit margins it is also likely that client 
experiences will fall short of the standards set  
by the group potentially leading to a reduction 
in repeat business or in referrals from client 
recommendations
 i continuing engagement with employees 
clients and supply chain
 i internal resources dedicated to the further 
development of perfect delivery ensuring 
maximum engagement
business conduct
failure by employees to observe the 
appropriate standards of integrity and conduct 
in dealing with clients suppliers and other 
stakeholders this is an increased risk in times 
of economic uncertainty and hardship
could expose the group to significant potential 
liability and reputational damage that results  
in it failing to prequalify for contracts
 i independent ‘raising concerns’ phone  
line available for all employees
 i 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
 i ethics policy communicated to all 
employees
 i training in place to ensure awareness  
of and compliance with both competition 
law and the bribery act
 i reviews and risk assessments undertaken 
to ensure adequate procedures are in place 
and followed
innovation
failure to adopt appropriate innovations  
in new products or techniques
the group becomes less effective than its 
competitors and not able to secure best value 
for or offer the best solutions to its clients
 i reviews undertaken to promote elimination 
of waste of both resources and process 
adopting lean methodology where 
appropriate
 i building information modelling strategy 
developed to provide more efficient asset 
management across the whole life cycle
 i maintaining knowledge base of new 
products and thinking
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successful outcomes
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 
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 there is also a risk that given the 
wider macroeconomic climate historical credit 
checks are relied upon that have subsequently 
been overtaken by events
insolvency of a client may result in significant 
financial loss due to a 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
 i work only carried out for financially sound 
clients established through credit checks
 i specific commercial terms including 
payment terms with escrow accounts 
used as appropriate
 i seek and obtain financial security  
where required
 i work with approved suppliers  
wherever possible
 i contracts with clients subcontractors or 
suppliers only entered into after review at 
the appropriate level of delegated authority
 i regular meetings with key supply chain 
members to give and receive feedback and 
maintain the quality of the relationship
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  
or growth markets
 i daily monitoring of cash levels and regular 
forecasting of future cash balances
 i regular stress testing of longterm cash 
forecasts
 i regular assessment of the level of banking 
facilities available to the group
 i working capital monitored and managed  
as appropriate with acute focus on any 
overdue work in progress debtors or 
retentions
 i for very significant purchases on large 
projects forward orders can be placed  
on a longer timescale
management of overheads
the group fails to responsibly shape  
the business and becomes uncompetitive
if the cost base is too high the group may  
be hindered in winning new work and profit 
margins will be eroded
 i overheads are reviewed on a monthly basis
 i business planning identifies future  
overhead requirements
 i internal and external benchmarking is 
carried out to ensure overhead levels  
are appropriate
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
finance review
39
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 sustainability review
it’s about  
t otal commitment
the roadmap for sustainability 
encourages the group as a  
whole to be forwardlooking  
and enhances its ability to identify 
emerging issues and legislation  
and assess their potential impact 
on the group
the group’s roadmap for sustainability launched in 201 1 consolidates 
its strategy for sustainability the roadmap provides a detailed action 
plan for embedding and progressing sustainable practices across the 
group it also provides a framework for measuring communicating  
and reporting progress to both internal and external stakeholders  
in 201 1 the group published its first dedicated sustainability report 
which included a comprehensive set of measurements that provide  
the benchmark for the group’s 201 2 performance the roadmap 
encourages the group to be forwardlooking in respect of sustainability 
and enhances its ability to identify emerging issues and legislation  
and assess their potential impact on the group 
the group’s sustainability commitment is focused on six specific  
areas known as its total commitment in addition a further series  
of priority objectives have been identified with appropriate targets  
and responsibilities the roadmap is reviewed regularly to ensure  
that it remains relevant and continues to match the priorities of  
the group
during 201 2 the group has been working towards merging its 
procurement and sustainability functions to create a new team headed 
by a director of group sustainability and procurement which will take 
effect from february 201 3 the closer alignment of sustainability and 
procurement will enable the group to drive further improvements in its 
sustainability performance as a significant level of its expenditure is on 
goods and services procured through its supply chain partners
performance in 201 2
despite the challenging economic environment the group has achieved 
significant improvements in its sustainability performance these 
achievements have delivered material commercial benefits to the group 
and have also benefited the environment and the communities within 
which it operates
the group’s objective in 201 2 was to embed its total commitment 
across all divisions and deliver measurable improvements in each of the 
six areas health and safety remains the group’s number one priority 
this year saw a further reduction in incidents although there is still  
work to do in achieving the group’s objective of achieving no lost time 
incidents excellent progress has been made especially in the areas  
of waste and energy the group was the first nonftse 350 company 
to achieve a listing in the carbon disclosure leadership index for the 
carbon disclosure project by significantly improving the percentage  
of waste diverted from landfill to 92 201 1 86 the group has 
achieved a saving of circa £3m in potential landfill tax 
the construction industry faces a bigger challenge than other industries 
in sustainable procurement with high levels of revenue spent through  
the supply chain in recognition of the role the group has to play in 
influencing its supply chain it has committed significant resources  
as a founder partner and sponsor to establish and support the citb 
construction skills supply chain sustainability school the school is  
open to the industry’s supply chain and provides an online educational 
programme to drive up comprehension and standards of all aspects  
of sustainability
statement in summary
 i total commitment to a safe workplace
 i total commitment to developing talented employees
 i total commitment to reducing energy consumption  
and carbon emissions
 i total commitment to reducing waste
 i total commitment to improving sustainable procurement
 i total commitment to supporting local employment
to find out more about sustainability visit 
corporatemorgansindallcomsustainability
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
sustainability review
40
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 total commitment 
 i total commitment to a safe workplace
providing a safe working environment for everyone is of the highest 
importance through proper training and education the group continues 
to ensure that its employees are fully engaged and involved in improving 
safety in the workplace at home and on their journeys to and from work 
the group ensures that everyone understands the part they play in 
preserving their own safety and that of their coworkers suppliers 
subcontractors and clients as well as the wider community 
objective no lost time incidents 2012 2011
total number of riddor incidents  
over three days to 31 march 201 2
26
96
total number of riddor incidents  
over seven days from 1 april 201 2
51
total number of incidents recorded  
between one and three days  
ie excluding riddor
102
81
total number of incidents recorded  
between three and seven days  
ie excluding riddor from 1 april 201 2
1 8
 the reporting of injuries diseases and dangerous occurrences 
regulations 1 995 ‘riddor’
on 1 april 201 2 the basis on which riddor incidents would be 
reported was changed from over three days to over seven days 
therefore going forward the group will comply with this change  
and will be reporting on incidents over seven days on a comparative 
basis the group’s riddor incidents over three days was 95 201 1 96 
this was the third consecutive year in which the group achieved its 
target of under 100 reportable incidents per annum with only 77 
reportable incidents 95 on the previous basis 201 1 96 and 2010 82 
over the last five years the group has achieved an underlying 45 
reduction in its reportable incidents
 i total commitment to developing talented employees
recruiting empowering and training talented individuals is essential  
to the group’s success to help develop talent the group provides  
all new employees with clear induction appraisal and appropriate 
development programmes
objective to attract and retain talented people 2012
average number of training days per employee
61
2011 58
in spite of the current economic climate the group has increased the 
average number of training days provided to all employees continuing  
to invest in employees is a strategic priority to secure the group’s 
position as a preferred employer and to motivate employees and to 
provide clients with a quality service delivery 
it’s about encouraging  
local employment
the construction and infrastructure and affordable housing divisions participated in 
the open doors scheme which aimed to raise interest in construction careers the 
scheme was organised by a partnership between the uk contractors group citb
constructionskills the considerate constructors scheme and the chartered institute 
of building participation in the scheme was considered an excellent opportunity to 
contribute towards the group’s commitment to support local employment 
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
sustainability review
41
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 sustainability review 
 i total commitment to reducing energy consumption  
and carbon emissions
the group continues to reduce emissions by targeting as a minimum  
a 5 yearonyear reduction in energy consumption by building more 
efficiently using less resources and energy the group creates efficient 
and sustainable workplaces housing schools and offices whilst also 
helping clients to reduce their own emissions
objective to demonstrate net reduction in carbon  
emissions across the group 2012
total carbon emissions tco
2
e
 
42000

2011 5681 2
 the current year figure of 42000 tonnes is a provisional result and 
may change subject to the group’s certified emissions management 
and reduction scheme ‘cemars’ audit which will be undertaken in 
may 201 3
the group’s reduction in its energy consumption and carbon emissions 
has translated directly into significantly reduced energy bills across  
the group
 i total commitment to reducing waste
the group continues to improve the total tonnage of waste diverted  
to landfill achieving a 7 increase on its 201 1 performance it remains 
committed to working with recognised waste reduction schemes as 
well as encouraging individual initiatives
objective to minimise waste generated  
throughout the group 2012
total waste produced tonnes
 
131 1032
2011 1311800
total waste diverted from 
landfill tonnes
1 20687 4
201 1 1 1 27035
percentage of waste diverted 
from landfill 
92
2011 86
the total quantity of waste produced was comparable to 201 1  
the overall improvement in its diversion rate to 92 brings the  
group closer to industryleading levels of circa 95
 i total commitment to improving sustainable procurement
the group’s supply chain is vital to the delivery of its sustainability 
objectives and therefore it supports the construction industry  
research and information association ‘ciria’ guidance on sustainable 
procurement in construction as its benchmark the group’s supply chain 
is diverse and dynamic and has to respond to changes in core markets 
the expectations of the group’s clients and external changes in policy 
and technology therefore a proportion of the group’s trading will 
always sit outside of its groupwide trading agreements as the group 
addresses specialist or niche client requirements or processes the 
application of new members
objective ensure that the group’s supply chain conforms  
to its minimum standards for sustainability 2012
percentage of total spend that is covered 
by group wide agreements 
65
201 1 85
the group has seen some subtle changes in its workstreams which  
have created the need to introduce new additions to its core supply  
chain partners as it looks to cover new markets to the same standards 
that apply to existing members of its core supply chain volume 
transactions through existing groupwide trading agreements fell  
from 85 to 65 as the group opened up its markets to new suppliers 
and service providers the group is currently completing its vendor 
registration and conformance checks before they are admitted as full 
members of the groupwide trading agreements this does not prevent 
the group trading with these companies in the interim on completion  
of the process transactions passing through the groupwide trading 
agreements should return to at least historical levels 
 i total commitment to supporting local employment
this was a new kpi to be reported in 201 2 the group is committed  
to provide sustainable employment opportunities in local communities  
in which it operates originally the group had intended to measure 
performance on distance travelled to site or office by employees and 
subcontractors based on postcodes for two projects per division
on the basis of early experience in capturing this data the group realised 
a need to adjust the original kpi in order to provide a more meaningful 
and accurate measurement across all divisions affordable housing has 
been monitoring the number of its direct employees living within 25 
miles of the sites on which they work in 201 2 this figure totalled 1576 
201 1 1599 in construction and infrastructure 59 of its employees 
commute less than 25 miles per day in addition the construction and 
infrastructure division has been using hand readers to gather data on 
commuting on several of its projects during 201 2 an example of which 
was the botanic house project in cambridge
the group’s full sustainability report can be viewed at  
wwwmorgansindallcomsustainability which provides  
more details about the group’s approach
the group has made good progress in 201 2 and is committed to  
drive further improvement across each total commitment and the 
priority objectives improving the group’s sustainability performance  
will drive efficiencies strengthen its competitive advantage and  
provide longlasting economic environmental and social gain
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
sustainability review
42
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 43
morgan sindall group plc annual report and accounts 201 2 
directors’ report governance
directors’ report governance
information about our board of directors  
and corporate governance
46 board of directors
48 corporate governance statement
54 directors’ remuneration report
64 other statutory and regulatory information
68 directors’ responsibilities statement
it’s about 
good  
governance
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 board of directors
01
03
06
07
02
04
05
08
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
board of directors
44
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 adrian martin
position chairman
appointed december 2008
in november 201 2 adrian was appointed nonexecutive chairman having 
previously held the role of senior independent director his career includes 30 
years’ audit and corporate finance experience with bdo stoy hayward the last 
eight years as managing partner before becoming chief executive and then 
consultant at reynolds porter chamberlain llp until 2009 adrian holds a 
number of nonexecutive directorships including h r owen plc mc saatchi plc 
and safestore holdings plc 
steve crummett
position finance director
appointed february 2013
steve was finance director of filtrona plc from 2008 to september 201 2  
prior to that he was director for mergers and acquisitions at exel plc and held  
senior finance roles within mckechnie plc and logica plc steve qualified as a 
chartered accountant with arthur andersen and has been a nonexecutive  
director of consort medical plc since june 201 2
patrick de smedt
position senior independent director
appointed december 2009
patrick assumed the role of senior independent director in november 201 2 
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 chairman of workplace systems ltd a 
nonexecutive director of victrex plc and a nonexecutive director of  
easynet global services ltd
simon gulliford
position 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 plc 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 barclays plc and standard  
life simon is a nonexecutive director of aegon uk plc and also a number  
of private companies
01
03
05
07
david mulligan will step down from the board as finance director on 25 february 2013 
john morgan
position chief executive
appointed october 1994
john has overall responsibility for proposing and developing the strategy  
and daytoday management of the operational activities of the group  
he cofounded morgan lovell in 1977 which then reversed into william  
sindall plc in 1994 to form morgan sindall group plc he was formerly chief 
executive from 1994 to 2000 and executive chairman from 2000 to 201 2 
paul whitmore
position commercial director
appointed april 2000
paul is the group’s senior executive for commercial operations in addition  
he has board responsibility for sustainability including health and safety 
appointed a director in april 2000 he is a chartered surveyor and previously  
held the position of chief executive of laing construction plc during his  
27 years with john laing plc
geraldine gallacher
position 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
liz peace cbe
position nonexecutive director
appointed november 201 2
liz has been chief executive officer of the british property federation since 
2002 following a career in the ministry of defence including as director of 
corporate affairs from 1990 to 2002 at qinetiq group plc formerly the 
defence evaluation and research agency liz is also a member of the board  
of peabody a trustee of property charity land aid and a nonexecutive 
director of turley associates 
02
04
06
08
board composition
executive 3 male 6 
nonexecutive 5  female 2
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
board of directors
45 corporate governance statement
chairman’s 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 group 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 no more so than at this time of continued challenges facing 
the construction and regeneration market equally important is the board’s 
work in formulating the risk management strategy of the group and 
monitoring its effectiveness
i was appointed as chairman in november 201 2 when a number of changes  
to the board took place with john morgan returning to the chief executive  
role following paul smith’s resignation from the board this move recognises 
the need for a simplified management structure at a time when some of the 
group’s divisions have faced efficiency reviews of their own operations the 
board now encompasses the more traditional structure of a nonexecutive 
chairman and chief executive considered to be better aligned to corporate 
governance best practice
these changes have however  in the short term resulted in certain areas of 
noncompliance with the provisions of the uk corporate governance code 
‘the code’ relating to the composition of board committees in addition  
in view of these changes the board decided to defer until 201 3 the annual 
evaluation of its effectiveness required by the code although an external 
evaluation is now underway further explanation of these areas of  
noncompliance is set out in the relevant sections of this corporate 
governance statement 
statement of compliance
the code which was introduced by the financial reporting council in 2010 
has applied to the company since 1 january 201 1 a copy of the code is 
available from the financial reporting council’s website wwwfrcorguk  
save as highlighted above the board has complied with the provisions of the 
code throughout the year ended 31 december 201 2 and up to the date of 
this report a summary of how the company has applied the main principles  
of the code and specific details of areas of noncompliance are set out below 
the company is committed to managing its affairs in compliance with the 
principles and provisions of the code whilst subject to the provisions of the 
code applicable to smaller companies the company seeks where appropriate 
to follow those applicable to ftse 350 companies the board is aware of the 
changes to the code issued by the financial reporting council in september 
201 2 and applicable to the company with effect from 1 january 201 3  
where practicable some of the new disclosure recommendations have  
been reflected in this report however  the board will seek to report fully  
on compliance with this 201 2 code in the 201 3 annual report and accounts
adrian martin
chairman
structure of the board
director changes
for most of 201 2 following the resignation of gill barr as a nonexecutive 
director in may the board comprised an executive chairman three further 
executive directors and four nonexecutive directors on 6 november 201 2 
the company announced paul smith’s resignation from the board and the 
appointment of john morgan as chief executive at the same time adrian 
martin who had been the senior independent director  was appointed 
nonexecutive chairman and patrick de smedt was appointed senior 
independent director  finally liz peace joined the board as nonexecutive 
director  therefore the structure of the board now comprises a nonexecutive 
chairman three executive directors and four nonexecutive directors meeting 
the requirements of the code
since the year end the company has announced that david mulligan will be 
leaving the board on 25 february 201 3 to be succeeded as finance director  
by steve crummett
roles of the chairman chief executive and senior independent director 
the division of responsibility between the chairman and the chief executive has 
changed with the appointment of a nonexecutive chairman and the changes 
are reflected in a revised written schedule agreed by the board the principal 
change is that the responsibility for proposing and developing the overall 
strategy of the group lies with john morgan as chief executive whilst adrian 
martin as nonexecutive chairman is responsible for ensuring that the board 
as a whole is involved in refining and determining group strategy the chairman 
remains responsible for ensuring that the board 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 the chief executive’s principal responsibility is for the daytoday 
management of the operational activities of the group in accordance with  
the strategy and policies determined by the board
patrick de smedt 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 chairman he meets with the other nonexecutive directors at least 
once a year to review the chairman’s performance
independence and diversity
all of the nonexecutive directors are considered by the board to be 
independent simon gulliford in his role as director of a subsidiary of chime 
communications plc has been involved in the provision of consulting services 
to the group the directors are satisfied that these arrangements are not such 
as to interfere with the discharge of simon gulliford’s duties as an independent 
nonexecutive director of the company further details of these services are 
set out in note 28 on pages 105 and 106
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
46
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 the directors are aware of their duties under the provisions of the companies 
act 2006 relating to the management of conflicts of interest the company’s 
articles of association ‘the articles’ 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 
the board recognises the importance of diversity in general at board level  
and believes that the balance of relevant experience perspective and thought 
amongst its members enables it to exercise effective leadership and control  
of the group 
in relation to gender diversity the board believes in the benefits of a greater 
female presence on the board whilst continuing to seek to recruit the right 
talent and skills irrespective of gender and not resorting to quotas the 
company had two women on the board from 2007 until may 201 2 when  
gill barr retired following the appointment of liz peace in november 201 2 
the female representation on the board has returned to approximately 25 
and is therefore aligned with the minimum representation level to be achieved 
by 201 5 as recommended by the davies review 
the board also recognises that gender diversity below board level remains an 
issue particularly in management and technical roles within certain types of 
industry including construction and civil engineering the divisions are taking 
steps to address this through membership of the ukcg’s diversity group and 
by working with a variety of organisations to promote recruitment into the 
construction industry from as wide a pool as possible 
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 ‘agm’ after his or her 
appointment and for reelection at every third agm thereafter  the board 
agreed with effect from last year’s agm however  that in accordance with  
the code all of its continuing directors should submit themselves for 
reelection on an annual basis all of the existing directors will therefore  
be standing for election at the 201 3 agm and their biographies are set out  
on pages 44 and 45 the board is satisfied that the performance of all of the 
nonexecutive directors continues to be effective and that they continue to 
show commitment to their respective roles
operation of the board
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 oversee 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 by 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 201 2 at scheduled board meetings 
and meetings of the remuneration audit and nominations committees are  
set out below
  percentage remuneration audit nominations 
 board attendances committee committee committee
total number of meetings 11  5 3 4
adrian martin 11 100 5 3 4 
john morgan 11 100 na na 4 
david mulligan 11 100 na na na 
paul whitmore 11 100 na na na 
patrick de smedt 1 1 100 5 3 4 
geraldine gallacher 1 1 100 5 na 4 
simon gulliford
1
 10 91 na 2 4 
liz peace
2
 2 100 na na 1 
paul smith
3
 9 100 na na na 
gill barr
4
 3 75 2 1 na
1
  simon gulliford joined the audit committee on 3 may 201 2 and attended  
all the audit committee meetings after his appointment his nonattendance 
at one board meeting was due to illness
2
  liz peace attended all the board and nominations committee meetings  
after her appointment
3
 paul smith ceased to be a director on 5 november 201 2
4
 gill barr ceased to be a director on 3 may 201 2 
in addition to the formal meetings the board met on several occasions to 
consider and debate specific strategic issues affecting the group and the 
industry with input where relevant from senior management 
the chairman whilst he held the senior independent director position and now 
in his current role meets regularly with the nonexecutive directors without 
the executive directors present
effectiveness
board evaluation
in previous years the board has carried out evaluations of its effectiveness and 
that of its committees and individual directors using a rigorous internal process 
this year  in light of the changes to the board and its committees announced in 
november  it was decided that there would be more benefit to be gained from 
an evaluation if it was postponed until 201 3 therefore no formal evaluation 
process was carried out for the year ended 31 december 201 2 and this 
represents a breach of principle b6 of the code the board has however   
since the year end instigated an evaluation process using an external consultant 
and details of this will be included in the 201 3 annual report and accounts 
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
47
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 training development and advice is provided
newly appointed directors receive a full induction including a detailed 
information pack including information about sustainability and governance 
matters relevant to the group visits to the group’s operations and meetings 
with senior divisional management t raining 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 and guidance affecting them 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
dialogue with 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 chairman meets from timetotime with major 
shareholders and the 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 201 2 details of proxy votes submitted for each resolution at 
general meetings including proxy directions to withhold votes are published 
on the company’s website
accountability
risk management and internal controls 
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 
which identifies the significant risks attached to the group’s strategy and 
objectives and the root cause for each risk it confirms the internal controls  
in place to mitigate the risk and any further 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 are compiled in a group risk register  which is 
updated and reviewed by the board twice yearly this process seeks to ensure 
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 34 to 39 in addition to the standing risk 
register review process the board devotes time during some of the scheduled 
board meetings to considering specific 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
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 will 
include specific financial reviews to validate the integrity of the divisions’ 
management accounts
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
corporate governance statement
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morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
48
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 31 and in the sustainability 
review on pages 40 to 42
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 an audit plan for each year is drawn up 
following review of the divisional and group risk registers and discussion with 
management and the audit committee and is approved in advance by the audit 
committee 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 twice a year 
the internal audit process is supplemented by a rolling programme of peer 
group reviews within construction and infrastructure and affordable housing 
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 201 2 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 and 
internal controls above as well as a review of the results of internal audit work 
and the overall effectiveness of the process
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 
patrick de smedt  
simon gulliford from 3 may 201 2 
geraldine gallacher from 10 january 201 3 
liz peace from 10 january 201 3 
gill barr until 3 may 201 2
all committee members during the year and up to the date of this report are or 
were independent nonexecutive directors in accordance with the code save 
that adrian martin whilst independent on appointment became chairman of 
the board on 5 november 201 2 biographical details of each member of the 
committee are set out on page 44 in particular  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 recent and relevant financial experience 
for that reason and to ensure continuity through the audit process he has 
agreed with the board to remain as chair of the committee until the conclusion 
of the 201 3 agm the independence of the committee has however  been 
strengthened by the appointments of both geraldine gallacher and liz peace 
liz will take over from adrian as chair of the committee after the 201 3 agm 
for the period during which adrian is both chairman of the board and of the 
committee this represents noncompliance with provision c3 1 of the code 
the board considers that the benefit to the audit committee of adrian’s 
financial and accounting experience outweighs the risk that his continued 
membership might bring to the independence of the committee and he will 
remain a member of the committee for the time being 
responsibilities 
 i to ensure that the interests of shareholders are properly protected in relation 
to financial reporting and internal control
 i 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
 i to review the company’s internal financial controls
 i 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
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
49
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120  i to make recommendations to the board regarding the appointment 
reappointment and removal of the external auditor and to approve its 
remuneration and terms of engagement
 i to review and monitor the external auditor’s independence and objectivity 
and the effectiveness of the audit process
 i to apply the board’s policy on the engagement of the external auditor to 
supply nonaudit services with the objective of ensuring that the provision  
of such services does not impair its independence or objectivity
 i to review the company’s procedures for detecting fraud and the adequacy 
of its systems and controls for the prevention of bribery
 i to review the company’s procedures for raising concerns
activities
the committee held three scheduled meetings during the year  senior 
representatives from the external auditor  the finance director and the  
group head of audit and assurance attended each of these meetings  
and part of each meeting was reserved for a private discussion with  
the external auditor without management present 
the main purpose of the first meeting was to review the scope and results  
of the full year audit and the effectiveness of the external audit process  
and to monitor the integrity of the annual financial statements this process 
involved discussing with the external auditor the key findings of the external 
audit and challenging the significant management judgments reflected in the 
financial results on matters such as recoverability of work in progress and other 
receivables areas of key contract risk the carrying value of goodwill and other 
intangible assets and the recognition and measurement of the fair value of 
shared equity loans the second meeting focused on the half year results with 
similar assessments of the key areas of management judgment the final 
meeting of the year addressed with the external auditor its overall work plan 
for the forthcoming audit 
time was set aside at each of the meetings to review with the group head  
of audit and assurance the results of reviews carried out by the internal  
audit team and any other matters he wished to bring to the attention of  
the committee further details of the internal audit function are set out  
under internal controls above
at each meeting the committee also reviewed a summary of calls received  
by the external call line introduced in 2010 for raising concerns and other 
similar calls received directly by the group 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 chair of the audit committee reports to the full board on matters of 
significance arising at meetings of the committee 
external auditor
monitoring the independence and objectivity of the external auditor
t o fulfil its obligations the committee reviewed the external auditor’s 
presentation of its policies and safeguards to ensure its 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 
auditor’s policy on rotating audit executives in particular the appointment of  
a new lead audit engagement partner for 201 2 those policies and safeguards 
together with the company’s own policy on engaging the external auditor 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 auditor
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 auditor’s fulfilment of the agreed 
audit plan and any major issues highlighted as part of the external audit
reviewing the use of the external auditor for nonaudit work 
the company’s policy on the engagement of the external auditor for 
nonaudit related services is designed to ensure that the provision of such 
services does not impair the external auditor’s independence or objectivity 
certain categories of services are excluded entirely from the external auditor  
in particular those which would be subject to direct review by the audit firm  
as part of the statutory audit or which could involve the external auditor in 
managerial decisions or judgments other categories such as audit related 
services or work which because of the auditor’s existing knowledge of the 
group’s business could be more effectively carried out by it may if not on  
the list of prohibited services be carried out by the external auditor subject  
to the advance approval of the finance director or  if the fees for such services 
exceed an absolute limit or a specified proportion of the audit fee the advance 
approval of the audit committee no nonaudit services to the company 
provided by deloitte llp in 201 2 required the approval of the committee  
the fees for nonaudit services during the year are set out in note 3 to  
the consolidated financial statements on page 84 these represented 
approximately 1 25 of the audit fee and comprised property and planning 
advice on certain projects review of a disputed final account claim and 
certification of accounting records for the purpose of compliance with 
government grant funding 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
corporate governance statement
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morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
50
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 reappointment of external auditor
the committee considers the reappointment of the external auditor each year 
and makes a recommendation to the board the committee has satisfied itself 
that deloitte llp  the external auditor  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 auditor 
remuneration committee 
members
patrick de smedt chair from 3 may 201 2 
geraldine gallacher  
adrian martin until agm 201 3 
liz peace from 1 february 201 3 
gill barr chair until 3 may 201 2
all members are independent and adrian was independent  
on appointment as chairman of the board 
responsibilities 
 i to set all elements of remuneration and any compensation payments  
for executive directors and the company secretary
 i to monitor the structure and level of remuneration  
for divisional managing directors
 i to ensure that the requirements for disclosure of directors’ remuneration  
are fulfilled
 i to select remuneration consultants to advise the committee
activities 
the activities of the committee during the year are set out in the separate 
directors’ remuneration report on pages 52 to 61 
nominations committee 
members
adrian martin chair from 5 november 201 2 
john morgan chair until 5 november 201 2 
patrick de smedt  
geraldine gallacher  
simon gulliford 
liz peace from 5 november 201 2 
gill barr until 3 may 201 2
responsibilities
 i to review the structure size and composition of the board
 i to make recommendations to the board for any changes considered 
necessary
 i to approve the description of the role and capabilities required for a particular 
appointment
 i 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 on a number of occasions during the year 
to review the structure size and composition of the board and in connection 
with various changes to the board in particular the committee
 i recommended the appointment of liz peace to the board following a 
review of its size and composition after gill barr’s resignation and her 
introduction to the company by augmentum recruitment consultants 
 i managed the changes following paul smith’s resignation and recommended 
the subsequent appointments of john morgan adrian martin and patrick de 
smedt to their current roles
 i led the instruction and briefing of odgers berndtson to recruit a new finance 
director following david mulligan’s indication of his intention to step down
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
corporate governance statement
51
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 dear shareholder 
as the new chair of the remuneration committee ‘the committee’ i am 
pleased to introduce our directors’ remuneration report for the year ended  
31 december 201 2
in this year’s report we have made a number of changes to the way in which 
we present information to help reflect the transparency sought by the uk 
government whilst the department of business innovation and skills ‘bis’ 
proposals are not yet final we have taken steps to disclose in advance 
additional information we believe these changes will make the report easier  
to read and assess 
201 2 was a year of continued challenges for the uk construction and 
regeneration market in the face of difficult economic conditions and ongoing 
constraints in public spending against this background the company has 
delivered a solid financial performance for the year ended 31 december 201 2 
and this has resulted in an annual bonus of 30 of the maximum and a vesting 
level for the awards made in 2010 under the morgan sindall executive 
remuneration plan 2005 the ‘plan’ of 4876 performance shares and 
4625 options bonus awards remain subject to final approval by the 
committee
during the year  paul smith resigned as chief executive and was succeeded  
by john morgan on 5 november 201 2 following the end of the financial year  
david mulligan announced his intention to step down as finance director   
he will be succeeded by steve crummett who will be appointed from 25 
february 201 3 the committee agreed a salary and benefits package for 
steve which is consistent with the current remuneration framework for 
executive directors with the largest part of the package subject to 
performance details of the termination arrangements for paul smith and 
david mulligan the recruitment package for steve crummett and john 
morgan’s ongoing remuneration package are set out in the detailed directors’ 
remuneration report which follows 
turning to our policy for 201 3 the committee has concluded that with the 
changes made last year  in particular to the policy for longterm incentives and 
with the challenging market conditions expected to continue the policy for the 
executive directors’ remuneration remains appropriate
john morgan’s base salary which was reviewed both when he moved from 
executive chairman to chief executive and as part of the normal annual salary 
review has remained unchanged since 201 1 paul whitmore’s salary increased 
by 26 in line with average increases across the group 
the annual bonus has been revised to introduce nonfinancial strategic and 
individual targets for 25 of the maximum bonus the balance will operate  
on similar terms to 201 2 based on stretching profit performance targets for 
the 201 3 financial year  following the changes made last year  the longterm 
incentive policy is for an award of performance shares equivalent to up to 
100 of base salary based on two equally weighted performance targets of 
adjusted earnings per share ‘eps’ and total shareholder return ‘tsr’ as part 
of his recruitment package steve crummett’s award for 201 3 will represent 
1 50 of basic salary
the committee is satisfied that this remuneration policy will continue to ensure 
that we can recruit and retain a highly talented senior management team to 
maximise shareholder value and deliver strong and sustainable growth
a resolution to approve the directors’ remuneration report will be proposed  
at the agm to be held on 9 may 201 3 and i hope that you will be supportive
patrick de smedt
chair of the remuneration committee
policy report
policy overview 
in setting the remuneration policy for the executive directors the 
committee takes into account the following general principles
 i the need to attract retain and motivate the best possible person for  
each position without paying more than is necessary
 i to ensure the remuneration packages are simple and fair in design so  
that they are valued by participants
 i 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 performance
 i to recognise the importance of rewarding exceptional performance  
but not under performance in both the short and longterm
 i to balance performance pay between the achievement of financial 
performance objectives and delivering sustainable stock market out 
performance financial performance creating a clear line of sight for 
individuals between performance and reward and providing a focus on 
sustained improvements in profitability tsr compared with that of our 
competitors providing a more direct alignment between the interests of 
executives and shareholders 
 i to calibrate carefully all financial and tsr performance metrics and 
associated sliding scale ranges 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 
 i to provide a significant proportion of performance linked pay in shares 
allowing executives to build significant shareholdings in the business 
therefore aligning the executive’s interests with those of the company’s 
shareholders
directors’ remuneration report
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ remuneration report
52
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120  i components of directors’ remuneration 
the key elements of the remuneration package for each executive director are set out in the table below there are no changes to the policy for 201 3
element purpose link to strategy and operation operation for 201 3
base salary i set to attract retain and motivate talented individuals
 i salary levels set by reference to market rates individual  
and company performance
salaries disclosed on the following page
annual bonus i rewards the achievement of annual financial and nonfinancial 
performance metrics
 i 75 of the bonus based on a target range of profit before tax  
and amortisation ‘pbta’ set relative to the group’s budget 
 i 25 based on nonfinancial strategic and personal objectives
maximum opportunity of 100 of base salary
longterm 
incentive
 i t o balance performance pay between the achievement of financial 
performance objectives and delivering sustainable stock market  
outperformance
 i annual awards of conditional shares with vesting dependent on the 
achievement of performance conditions over a threeyear period
 i 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 tsr compared with eight of our  
uklisted peers over a threeyear period
normally the maximum grant is 100 of base salary 
up to 1 50 in exceptional circumstances
pension i contributions towards retirement planning 10 of base salary
benefits i t o provide a market competitive level of benefits car allowance private medical insurance permanent 
health insurance and life assurance 
directors’ report governance
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directors’ remuneration report
53
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 remuneration scenarios for the chief executive
the chart below shows an estimate of the potential future remuneration 
payable for the chief executive in 201 3 at different levels of performance  
the chart highlights that the performancerelated elements of the package 
comprise a highly significant portion of the chief executive’s total remuneration 
at target and maximum performance 
chart showing proportionate breakdown of the 
chief executive’s remuneration at below threshold 
target and maximum performance
longterm incentive plan
annual bonus
pension
salary
£500000 £1000000 £1500000 £0
919
47524 24
32432 32
percentage of maximum remuneration 
maximum
target
below
threshold
below threshold performance assumes no award is earned under the annual 
bonus plan and no vesting is achieved under the plan at target 50 is earned 
under the annual bonus plan and 50 is achieved under the plan and at 
maximum full vesting under both plans 
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 considering policy in relation to executive directors  
when considering the executive directors’ remuneration structure and levels 
for 201 3 the committee reviewed the salaries and proposed annual bonus 
arrangements for the senior executives in the divisions to ensure that there 
was a coherent approach
incentive recovery provision
t o improve the risk profile of the remuneration policy further  last year the 
committee 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 conditions
detailed remuneration policy for 2013
base salaries
the base salary of individual executive directors is determined annually by the 
committee or  if appropriate in the event of a change in an individual’s position 
or responsibilities it is intended that base salaries should be determined in line 
with market rates taking into account individual performance and experience 
and the group’s results 
in setting the 201 3 base salaries 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 approximately 25 not all divisional management have received 
an increase in base salary for 201 3 having regard to the above and to the 
challenging market conditions expected to continue in 201 3 the committee 
determined that paul whitmore should receive an increase in his base salary  
of 26 but john morgan’s salary should not be increased in view of david 
mulligan’s forthcoming departure from the group in april 201 3 the 
committee decided against awarding him any increase accordingly annual 
base salaries for the executive directors for 201 3 will be as follows
 from 1012013 from 1012012 increase
john morgan £438000 £438000 0 
david mulligan £31 5000 £31 5000 0 
paul whitmore £319000 £31 1000  26 
steve crummett from 2502201 3 £330000 na na
pension arrangements
the company contributes the equivalent of 10 of base salary in the case  
of david mulligan to the morgan sindall retirement benefits plan ‘the 
retirement plan’ and in the case of john morgan and paul whitmore  
to their individual personal pension plans 
the company operates a salary exchange process that allows all employees 
who are members of the retirement 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 national insurance contribution ‘nic’ 
annual bonus
for the 201 3 annual bonus plan the committee has determined that 75 
should be based on a pbta target range set in relation to the group’s budget 
the remaining 25 will be based on nonfinancial personal and strategic 
targets this provides a rounded assessment of the group and management’s 
performance
the pbta element of the bonus incorporates an appropriate sliding scale range 
around a challenging target for executives recognising however  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
directors’ remuneration report
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ remuneration report
54
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 the committee has discretion to override the formulaic outturn of the bonus 
to determine the appropriate level of bonus payable 
the maximum potential annual cash bonus for executive directors for 201 3  
is unchanged from 201 2 at 100 of base salary 
longterm incentives
the company’s current longterm incentive arrangement for senior executives 
is the morgan sindall executive remuneration plan 2005 
a number of changes were made to the plan for the 201 2 awards and the 
revised structure is being retained for the 201 3 awards the awards will take 
the form of performance shares ie a conditional award of shares vesting after 
three years subject to continued employment and the achievement of 
challenging performance conditions 
the awards to be made in 201 3 will be 100 of salary with the exception  
of steve crummett whose award as part of his recruitment package will be 
1 50 of salary for 201 3 reverting in line with the other executive directors  
in subsequent years
last year the committee introduced a comparative tsr condition in addition 
to the adjusted eps condition both measured over a threeyear period  
the same approach will be taken for the 201 3 awards and accordingly 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 tsr 
compared with eight of our uk listed peers defined overleaf over a 
threeyear period 
eps performance condition
performance will be assessed by reference to the adjusted eps performance in 
201 5 in what remain challenging and uncertain market conditions the targets 
are considered an appropriate incentive to preserve and maximise longterm 
profitability within an appropriate risk framework thereby providing a strong 
link with the strategy of the business in setting the target range the 
committee has narrowed the range between threshold and targets compared 
with targets set for the 201 2 award and has increased the level of stretch 
between the target and the maximum
this vesting range for the targets is shown graphically below 
60 65 70 75 80 85 90 95
2015 adjusted eps pence
no vesting
below 675p
50 vesting at 751p
100 vesting above 90p
percentage of eps 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
tsr performance condition
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
the target range for the tsr performance condition is shown graphically 
below 
median 2nd
morgan sindall group’s position relative to the comparator group
for this purpose median of the tsr comparator group is defined as the tsr value half way between 
the comparator companies ranked fourth and fifth
no vesting
below median
25 vesting at median
percentage of tsr half of award vesting
0
20
40
60
80
100
40 vesting if tsr 
equals 4th position
70 vesting if tsr 
equals 3rd position
100 vesting if 
tsr equals 2nd 
position or better 
in addition to the vesting being determined by the sliding scale of tsr 
performance shown above there are 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
 i financial performance has been unsatisfactory andor 
 i the outcome has been distorted due to the tsr for the company or any 
comparator company being considered abnormal
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
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
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ remuneration report
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 directors’ remuneration report
other share plans
the company currently operates two other share plans for its employees
 i the morgan sindall sharesave plan in which executive directors are 
permitted to participate on the same terms as other employees
 i 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 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 10year 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 37 of the 
current issued ordinary share capital under all employee share plans of which 
04 relates to discretionary share plans 
separately the employee benefit trust currently holds 723970 shares which 
may be used to satisfy awards 
service contracts 
all executive directors’ service agreements are terminable on 1 2 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 an 
equitable compensation package having regard to the particular circumstances 
of the case 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 201 2 
david mulligan 20 february 201 2 
paul whitmore 21 march 2000 
steve crummett 5 february 201 3
fees receivable by the executive directors serving on other boards
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 steve crummett is a nonexecutive director and chair of the audit 
committee at consort medical plc for which he receives a fee of £44000 per 
annum none of the other executive directors is currently receiving fees for 
nonexecutive positions with other companies
nonexecutive directors’ terms of engagement
all nonexecutive directors have specific terms of engagement being an initial 
period of three years which thereafter may be extended by mutual consent 
subject to the requirements for reelection and the listing rules of the 
financial services authority and the relevant schedules of the companies  
act 2006 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
the base fees for the nonexecutive directors for 201 3 will remain unchanged 
current annual fees are as follows
 2013 2012 
 £ £
chairman 135000 135000 
base fee 41200 41200 
additional fees   
audit committee chair 7500 7500 
remuneration committee chair 6000 6000
 adrian martin’s fee was increased upon his appointment as chairman on 5 november 201 2 from £49000 
he will remain as chair of the audit committee until the end of the 201 3 agm without taking the additional 
fee shown above
nonexecutive directors receive no other benefits and do not participate in 
short term or longterm reward schemes
the dates of the terms of engagement of the nonexecutive directors are
patrick de smedt  26 november 2009 
geraldine gallacher 16 august 2007 
adrian martin 28 november 2008 
simon gulliford 24 february 2010 
liz peace  5 november 201 2
directors’ report governance
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directors’ remuneration report
56
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 implementation report 
the directors’ remuneration report has been prepared on behalf of the  
board by the committee the committee adopts the principles of good 
governance as set out in the uk corporate governance code ‘the code’  
and complies with the listing rules of the financial services authority the  
act and the directors’ remuneration report regulations in schedule 8 to  
the large and mediumsized companies and groups accounts and reports 
regulations 2008
the act requires the external auditor 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 those parts of the directors’ remuneration report subject to audit are 
contained in this implementation report 
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 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
members and activities of the committee
the members of the committee during 201 2 were gill barr chair until 
stepping down from the board and the committee on 3 may 201 2 patrick 
de smedt who succeeded gill as chair geraldine gallacher and adrian martin 
all members during the year were independent nonexecutive directors save 
adrian martin who became nonexecutive chair on 5 november 201 2 liz 
peace has joined the committee with effect from 1 february 201 3 and finally 
adrian martin is intending to step down from the committee at the 
forthcoming agm
the committee met on five occasions during the year and attendance at 
meetings is disclosed in the corporate governance statement on page 48 
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 introduced for 201 2 and 
the changes to the annual bonus being introduced for 201 3 
external advice received
during the year  the committee received independent advice from new bridge 
street ‘nbs’ an aon hewitt subsidiary in relation to its consideration of the 
structure of the executive directors’ remuneration for 201 2 and other matters 
considered by the committee during the year  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 and the committee is comfortable that these services do not 
prejudice nbs’s position as independent advisers to the committee
shareholder voting at agm
at last year’s agm 201 1  the directors’ remuneration report received the 
following votes from shareholders
   of  
  votes cast  
 total including  
 number withheld  
 of votes votes
for 30498651 96 
against 457862 1 
total votes cast for and against 30956513 97 
votes withheld 89541 1 3 
total votes cast  
including withheld votes 31851924 100
 a vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast ‘for’ 
and ‘against’ a resolution
fiveyear 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 201 2 of £100 invested  
in morgan sindall group plc on 1 january 2007 compared with the value of 
£100 invested in the ftse all share index excluding investment trusts and 
the ftse all share index construction and materials sector the other points 
plotted are the values at intervening financial year ends
31 dec
2007
31 dec
2008
31 dec
2009
31 dec
2010
31 dec
2011
31 dec
2012
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
directors’ report governance
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directors’ remuneration report
57
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 directors’ remuneration report
the directors’ remuneration for the year was as follows
 value of longterm 
 incentives
 
 
   money     
   purchase  employment     2012 
 feesbasic  pension annual cash termination total total   single 
 salary benefits contributions bonuses
a 
payment 2012 2011 2012
h
 2011
i
 figures 
name of director £’000s £’000s  £’000s £’000s £’000s £’000s £’000s £’000s £’000s £’000s
executive 
john morgan 438 22 43 1 31 – 634 875 37 – 671 
david mulligan
b
 315 20 34 95 – 463 616 70 – 533 
paul whitmore 31 1 20 30 93 – 454 605 105 – 559 
paul smith  
resigned 5 nov 201 2
c
 515 22 48
d
 132 501 1218 1025 109 – 1327
 1579 84 155 451 501 2769 3121 321 – 3090
chairman 
adrian martin
e
 65 – – – – 65 49 – – 65
nonexecutive 
patrick de smedt 45 – – – – 45 41 – – 45 
geraldine gallacher 41 – – – – 41 41 – – 41 
simon gulliford 41 – – – – 41 41 – – 41 
liz peace
f
 7 – – – – 7 – – – 7 
gill barr
g
 16 – – – – 16 47 – – 16
 215 – – – – 215 219 – – 215
total 1794 84 155 451 501 2984 3340 321 – 3305
a
  for the 201 2 cash bonus awards adjusted pbta of £37 8m was required for threshold performance rising to £448m at maximum the committee adjusted 
the group pbta of £37  1m for the £100m of nonrecurring reorganisation costs and also for the £7 0m gain on disposal of the group’s medical properties 
investment however  it considered that the resulting bonus should be reduced to reflect the committee’s overriding assessment of the company’s 
performance during the year and it has therefore awarded an annual bonus of 30 of maximum the annual bonus for john morgan david mulligan and  
paul whitmore is subject to final approval by the committee
b
  david mulligan’s employment with the company will cease on 10 april 201 3 the company has agreed to pay £31 5 1 26 in cash for payment in lieu of notice  
for nine months’ salary pension contributions and other benefits plus an element in respect of his bonus entitlement for the portion of the 201 3 year worked  
in respect of his outstanding longterm incentive awards under the plan the committee has determined in accordance with the rules of the plan that the 
awards may remain capable of vesting on their normal vesting dates subject to a prorata reduction in the number of shares comprised in the awards based  
on the number of months from the date of grant to the date of termination of his employment and subject to satisfaction of performance conditions further 
details are shown in the paragraph headed the plan
c
  paul smith’s employment with the company ceased on 31 december 201 2 the company has agreed to pay him £500936 in cash for payment in lieu of 
notice representing approximately 10 months’ salary pension contributions and other benefits approximately one half was paid on 2 january 201 3 the other 
half is payable on 1 june 201 3 subject to a reduction in respect of any earnings from any alternative position obtained prior to 1 june 201 3 he will be paid a 
prorata annual bonus in respect of the period from 1 january 201 2 to 5 november 201 2 on the same basis as other executives in the bonus plan in respect 
of his outstanding longterm incentive awards under the plan the committee has determined in accordance with the rules of the plan that the awards may 
remain capable of vesting on their normal vesting dates subject to a prorata reduction in the number of shares comprised in the awards based on the number 
of months from the date of grant to the date of termination of his employment and subject to satisfaction of the performance conditions further details are 
shown in the paragraph headed the plan
d
  paul smith was paid a cash allowance in lieu of pension contribution in 201 2 and this is shown in the column headed ‘money purchase pension contributions’
e
  adrian martin was appointed as nonexecutive chairman on 5 november 201 2
f
  liz peace was appointed as a director on 5 november 201 2
g
  gill barr ceased to be a director on 3 may 201 2
h
  this represents gains on awards under the plan which vest by reference to performance for the year ended 31 december 201 2
i
  no awards under the plan vested by reference to performance for the year ended 31 december 201 1 
directors’ report governance
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directors’ remuneration report
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 201 2 and 18 february 201 3 
 31 december 2012 31 december 2011 
 no of shares no of shares 
adrian martin 2000 2000 
john morgan 4497 508 4497508 
david mulligan 24544 24544 
paul whitmore 62840 62840 
geraldine gallacher 7772 7772 
patrick de smedt 2000 – 
simon gulliford – – 
liz peace – –
the plan 
details of the executive directors’ interests in longterm incentive awards under the 2005 plan as at 31 december 201 2 and movements during the year are  
as follows 
performance shares
  no of awards    no of awards 
  outstanding no of no of outstanding date market 
  as at  shares shares as at awards price on 
 date of award 1 jan 2012 awarded   lapsed  31 dec 2012 vest  award
john morgan 2152012 – 68224 – 68224 21052015 £642
david mulligan 30032009 19073 – 19073 – – – 
 17032010 19932 – – 19932 17032013 £552 
 30032011 34703 – – 34703 30032014 £657 
 21052012 – 49065 19073 49065 21052015 £642
total  73708 49065 19073 103700
paul whitmore 30032009 34914 – 34914 – – – 
 17032010 36486 – – 36486 17032013 £552 
 30032011 34247 – – 34247 30032014 £657 
 21052012  – – – 48442 21052015 £642
total  105647 48442 34914 119175
paul smith resigned 5 november 201 2 30032009 32328 – 32328 – – – 
 17032010 33784 – 2816 30968 17032013 £552 
 30032011 58790 – 24496 34294 30032014 £657 
 21052012 – 80218 64621 15597 21052015 £642
total  124902 80218 124261 80859 
notes
 i no shares vested in the year
 i the threshold performance condition for the performance shares awarded on 30 march 2009 was not met and the awards have lapsed
 i in respect of the performance shares awarded on 1 7 march 2010 the company’s achieved eps for the year ended 31 december 201 2 adjusted for 
amortisation the nonrecurring reorganisation costs of £100m and for the £7 0m profit on the disposal of the group’s medical properties investment  
of 807p as a result 488 of the performance shares will vest on the 1 7 march 201 3 and the remaining performance shares will lapse
 i as described above paul smith’s awards are subject to a prorata reduction based on the number of complete months from the date of grant to the date  
of termination of his employment relative to 36 months in the number of shares in the awards 
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ remuneration report
59
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 share options 
    no of 
  no of options  options 
  outstanding  no of outstanding  date from 
  as at options as at exercise which 
 date of grant 1 jan 2012 lapsed 31 dec 2012 price exercisable
john morgan 20052005 107736 – 107736 £724 20052008 
 5042006 81016 – 81016 £1259 5042009 
 30032009 219828 219828 – – – 
 17032010 229728 – 229728 £555 17032013 
 30032011 200000 – 200000 £657 30032014
total  838308 219828 618480
david mulligan 20052005 35220 – 35220 £724 20052008 
 5042006 28594 – 28594 £1259 5042009 
 30032009 76294 76294 – – – 
 17032010 79730 – 79730 £555 17032013
total  219838 76294 143544  
paul smith resigned 5 nov 201 2 20052005 68370 – 68370 £724 20052008 
 5042006 47656 – 47656 £1259 5042009 
 30032009 129310 129310 – – – 
 17032010 135136 11262 123874 £555 17032013
total  380472 140572 239900  
notes
 i no options were granted or exercised during the year
 i the maximum performance condition for the options granted in 2005 and 2006 was satisfied and the options are therefore fully exercisable
 i the threshold performance condition for the options granted on 30 march 2009 was not met and the options lapsed 
 i in respect of the options granted on 1 7 march 2010 the company achieved adjusted eps of 807p as explained under performance shares above as a result 
463 of the options will become exercisable on the 1 7 march 201 3 and the remaining options will lapse
 i as described above paul smith’s options are subject to a prorata reduction based on the number of complete months from the date of grant to the date of 
termination of his employment relative to 36 months in the number of options
 i the outstanding options detailed above will if not lapsed or exercised earlier  lapse 10 years from the date of grant 
the awards of performance shares and share options made in 201 1 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 201 3 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 77 6p share options the awards of performance shares made in 201 2 are subject 
to an absolute adjusted eps performance target and a tsr performance condition with full vesting of 50 of the awards for achieving adjusted eps of 106p  
or more for the year ending 31 december 201 4 reducing on a sliding scale to 50 vesting for achieving 919p and reducing on a sliding scale to 0 vesting  
for achieving 80p or less the other 50 of the award is subject to a condition measuring the company’s tsr compared with eight of the company’s uk listed 
peers over a threeyear period with full vesting at 2nd position or higher  25 vesting at median and 0 at less than median further details are given in the  
policy report
the midmarket price of a share on 31 december 201 2 was £5 1 5 and the range during the year was £508 to £7 25
directors’ remuneration report
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ remuneration report
60
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 27 on pages 102 to 104 
  outstanding  lapsed outstanding option date within 
  as at during as at exercise which 
 date of grant 1 jan 2012 the year 31 dec 2012 price exercisable
john morgan 27 09201 1 1814 – 1814 £496 1112014–1052015
david mulligan 107 2008 1338 1338 – £702 1092011–28022012 
 27092011 1814 – 1814 £496 1112014–1052015
total  3152 1338 1814  
paul whitmore 107 2008 1338 1338 – £702 1092011–28022012 
 27092011 1814 – 1814 £496 1112014–1052015
total  3152 1338 1814  
paul smith resigned 5 nov 201 3 107 2008 1338 1338 – £702 1092011–28022012 
 27092011 1814 1814 – £496 1112014–1052015
total  3152 3152 –  
note
no options were granted or exercised during the year 
this report was approved by the board and signed on its behalf by
patrick de smedt
chair of the remuneration committee 
1 9 february 201 3
directors’ report governance
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directors’ remuneration report
61
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 201 2 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 43 to 66 and in the 
business review section of the directors’ report on pages 4 to 42 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 group is a construction and regeneration group with five 
divisions construction and infrastructure fit out affordable housing urban 
regeneration and investments the principal subsidiary companies and joint 
ventures operating within this divisional structure are listed in note 1 3 of the 
company financial statements on pages 90 to 92
results and dividends
the group’s profit before income tax expense for the year amounted to 
£342m 201 1  £400m 
an interim dividend of 1 20p 201 1  1 20p per share amounting to £5 1m 
201 1  £5 1m was paid on 26 october 201 2 the directors recommend  
a final dividend for the year of 1 50p 201 1  300p per share amounting  
to £64m 201 1  £1 28m payable on 24 may 201 3 to shareholders on  
the register at close of business on 3 may 201 3 t ogether with the interim 
dividend this makes a total dividend of 27 0p 201 1  420p for the year  
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 9 of the consolidated 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 3 may 201 2  
to allot relevant securities up to a nominal amount of £108048 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 75 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 holder 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 the 
first named being the most senior
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
 i that certain restrictions may from timetotime be imposed by laws  
and regulations for example insider trading laws
 i 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
the company is not aware of any agreements between holders of securities 
that may result in restrictions on the transfer of securities
other statutory and regulatory information
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
other statutory and regulatory information
62
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 purchase of own shares
at the agm on 3 may 201 2 a resolution was passed giving the directors 
authority to make market purchases of its shares up to 432191 5 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 3 august 201 3 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 timetotime 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 
t rust ‘the trust’ held 17 of the issued share capital of the company as  
at 31 december 201 2 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 t rustee 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 t rust may be found in note 25 to the 
consolidated financial statements on page 100
appointment and replacement of directors
the directors shall be not less than two and not more than 1 2 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 himherself for reappointment by the members the company may  
by special resolution remove any director before the expiration of hisher 
period of office the office of a director shall be vacated if i heshe resigns  
or offers to resign and the board resolves to accept such offer ii hisher 
resignation is requested by all of the other directors and all of the other 
directors are not less than three in number iii heshe is or has been suffering 
from mental ill health and the board resolves that hisher office be vacated  
iv heshe is absent without the permission of the board from meetings of the 
board whether or not an alternate director appointed by himher attends for 
six consecutive months and the board resolves that hisher office is vacated 
v heshe becomes bankrupt or compounds with hisher creditors generally 
vi heshe is prohibited by law from being a director vii heshe ceases to be  
a director by virtue of the act or viii heshe is removed from office pursuant 
to the articles 
however  at the forthcoming agm of the company to be held on 9 may 
201 3 notwithstanding the provisions of the articles each of the directors  
will offer themselves for election 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
the directors who served throughout the year except as noted were  
as follows
adrian martin nonexecutive chairman 
john morgan chief executive 
david mulligan finance director 
paul whitmore commercial director 
patrick de smedt senior independent director 
geraldine gallacher 
simon gulliford 
liz peace appointed 5 november 201 2
paul smith resigned on 5 november 201 2 david mulligan will step down  
from the board on 25 february 201 3 and steve crummett will be appointed 
as finance director with effect from 25 february 201 3
biographical details of the directors of the company are set out on pages 44 
to 45
details of directors’ interests including interests in the company’s shares  
are disclosed in the directors’ remuneration report on pages 52 to 61
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
other statutory and regulatory information
63
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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
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 1 9 february 201 3 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
john morgan 4497 508 1040 
franklin templeton institutional llc 3646900 844 
standard life group 3025295 7 00 
john james clifford lovell 241 5273 559  
aberdeen asset management plc 2234219 5 1 7 
jp morgan chase  co 2 1 23287 492 
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 33 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
 i details of the group’s sustainability roadmap are set out on page 31 of  
the chief executive’s review and in the sustainability review on pages 40  
to 44 the 201 2 online sustainability report will provide further details of 
the group’s approach and its performance against its six t otal commitments
 i 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
 i the average number of employees in the group during the year is given  
in note 4 to the consolidated financial statements on page 84
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 note 27 of the 
consolidated financial statements on pages 102 to 104
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 the company does not 
adopt different policies with respect to different suppliers
as at 31 december 201 2 the group’s number of creditor days outstanding 
was equivalent to 28 days’ purchases 201 1  28 days based on the average 
daily amount invoiced by suppliers during the year 
political and charitable contributions
during the year  the group made charitable donations of £83682  
201 1  £47  1 34 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 201 2 sustainability report  
at wwwmorgansindallcomsustainability
no contributions were made to any political parties during the current  
or preceding year  
other statutory and regulatory information
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
other statutory and regulatory information
64
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 fixed assets
there is no material difference between the book value and current market 
value of the group’s interest in land and buildings 
disclosure of information to the external auditor
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 jefferies hoare govett 
vintners place 68 upper thames street london ec4v 3bj on 9 may 201 3 at 
1 200 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 4 to 66 inclusive was approved by the board 
and signed on its behalf by
mary nettleship
company secretary 
1 9 february 201 3
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
other statutory and regulatory information
65
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 the directors are responsible for preparing the annual report and the financial 
statements in accordance with applicable law 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 united kingdom 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
 i select suitable accounting policies and then apply them consistently
 i make judgments and accounting estimates that are reasonable and prudent
 i state whether applicable united kingdom accounting standards have been 
followed subject to any material departures disclosed and explained in the 
financial statements
 i 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
 i properly select and apply accounting policies
 i present information including accounting policies in a manner that provides 
relevant reliable comparable and understandable information
 i provide additional disclosures when compliance with the specific 
requirements in ifrss 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
 i 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 united kingdom governing the preparation and dissemination 
of financial statements may differ from legislation in other jurisdictions
responsibility statement 
we confirm that to the best of our knowledge
 i 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
 i 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
john morgan david mulligan
chief executive finance director 
1 9 february 201 3 1 9 february 201 3
directors’ responsibilities statement
directors’ report governance
morgan sindall group plc annual report and accounts 201 2 
directors’ responsibilities statement
66
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 67 about morgan sindall group
morgan sindall group plc annual report and accounts 201 2 
section header
67
morgan sindall group plc annual report and accounts 201 2 
group consolidated financial statements
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
group consolidated financial statements
the group’s consolidated financial statements  
for the financial year ended 31 december 2012
70 independent auditor’s report
71 income statement
71 statement of comprehensive income
72 balance sheet
73 cash flow statement
74 statement of changes in equity
75 significant accounting policies
84 notes to the consolidated financial statements we have audited the group financial statements of morgan sindall group  
plc for the year ended 31 december 201 2 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 the 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
 i give a true and fair view of the state of the group’s affairs as at  
31 december 201 2 and of its profit for the year then ended
 i have been properly prepared in accordance with ifrss as adopted  
by the european union
 i 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
 i certain disclosures of directors’ remuneration specified by law are not made
 i we have not received all the information and explanations we require for  
our audit
under the listing rules we are required to review
 i the directors’ statement contained within the financial review in relation  
to going concern
 i 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
 i 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 201 2 and on the 
information in the directors’ remuneration report that is described as having 
been audited
mark beddy
senior statutory auditor 
for and on behalf of deloitte llp 
chartered accountants and statutory auditor 
london united kingdom 
1 9 february 201 3
independent auditor’s report
to the members of morgan sindall group plc
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
independent auditor’s report
68
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 consolidated income statement
for the year ended 31 december 201 2
     2012 2011 
    notes £m £m
continuing operations      
revenue    1 2 20471  22266  
cost of sales     18604 20109
gross profit     1867  21 57 
amortisation of intangible assets    2 3 10 29 39 
nonrecurring items    3 100 14 
other administrative expenses     1537 1703
total administrative expenses     1666 1756
share of net profit of equity accounted joint ventures    2 1 3 57  03  
other gains and losses    1 3 94  04 
profit from operations     2 352  408 
finance income    6 23  16  
finance costs    6 33 24
net finance expense     10 08
profit before income tax expense    2 342  400 
income tax expense    7 35 72
profit for the year    3 307  328 
attributable to     
owners of the company     308  329  
noncontrolling interests     01 01
     307  328 
earnings per share      
from continuing operations      
basic    9 725p 775p 
diluted    9 720p 765p
there were no discontinued operations in either the current or comparative years
consolidated statement of comprehensive income
for the year ended 31 december 201 2
     2012 2011 
    notes £m £m
profit for the year     307  328 
other comprehensive incomeexpense    
actuarial loss arising on defined benefit obligation    20 08 –  
deferred tax on defined benefit obligation    21 01  0 1 
movement on cash flow hedges in equity accounted joint ventures    1 3 04 07 
reclassification adjustments for loss on cash flow hedges included in profit    1 3 21  –  
other movement on cash flow hedges     –  02
other comprehensive incomeexpense for the year  net of income tax      10 10
total comprehensive income for the year     317  318 
attributable to    
 owners of the company     318  319  
 noncontrolling interests     01 01
     317  318 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
consolidated income statement
69
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 consolidated balance sheet
at 31 december 201 2
     2012  2011  
    notes £m £m
noncurrent assets     
goodwill    10 2139  2141  
other intangible assets    10 93  125  
property plant and equipment    1 1 201  216  
investment property    12 113  11 1  
investments in equity accounted joint ventures    2 1 3 622  498  
investments     04  04  
shared equity loan receivables    14 192  1 76 
     3364  327 1 
current assets     
inventories    15 1594  1460  
amounts due from construction contract customers    1 7 2173  2286  
trade and other receivables    16 1876  1865  
cash and cash equivalents    29 504  1089 
     6147  6700 
total assets    2 9511  997 1 
current liabilities     
trade and other payables    18 5721 6209 
amounts due to construction contract customers    1 7 474 788 
current tax liabilities     52 87 
finance lease liabilities    19 12 08 
provisions    22 30 46
     6289 7138
net current liabilities     142 438
noncurrent liabilities     
trade and other payables    18 229 03 
finance lease liabilities    19 50 43 
retirement benefit obligation    20 15 13 
deferred tax liabilities    21 190 198 
provisions    22 245 220
     729 477
total liabilities     7018 7615
net assets     2493  2356 
equity     
share capital    25 22  22  
share premium account     267  267  
capital redemption reserve     06  06  
own shares     56 58 
hedging reserve     23 40 
retained earnings     2281  2162 
equity attributable to owners of the company     2497  2359  
noncontrolling interests     04 03
total equity     2493  2356 
the consolidated financial statements of morgan sindall group plc company number 00521 970 were approved by the board and authorised for issue on  
1 9 february 201 3 and signed on its behalf by
john morgan david mulligan
chief executive finance director
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
consolidated balance sheet
70
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 consolidated cash flow statement
for the year ended 31 december 201 2
     2012  2011  
    notes £m £m
profit from operations for the year     352  408  
adjusted for    
 amortisation of fixed life intangible assets    3 10 29  39  
 share of net profit of equity accounted joint ventures    1 3 57 03 
 depreciation of property plant and equipment    3 1 1 65  95  
 expense in respect of share options    27 02  05  
 defined benefit obligation payment    20 07 07 
 defined benefit obligation charge    20 01  01  
 gain on disposal of interests in joint ventures    1 3 88 –  
 gain on disposal of property plant and equipment    3 06 10 
 revaluation of investment properties    1 2 05  02  
 movement in fair value of shared equity loan receivables    14 02 09 
operating cash flows before movements in working capital     294  539 
net increase in investment properties    1 2 07 70 
increase in shared equity loan receivables    14 15 49 
redemptions of shared equity loan receivables    14 01  03  
increase in inventories     109 32 
decreaseincrease in receivables     108  75 
increase in noncurrent provisions    22 25  66  
decrease in payables and shortterm provisions     784 412
movements in working capital     781 569
cash utilised in operations     487 30
income taxes paid     81 68 
interest paid     30 20
net cash outflow from operating activities     598 118
cash flows from investing activities    
interest received     22  14  
dividend from joint ventures    1 3 13  03  
proceeds on disposal of property plant and equipment     16  46  
purchases of property plant and equipment     40 54 
net payments to acquire or increase interests in joint ventures    1 3 70 63 
proceeds on disposal of interests in joint ventures     262  –  
payments for the acquisition of subsidiaries and other businesses    26 01 04
net cash inflowoutflow from investing activities     202  58
cash flows from financing activities    
dividends paid    8 178 178 
repayments of obligations under finance leases     11 43
net cash outflow from financing activities     189 221
net decrease in cash and cash equivalents     585 397 
cash and cash equivalents at the beginning of the year     1089  1486 
cash and cash equivalents at the end of the year    
bank balances and cash     504  1089 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
consolidated cash flow statement
71
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 consolidated statement of changes in equity
for the year ended 31 december 201 2
 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 201 1 22  267  06  59 3 1  2014  2219  02 2217 
total comprehensive income for the year          
net profit –  –  –  –  –  329  329  0 1  328  
other comprehensive income          
deferred tax on defined benefit  
 obligation note 21  –  –  –  –  –  0 1  0 1  –  0 1  
movement on cash flow hedges in  
 equity accounted joint ventures note 1 3 –  –  –  – 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  0 1  318 
sharebased payments note 27 –  –  –  –  –  05  05  –  05  
exercise of share options note 27 –  – –  0 1  – 0 1  –  –  –  
movement on deferred tax asset on  
 sharebased payments note 21  –  – –  –  –  06 06 –  06 
dividends paid          
second interim dividend for 2010 note 8 –  –  –  –  –  1 27 1 27 –  1 27 
interim dividend for 201 1 note 8 –  –  –  –  –  5 1  5 1  –  5 1 
balance at 31 december 201 1 22  267  06  58 40 2162  2359  03 2356 
balance at 1 january 2012 22  267  06  58 40 2162  2359  03 2356 
total comprehensive income for the year          
net profit –  –  –  –  –  308  308  0 1  307  
other comprehensive income          
actuarial loss arising on defined  
 benefit obligation note 20 –  –  –  –  –  08 08 –  08 
deferred tax on defined benefit  
 obligation note 21  –  –  –  –  –  0 1  0 1  –  0 1  
movement on cash flow hedges  
 in equity accounted joint ventures note 1 3 –  –  –  –  04 –  04 –  04 
reclassification adjustments for gains  
 included in profit note 1 3 –  –  –  –  2 1  –  2 1  –  2 1 
total comprehensive income for  
 the year  net of income tax –  –  –  –  17  30 1  318  0 1 317 
sharebased payments –  –  –  –  –  02  02  –  02  
exercise of share options note 27 –  –  –  02  –  02 –  –  –  
movement on deferred tax asset on  
 sharebased payments note 21  –  –  –  –  –  04 04 –  04 
dividends paid –  –  –  –  –  –  –  –  –  
final dividend for 201 1 note 8 –  –  –  –  –  1 27 1 27 –  1 27 
interim dividend for 201 2 note 8 –  –  –  –  –  5 1  5 1  –  5 1 
balance at 31 december 2012 22  267  06  56 23 228 1  2497  04 2493 
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 t rust the ‘trust’ to satisfy options under the group’s share incentive schemes
the number of shares held by the t rust at 31 december 201 2 was 723970 201 1  77671 4
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 cumulative movements recognised through the hedging reserve are recycled through the income statement on disposal of  
the associated joint ventures
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
consolidated statement of changes in equity
72
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 reporting entity
morgan sindall group plc the ‘company’ is domiciled and incorporated in  
the united kingdom the nature of the group’s operations and its principal 
activities are set out in note 2 and in the directors’ report business review  
on pages 4 to 42
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 32 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 £0 1m
d adoption of new and revised standards
i new and revised accounting standards adopted by the group
during the year  the group has adopted the following new and revised 
standards and interpretations their adoption has not had any significant 
impact on the amounts reported in these financial statements
 i amendment to ifrs 7 ‘disclosure – transfer of financial assets’ ifrs 7 has 
been amended such that enhanced disclosures are required for transactions 
involving the transfer of financial assets the group has not transferred 
any financial assets during the current year and accordingly no additional 
disclosures have been included in these financial statements
ii new and revised accounting standards and interpretations which  
were in issue but were not yet effective and have not been adopted early 
by the group
at the date of publishing these financial statements the following new  
and revised standards and interpretations were in issue but were not yet 
effective and in some cases had not yet been adopted by the eu none  
of these new and revised standards and interpretations have been adopted 
early by the group
 i annual improvements to ifrss 2009 201 1 cycle
 i ifrs 1 amended ‘severe hyperinflation and removal of fixed dates  
for first time adopters’
 i ifrs 1 amended ‘government loans’
 i ifrs 7 amended ‘disclosure – offsetting financial assets and  
financial liabilities’
 i ifrs 9 ‘financial instruments’
 i ifrs 10 ‘consolidated financial statements’
 i ifrs 10 amended ‘investment entities’
 i ifrs 1 1 ‘joint arrangements’
 i ifrs 1 2 ‘disclosures of interests in other entities’
 i ifrs 1 2 amended ‘investment entities’
 i ifrs 1 3 ‘fair value measurement’
 i ias 1 amended ‘presentation of items of other comprehensive income’
 i ias 1 2 amended ‘deferred t ax recovery of underlying assets’
 i ias 1 9 revised ‘employee benefits’
 i ias 27 revised ‘separate financial statements’
 i ias 27 amended ‘investment entities’
 i ias 28 revised ‘investments in associates and joint ventures’
 i ias 32 amended ‘offsetting financial assets and liabilities’
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
 i ifrs 1 1 will impact both the measurement and disclosure of joint 
arrangements
 i ifrs 1 2 will impact the disclosure of the interests the group has in  
other entities
 i ifrs 1 3 will impact the measurement of fair value for certain assets  
and liabilities as well as the associated disclosures
 i ias 1 2 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
 i ias 1 9 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
e 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
significant accounting policies
for the year ended 31 december 201 2
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
73
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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
 i 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 judgment 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
 i 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 judgment is required to determine  
which items are disclosed as nonrecurring inclusion within this category  
is restrictive and is applied consistently to oneoff costs and oneoff gains
 i 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 judgment 
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
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
 i 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
 i tax 
judgments are required in establishing the group’s liability to pay taxes 
where tax positions are uncertain
 i recognition and measurement of intangible assets 
the group recognises certain intangible assets in respect of other contracts 
and related relationships 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
 i 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 
t esting 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 10
 i 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
 i 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 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 1 4 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 as other gains and losses
 i 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
significant accounting policies
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
74
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120  i 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 20
 i 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 noncontrolling 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 t ypically 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 acquisitionby
acquisition 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 statement of 
comprehensive income
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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
75
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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  this is 
measured through an internal assessment of work carried out based on time 
incurred and materials utilised or percentage of completion depending upon 
the nature of the service
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 ppp pfi 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
significant accounting policies
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
76
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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
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
h leases
the group as lessor
rental income from operating leases is recognised on a straight line basis  
over the term of the relevant lease initial direct costs incurred in negotiating 
and arranging an operating lease are expensed to the income statement  
as incurred
the group does not have any finance leases as lessor 
the group as lessee
i 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
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
ii operating leases
rentals payable under operating leases are charged to the income statement 
on a straight line basis over the term of the relevant lease
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
t axable 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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
77
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 1 998 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 prorata 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 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
ii 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 straight line basis and removed when expired
the estimated useful lives for the group’s finite life intangible assets are
 i other contracts and related relationships 1– 1 2 years
 i 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 straight line method on the 
following basis
 i plant machinery and equipment  between 83 and  
33 per annum
 i freehold property 2 per annum
 i leasehold property  over the period  
of the lease
significant accounting policies
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
78
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 the loan term  10 or 25 years 
depending upon the scheme 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
t rade 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 
short term 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 
t rade payables are recognised initially at fair value and are subsequently 
measured at amortised cost using the effective interest rate method
retirement benefit schemes
a defined contribution plan
a defined contribution plan is a post retirement 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 post retirement 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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
79
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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 straight line 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
sharebased payments
the group issues equitysettled 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
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
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
significant accounting policies
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
80
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
1 revenue
an analysis of the group’s revenue is as follows
     2012  2011  
     £m £m
revenue from construction contracts     20215  22030  
revenue from professional services     234  197  
equipment leasing income     16  35  
property rental income note 1 2     06  04 
total revenue as stated in the consolidated income statement     20471  22266 
finance income note 6     23  16 
total revenue      20494  22282 
2 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
 i construction and infrastructure offers national design construction and infrastructure services to private and public sector clients the division works on 
projects and frameworks of all sizes across a broad range of sectors including commercial defence education energy healthcare industrial leisure retail 
transport and water 
 i fit out specialises in fit out and refurbishment projects in the commercial and government office education retail technology and leisure markets  
overbury operates as a national fit out company through multiple procurement routes and morgan lovell specialises in the design and build of offices
 i affordable housing specialises in the design and build refurbishment and maintenance of homes and the regeneration of communities across the uk  
the division operates a full mixedtenure model creating homes for rent shared ownership and open market sale
 i urban regeneration works with landowners and public sector partners to unlock value from under developed assets to bring about sustainable regeneration 
and urban renewal through the delivery of mixeduse projects t ypically projects create commercial retail residential leisure and public realm facilities
 i investments facilitates project development primarily in the public sector  by providing flexible financing solutions and development expertise the division 
covers 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 such  
as treasury management corporate tax coordination insurance management pension administration and company secretarial services the divisions are the  
basis on which the group reports its segmental information as presented below
2012 
 construction 
 and  affordable urban  group 
 infrastructure fit out housing regeneration investments activities eliminations total 
 £m £m £m £m £m £m £m £m
revenue external 1 168 1  4268  3858  623  4 1  –  –  2047  1  
revenue intersegment 0 1  100  –  –  –  –  10 1 – 
included in profitloss below 
 share of results of associates  
 and joint ventures after tax –  –  03 03  57  –  –  57 
profitloss from operations  
 before amortisation and  
 nonrecurring items 197  1 13  1 15  27  7 4  45 –  48 1  
amortisation of intangible  
 assets note 10 –  –  08 2 1 –  –  –  29 
nonrecurring items note 3 68 –  25 –  02 05 –  100
profitloss from operations 129  1 13  82 06 7 2 50 –  352 
 
net finance expense        10
  
profit before income tax expense         342 
  
during the year ended 31 december 201 2 and the year ended 31 december 201 1 inter segment sales were charged at prevailing market prices and 
significantly all of the group’s operations were carried out in the uk
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
82
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 2 business segments continued
2011
 construction  
 and  affordable urban  group   
 infrastructure fit out housing regeneration investments activities eliminations total 
 £m £m £m £m £m £m £m £m
revenue external 1267 8  4380  4623  566  19  –  –  22266  
revenue intersegment 02  7 0  32  –  –  –  104 – 
included in profitloss below 
share of results of associates  
 and joint ventures after tax –  –  0 1  12 16  –  –  03 
profitloss from operations  
 before amortisation and  
 nonrecurring items 21 1  1 24  185  39  39 59 –  46 1  
amortisation of intangible  
 assets note 10 –  –  09 30 –  –  –  39 
nonrecurring items note 3 14 –  –  –  –  –  –  14
profitloss from operations 197  1 24  1 7 6  09  39 59 –  408
 
net finance expense        08
  
profit before income tax expense        400
  
2012 
 construction  
 and  affordable urban  group  
 infrastructure fit out housing regeneration investments activities total 
 £m £m £m £m £m £m £m
goodwill 151 1  –  468  160  –  –  2139  
other intangible assets –  –  28  65  –  –  93  
equity accounted joint ventures –  –  03  415  204  –  622  
other assets 382 1  1232  2002  503  25  926 6657 
total assets 5332  1232  250 1  1 143  229  926 951 1 
total liabilities 4038 1018 1258 517 178 09 7018 
other information        
amortisation of intangible assets note 10 –  –  08  2 1  –  –  29  
depreciation note 1 1  43  07  07  0 1  –  07  65  
property plant and equipment  
 additions note 1 1  38  05  02  –  0 1  13  59
2011 
 construction  
 and  affordable urban  group  
 infrastructure fit out housing regeneration investments activities total 
 £m £m £m £m £m £m £m
goodwill 1 51 1  –  468  162  –  –  214 1 
other intangible assets –  –  36  89  –  –  1 25 
equity accounted joint ventures –  –  –  269  229  –  498 
other assets 4362  1052  2218  316  109 632 7207 
total assets 587 3  1052  2722  836  1 20  632 997  1 
total liabilities 4484 835 1 753 267 1 7 5 10 1  7615 
other information        
amortisation of intangible assets note 10 –  –  09  30  –  –  39  
depreciation note 1 1  58  08  2 1  02  –  06  95  
property plant and equipment  
 additions note 1 1  3 1  05  24  –  –  06  66 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
83
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
3 profit for the year
profit before income tax expense for the year is stated after chargingcrediting
     2012  2011  
     £m £m
nonrecurring items see below     100  14  
depreciation of property plant and equipment note 1 1      65  95  
gain on disposal of plant property and equipment      06 10 
staff costs note 5     3417  3784  
amortisation of intangible assets note 10     29  39  
decrease in fair value of investment property note 1 2     05  02  
government grants     33  08  
increasedecrease in provision for impairment losses on trade receivables note 29     26  03 
auditor’s remuneration for audit and other services see below     08  10 
a more detailed analysis of nonrecurring items is provided below
     2012  2011  
     £m £m
integration costs     –  14  
reorganisation costs     100  – 
total nonrecurring items     100  14 
total nonrecurring items post income tax     76  10 
in response to market conditions the group undertook a reorganisation during 201 2 the nonrecurring items relate to the cost of reorganising its network  
of offices and comprise redundancy and property related costs in 201 1 nonrecurring items were incurred in merging the construction and infrastructure 
services divisions
in 201 1 there was also a nonrecurring credit to the tax charge of £28m note 7
a more detailed analysis of auditor’s remuneration is provided below
     2012  2011  
     £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     06  08 
total audit fees     07  09 
other services     01  01 
total nonaudit fees     01  01 
total auditor’s remuneration     08  10 
4 employees
the average monthly number of people employed by the group during the year was
     2012  2011  
     no no
construction and infrastructure     3661  3899  
fit out     605  596  
affordable housing     1975  2136  
urban regeneration     52  50  
investments     68  40  
group activities     23  23 
     6384  6744 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
84
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 5 staff costs
     2012  2011  
     £m £m
wages and salaries     3016  3354  
social security costs     313  334  
other pension costs note 20     88  96 
     3417  3784 
6 finance income and costs
     2012  2011  
     £m £m
interest income on bank deposits     05  02  
other interest income     03  05  
interest receivable from joint ventures     15  09 
finance income     23  16 
interest payable on bank overdrafts and borrowings     23 07 
interest payable on finance leases     03 05 
loan arrangement and commitment fees     07 12
finance costs     33 24
net finance costs     10 08
7 income tax expense
     2012  2011  
     £m £m
current tax expensecredit 
uk corporation tax     54  100  
adjustment in respect of prior years as set out below     08 251
     46  151
deferred tax creditexpense  
current year     13 10 
adjustment in respect of prior years as set out below     02  233 
     11 223 
income tax expense for the year     35  72 
corporation tax is calculated at 245 201 1  265 of the estimated assessable profit for the year 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
85
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
7 income tax expense continued
the total tax charge for the year of £35m is lower than the standard rate of corporation tax in the uk of 245 201 1 265  
the difference can be reconciled as follows
     2012  2011  
     £m £m
current tax expense  
profit before tax     342  400  
less posttax share of profits from joint ventures     57 03
     285  397  
uk corporation tax rate     245 265 
income tax expense at uk corporation tax rate     70  106  
 
tax effect of     
gain on disposal of equity accounted joint ventures not giving rise to a tax liability     22 –  
expenses that are not deductible in determining taxable profits     09  03  
agreement with hmrc see below     –  28 
other adjustments in respect of prior years     06 05 
other effect of expected forthcoming change in tax rates upon closing deferred tax balance    15 01 
other     01 03
income tax expense for the year     35  72 
effective tax rate for the year     123 181
the low effective tax rate for 201 2 arises primarily as a result of there being no expected tax liabilities upon the gains on disposals of investments during the year  
together with the effect of revaluing the deferred tax liabilities to reflect changes in the statutory rate of corporation tax from 25 to 23 after adjusting for 
these two items the tax charge is approximately equal to tax at the uk corporation tax rate on profit before tax excluding joint venture profit which is reported 
after tax
during 201 1 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 gave rise to a net £28m reduction in the 201 1 tax charge
8 dividends
amounts recognised as distributions to equity holders in the year   
     2012  2011  
     £m £m
final dividend for the year ended 31 december 201 1 of 300p  
 2010 second interim dividend 300p per share     127  127  
interim dividend for the year ended 31 december 201 2 of 1 20p 201 1 1 20p per share    51  51 
     178  178 
proposed dividend
     £m £m
proposed final dividend for the year ended 31 december 201 2 of 1 50p  
 201 1 final dividend of 300p per share     64  128 
the proposed final dividend of 1 50p 201 1  final 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 24 may 201 3 to shareholders on the register at 3 may 201 3 
the exdividend date will be 1 may 201 3
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
86
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 9 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
     2012  2011  
    notes £m £m
earnings 
earnings before tax     342  400  
deduct tax expense per the income statement    7 35 72 
noncontrolling interests     01  01 
earnings for the purposes of basic and dilutive earnings per share  
 being net profit attributable to owners of the company     308  329  
add back    
amortisation expense    3 10 29  39 
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    337  368 
     2012  2011  
     no ‘000s no ‘000s
number of shares 
weighted average number of ordinary shares for the purposes of basic earnings per share    42497  42442  
effect of dilutive potential ordinary shares       
 share options     238  204  
 conditional shares not vested     45  357 
weighted average number of ordinary shares for the purposes of diluted earnings per share    42780  43003 
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 £641 201 1  £630
earnings per share as calculated in accordance with ias 33 ‘earnings per share’ are disclosed below
     2012  2011 
basic earnings per share     725p 775p 
diluted earnings per share     720p 765p
earnings per share adjusted for amortisation expense 
     2012  2011 
basic earnings per share adjusted for amortisation expense      793p 867p 
diluted earnings per share adjusted for amortisation expense     788p 856p
a total of 1030688 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 201 2 201 1  231 1976
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
87
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
10 goodwill and other intangible assets
 other intangible assets 
  
   other   
   contracts and  total other  
   related noncompete intangible  
   relationships agreements assets goodwill 
   £m £m £m £m
cost or valuation       
balance at 1 january 201 1   307  58  365  2233  
additions in the year   09  –  09  –  
disposals during the year   16 50 66 02
balance at 31 december 201 1   300  08  308  223 1 
balance at 1 january 2012   300  08  308  223 1  
disposals during the year   09 –  09 02
balance at 31 december 2012   29 1  08  299  2229 
accumulated amortisation     
balance at 1 january 201 1   147 52 199 90 
amortisation charge for the year   36 03 39 –  
disposals during the year   05  50  55  – 
balance at 31 december 201 1   1 7 8 05 183 90
balance at 1 january 2012   178 05 183 90 
amortisation charge for the year   26 03 29 –  
disposals during the year   06  –  06  – 
balance at 31 december 2012   198 08 206 90
carrying amount     
carrying amount at 31 december 2012   93  –  93  2139  
carrying amount at 31 december 201 1   1 22  03  1 25  214 1 
other contracts and related relationships arise from valuing the relationship with a number of clients where there is a secured pipeline of work or historical 
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 201 9
goodwill represents the value of people track record and expertise acquired within acquisitions that are not capable of being individually identified and separately 
recognised goodwill is allocated at acquisition to the cashgenerating units that are expected to benefit from the business combination each of the operating 
segments disclosed in note 2 represents a single cashgenerating unit
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired in testing goodwill and other 
intangible assets for impairment the recoverable amount of each cashgenerating unit has been determined from value in use calculations the key assumptions 
for the value in use calculations are those regarding the forecast revenue and margin discount rates and longterm growth rates by market sector  forecast 
revenue and margin are based 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 
cash flow forecasts have been determined by using board approved budgets for the next three years cash flows beyond three years have been extrapolated 
using an estimated nominal growth rate of 24 201 1  23 this growth rate does not exceed the longterm average for the relevant markets
discount rates are pretax and reflect the current market assessment of the time value of money and the risks specific to the cashgenerating units  
the riskadjusted nominal rates used are 1 2 201 1  1 2 for construction and infrastructure 1 3 201 1  1 3 for affordable housing and 1 5  
201 1  1 5 for urban regeneration 
in carrying out this exercise no impairment of goodwill or other intangible assets has been identified
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
88
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 1 1 property plant and equipment
  owned plant leased plant    
  machinery machinery freehold   
  and and property and leased  
  equipment equipment land property total 
  £m £m £m £m £m
cost      
balance at 1 january 201 1  463  1 28  24  94  709  
additions in the year  54  –  –  12  66  
transfers  0 1  0 1  –  –  –  
disposals during the year  1 36 48 –  06 190
balance at 31 december 201 1  382  7 9  24  100  585 
balance at 1 january 2012  382  7 9  24  100  585  
additions in the year  29  19  –  1 1  59  
transfers  03  03 –  –  –  
disposals during the year  1 10 –  –  3 1  14 1 
balance at 31 december 2012  304  95  24  80  503 
accumulated depreciation      
balance at 1 january 201 1  33 1  42 –  58 43 1  
depreciation charge for the year  7  1  12 –  12 95 
transfers  0 1  0 1  –  –  –  
disposals during the year  1 18  33  –  06  1 57 
balance at 31 december 201 1  285 20 –  64 369
balance at 1 january 2012  285 20 –  64 369 
depreciation charge for the year  47 06 –  12 65 
transfers  03 03  –  –  –  
disposals during the year  106  –  –  26  1 32 
balance at 31 december 2012  229 23 –  50 302
net book value      
net book value at 31 december 2012  7 5  7 2  24  30  20 1  
net book value at 31 december 201 1  97  59  24  36  216 
within the carrying value of property plant and equipment there are no assets under construction 201 1  £nil
contractual commitments for the acquisition of property plant and equipment are £nil 201 1  £nil
the group’s obligations under finance leases are secured by the lessor’s title to the leased assets which have a carrying amount of £7 2m 201 1  £59m  
no other assets have been pledged to secure borrowings
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
89
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
12 investment property
     2012  2011  
     £m £m
valuation 
at 1 january      111  43  
additions in the year     08  70  
revaluation in the year     05 02 
disposals in the year     01 – 
at 31 december     113  11 1 
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 property rental income earned by the group from its investment property which is leased out under operating leases with terms of between six months  
and two years amounted to £06m 201 1  £04m direct operating expenses arising on properties generating rent and vacant properties in the year amounted 
to £0 1m 201 1  £02m 
all operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew the lessee does not have an option to 
purchase the property at the expiry of the lease period at the balance sheet date the group had contracted with tenants for future minimum lease payments  
of £0 1m 201 1  £03m all of which was receivable within one year  the average committed lease term is 2 1 months 201 1  54 months 
the group does not have any contractual obligations for the repairs or maintenance of its investment properties
the fair value of the group’s investment property at 31 december 201 2 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 fair value 
measurement is classified as level 2 as defined by ifrs 7 ‘financial instruments disclosures’
13 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 
bromley park limited 50 share
bromley park limited is a joint venture with t aylor 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 roads limited and is responsible for the upgrade and operation of the a92 
between dundee and arbroath in scotland
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 
hb community solutions holdco limited 50 joint control
hb community solutions holdco limited is a joint venture with hb villages limited and is developing supported living solutions for disabled adults across the 
united kingdom joint control is exercised through the board of directors which includes two members from each of the joint venture partners
hub west scotland limited 33⅓ share
hub west scotland limited is a joint venture between wellspring partnership limited a subsidiary of morgan sindall investments limited scottish futures t rust 
east dunbartonshire council east renfrewshire council west dunbartonshire council greater glasgow health board and clydebank property company limited 
the joint venture is delivering a pipeline of public sector health and education projects in the glasgow area
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
90
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 13 investments in equity accounted joint ventures continued
hull esteem consortium psp limited 33⅓ share
hull esteem consortium psp limited is the private sector investor in the hull bsf scheme with nine schools currently in operation three under construction  
and with a pipeline of a further three the other investors in this company are robertson capital projects investments limited sewell education hull bsf limited 
and hull city council
isis waterside regeneration 50 equity participation
the group increased its stake in isis waterside regeneration which is a limited partnership between british waterways and warp 4 limited partnership  
a subsidiary of muse developments limited during the year from 25 to 50 the partnership is to undertake regeneration of waterside sites 
lewisham gateway developments limited
lewisham gateway developments limited was a joint venture with t aylor wimpey and is redeveloping a mixeduse site comprising retail office hotel residential 
education health and leisure space on 20 december 201 2 this joint venture became a wholly owned subsidiary of the group note 26
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
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
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
t aycare 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 t ayside 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
     2012  2011  
     £m £m
at 1 january      498  454  
equity accounted share of net profits for the year     57  03  
increase in investment     287  60  
investment repayment     29 –  
disposals see below     169 09 
dividends received     18 03 
movement on cash flow hedges     04 07
at 31 december     622  498 
additions
the increase in investments in joint ventures during the year was mainly due to an additional equity investment in isis waterside regeneration partnership of 
£185m on 22 november 201 2 which increased the group’s interest in the joint venture from 25 to 50 and additional debt investment of £47m in t aycare 
health holdings limited £27m in renaissance miles platting limited and £24m in hb community solutions holdco limited
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
91
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
13 investments in equity accounted joint ventures continued
disposals
the disposals of investments in joint ventures principally relate to the three following transactions
i on 16 february 201 2 the group sold its 335 holding in the dorset fire and rescue pfi project for cash consideration of £38m the gain on disposal  
was £18m
ii on 20 july 201 2 the group sold its nhs lift and medical properties interests in community solutions investment partners limited and cspc 3pd limited 
both equity accounted joint ventures in which the group held a 50 share for cash consideration of £239m the gain on disposal was £7 0m comprising a gain 
of £9 1m in respect of the investments and a loss of £2 1m in respect of the hedging reserve which was recycled to the income statement the transaction costs 
were £15m 
the disposals are in line with the group’s strategy of realising investments as they mature in order to redeploy capital into new projects
iii on 20 december 201 2 the group through its subsidiary muse developments limited acquired from t aylor wimpey uk limited its 50 interest in the  
jointly owned lewisham gateway developments limited for £04m as a result of the transaction muse developments limited now owns the entire issued  
share capital of lewisham gateway developments limited this transaction has been accounted for as a step acquisition under ifrs 3 ‘business combinations’ 
and accordingly is shown as a disposal of an investment in a joint venture further details of the acquisition are included in note 26
the group’s share of the results of all of these joint ventures up to the dates of their disposal is included within the investments operating segment as the criteria 
to be included as discontinued operations were not met
of the dividends received in the year  £13m 201 1  £03m were paid in cash and £05m 201 1  £nil were dividends in specie
financial information related to equity accounted joint ventures
     2012  2011  
     £m £m
noncurrent assets 100     4865  4762  
current assets 100     2288  3637  
current liabilities 100     818 1342 
noncurrent liabilities 100     5196 5745
net assets reported by equity accounted joint ventures 100     1139  1312 
revenue 100     1980  969  
expenses 100     1850 966
net profit 100     130  03
results of equity accounted joint ventures
     2012  2011  
     £m £m
group share of profit before tax     69  18  
group share of income tax expense     12 15
group share of profit after tax     57  03 
commitments in respect of interests in joint ventures
     2012  2011  
     £m £m
commitment to provide further equity and subordinated debt to pfippp joint ventures     23  74 
     23  74 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
92
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 14 shared equity loan receivables
     2012  2011  
     £m £m
balance at 1 january      176  139  
additions arising from the sale of properties     15  49  
net change in fair value recognised in the income statement     02  09 
repayments     01 03
balance at 31 december      192  176 
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 the net change in fair value shown above includes accreted interest
during the year  there were repayments of shared equity loan receivables of £0 1m 201 1  £03m 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 the group’s credit risk is partially mitigated  
as the shared equity loan receivables are secured by way of a second charge over the property the change in the fair value attributable to a change in the credit 
risk during the year was £02m 201 1  £nil there was one default during the year 201 1  no defaults 
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
     2012  2011 
assumption    
period over which shared equity loan receivables are discounted – first buy and home buy schemes    25 years 25 years 
period over which shared equity loan receivables are discounted – other schemes     7 years 7 years 
weighted average nominal annual property price increase      25 25 
nominal discount rate applied to initial shared equity loan receivable     64 58 
rate of delinquency assumed in valuation of shared equity loan portfolio     10 – 
at 31 december 201 2 a total of 730 201 1  618 properties had been sold under the shared equity scheme for which a loan was outstanding at the year end
at 31 december 201 2 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 24 201 1  24 the maximum loan contribution by the group under the shared equity scheme is 25 201 1  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 201 2 if the nominal interest rate had been 1 1 higher at 7 5 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 201 2 if the period over which the shared equity loan receivables excluding those relating to the first buy and home buy schemes 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 £20m with a corresponding reduction in both the result for the year and equity
15 inventories
     2012  2011  
     £m £m
work in progress     1594  1460 
work in progress comprises land and housing commercial and mixed developments in the course of construction
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
93
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
16 trade and other receivables
     2012  2011  
     £m £m
trade receivables note 29     1735  1682  
provision for impairment losses note 29     35 09
     1700  1673  
amounts owed by joint ventures note 28     55  36  
prepayments     55  64  
other receivables     66  92 
     1876  1865 
the directors consider that the carrying amount of trade and other receivables approximates to their fair value
the average credit period on revenue is 18 days 201 1  1 5 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 £560m 201 1  £47 0m 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 1 78 days 201 1  161 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 201 1  £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
17 construction contracts
     2012  2011  
     £m £m
amounts due from construction contract customers     2173  2286  
amounts due to construction contract customers     474 788
carrying amount at the end of the year     1699  1498  
contract costs incurred plus recognised profits less recognised losses to date     91558  92277  
less progress billings     89859 90779
     1699  1498 
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 historical 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 201 2 retentions held by customers for contract work amounted to £537m 201 1  £584m these will be recovered in the normal operating 
cycle of the group
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
94
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 18 trade and other payables
     2012  2011  
     £m £m
trade payables     1702  1823  
amounts owed to joint ventures note 28     07  08  
other tax and social security     140  113  
accrued expenses     3567  4096  
deferred income     73  –  
other payables     232  169 
     5721  6209 
t rade 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 
201 1  28 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 £229m 201 1  £03m that fall due between two and five years this principally relates to the deferred 
consideration due on the additional equity investment in isis waterside regeneration partnership note 1 3
19 finance lease liabilities
 minimum lease capital element  
 payments of lease payments
 
 
 
 
   2012  2011 2012  2011  
   £m £m £m £m
amounts payable under finance leases     
within one year   16  10  12  08  
in the second to fifth years inclusive   52  41  47  35  
after more than five years   03  08  03  08 
   71  59  62  51  
less future finance charges   09 08 na na
present value of lease obligations   62  51  62  51 
     
current lease liability     12  08  
noncurrent lease liability     50  43 
     62  51 
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 201 1  six years for the year 
ended 31 december 201 2 the average effective borrowing rate was 5 201 1  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
20 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 1 995 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 £82m 201 1  £92m represents contributions payable to the defined contribution section of the plan by the group
as at 31 december 201 2 contributions of £10m 201 1  £09m 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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
95
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
20 retirement benefit schemes continued
ii local government pension schemes
the group makes contributions to a number of local government pension schemes ‘lgps’ for employees who have transferred to the group from other 
employers under tupe arrangements the assets of these plans are held separately from those of the group under the control of the trustees of the lgps  
the amount of any liabilities to fund these deficits on termination of the contractor admission agreement is capped at £02m 201 1  £02m the group 
accounts for these schemes as though they were defined contribution schemes the total cost charged to the income statement of £05m 201 1  £03m 
represents contributions payable to these lgps by the group
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 1 995 and benefits transferred in from the snape group limited retirement benefits scheme include accruals up to 1 august 1 997 no further 
defined benefit membership rights can accrue after those dates
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
     2012  2011  
      
key assumptions used 
discount rate     41  47  
expected return on the plan assets     35  38  
expected rate of salary increases     40  41  
future pension increases
a
     35  35  
inflation increases     30  31 
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 201 2 the s1nxa series of tables 31 december 201 1 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
     2012  2011 
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
     2012  2011 
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
     2012  2011  
     £m £m
present value of the plan liabilities     104 94 
fair value of the plan assets     89  81 
deficit in the plan liability recognised in the balance sheet     15 13
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
96
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 20 retirement benefit schemes continued
amounts recognised in the income statement in respect of the plan are as follows
     2012  2011  
     £m £m
interest cost     04 04 
expected return on the plan assets     03  03 
net periodic cost     01 01
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 £02m 201 1  £08m
movements in the present value of the plan liabilities were as follows
     2012  2011  
     £m £m
liabilities at 1 january     94 85 
interest cost     04 04 
actuarial loss     10 07 
benefits paid     04  02 
liabilities at 31 december     104 94
the liabilities in respect of pensions in payment account for around 30 of the total liabilities 201 1  35 the average term to retirement is 7 4 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 201 1  7 4 years and 63 years 201 1  63 years for deferred members
movements in the value of the plan assets were as follows
     2012  2011  
     £m £m
assets at 1 january     81  66  
expected return on the plan assets     03  03  
actuarial gain     02  07  
contributions from sponsoring company     07  07  
benefits paid     04 02
assets at 31 december     89  81 
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     17 21 
inflation rate       
effect on interest cost     –  –  
effect on the defined benefit obligation     09  08
expected rate of return on assets       
effect on the expected return on the plan assets     01  0 1
the sensitivities to the interest cost and expected return on assets shown above relate to the calendar year ending 31 december 201 3 the sensitivities to  
the defined benefit obligation relate to the liability as at 31 december 201 2
     2012  2011  
     £m £m
actuarial loss recognised in the statement of comprehensive income     08  –  
cumulative actuarial loss recognised in the statement of comprehensive income     38  30 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
97
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
20 retirement benefit schemes continued
the plan assets and the expected rate of return at the balance sheet date were as follows
 fair value of assets expected return
 
 
 
 
   2012  201 1  2012  2011  
   £m £m  
fixed interest gilts   41  41  30  30  
corporate bonds   46  39  41  47  
other assets   02  01  20  20 
   89  81   
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 the group and does not hold any property or other assets used by the group
the history of experience adjustments is as follows
  2012  201 1  2010  2009  2008  
  £m £m £m £m £m
present value of the plan liabilities  104 94 85 89 80 
fair value of the plan assets  89  8 1  66  57  50 
deficit in the plan  15 13 19 32 30
experience adjustments on the plan liabilities       
amount  10 07 06  08 02  
percentage of the plan liabilities  95 77 67 89 19 
experience adjustments on the plan assets       
amount  02  07  02  02  03 
percentage of the plan assets  26 93 36 26 66
the amount of contributions expected to be paid to the plan during 201 3 is £07m 201 2 £07m
21 deferred tax
  noncurrent shortterm retirement share  
  asset timing benefit based  
  amortisation differences obligation payments total 
  £m £m £m £m £m
at 1 january 201 1  15  0 1  05  13  32  
charge to income statement  234 03 0 1  –  238 
charge to equity  –  –  0 1  05 06 
effect of change in tax rate       
 income statement  15  –  –  –  15  
 equity  –  –  –  0 1  0 1 
at 31 december 201 1  204 04 03  07  198
at 1 january 2012  204 04 03  07  198 
charge to income statement  02 0 1  0 1  –  04 
creditcharge to equity  –  –  0 1  04 03 
effect of change in tax rate       
 income statement  15  –  –  –  15 
at 31 december 2012  19 1 05 03  03  190
certain deferred tax assets and liabilities as shown above have been offset as the group has a legally enforceable right to do so 
at 31 december 201 2 the group had unused tax losses of £10m 201 1  £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 23 in april 201 3 affecting the closing deferred tax balances as shown above further reductions in the uk 
corporation tax rate to 21 are expected but not yet legislated the closing net deferred tax liability would reduce by £17m to £1 7 3m if these further expected 
changes were taken into account
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
98
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 22 provisions
current liabilities
    contract employee  
    provisions provisions total 
    £m £m £m
at 1 january 201 1    43  34  7 7  
utilised    31 –  31
at 31 december 201 1    12  34  46 
at 1 january 2012    12  34  46  
additions    –  05  05  
utilised    12 09 21
at 31 december 2012    –  30  30 
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 201 1   07  1 13  34  1 54  
utilised   –  18 08 26 
additions   –  32  66  98  
released   –  05 0 1  06
at 31 december 201 1   07  1 22  9 1  220 
at 1 january 2012   07  122  9 1  220  
utilised   –  25 09 34 
additions   –  32  38  7 0  
released   03 08 –  1 1 
at 31 december 2012   04  12 1  120  245 
employee provisions comprise obligations to former employees other than retirement or post retirement obligations 
insurance provisions comprise the group’s self insurance of certain risks and include £14m 201 1  £19m held in the group’s captive insurance company 
newman insurance company limited 
other provisions include onerous lease commitments and legal claims
the majority of the provisions are expected to be utilised within five years
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
99
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
23 operating lease commitments
     2012  2011  
     £m £m
minimum lease payments under operating leases recognised as an expense for the year    124  110 
at 31 december 201 2 the group had outstanding commitments for minimum lease payments under noncancellable operating leases which fall due  
as follows
 2012 2011
 
 
 
 
 land and   land and   
 buildings other total buildings other total 
 £m £m £m £m £m £m
within one year 68  4 1  109  60  16  7 6  
within two to five years 149  7  1  220  1 52  15  167  
after more than five years 34  –  34  19  –  19 
at 31 december 25 1  1 12  363  231  31  262 
operating lease payments represent rentals payable by the group for certain properties and other items other lease commitments increased during the year  
as a result of the group introducing a new car scheme 
leases are negotiated for an average term of four years 201 1  five years  and rentals are fixed for an average of four years 201 1  four years 
the total of future minimum sublease payments expected to be received under noncancellable subleases at 31 december 201 2 is £02m 201 1  £04m
24 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 201 2 contract bonds in issue under uncommitted facilities covered £1865m 201 1  £204 1m of contract commitments of the group
25 share capital
 2012 2011
 
 
 
 
   no ‘000s £’000s no ‘000s £’000s
issued and fully paid       
at the beginning of the year   43215  2160  43188  2159  
exercise of share options   10  –  27  1 
at the end of the year   43225  2 160  43215  2160 
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 timetotime 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
10 1 49 shares were issued during 201 2 in respect of options exercised under the company’s saye scheme for a total consideration of £58268 201 1  no shares 
were issued no shares were issued in respect of the company’s 1 995 scheme 201 1  27 01 9 shares for a total consideration of £135 1  all options exercised 
under the 1 995 scheme during the prior year were settled on a net basis
no other shares were issued during the year 
own shares
own shares at cost represent 723970 201 1  77671 4 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 t rust 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 201 2 of £5 1 5 201 1  £594 the market value of the shares was £3728446 201 1  £4554281 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
100
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 26 acquisition of investment from partner in a joint venture
on 20 december 201 2 the group through its subsidiary muse developments limited acquired from t aylor wimpey uk limited its 50 interest in the jointly 
owned lewisham gateway developments limited as a result of the transaction muse developments limited now owns the entire issued share capital of 
lewisham gateway developments limited the fair value of the consideration payable to t aylor wimpey uk limited for the purchase was £04m of this £0 1m 
was paid in cash during the year and the remaining consideration will be paid upon reaching specified project milestones there were no acquisitionrelated costs 
this transaction has been accounted for as a step acquisition under ifrs 3 ‘business combinations’ due to the proximity of the acquisition date to the balance 
sheet date the fair values assigned to the identifiable assets and liabilities acquired are provisional 
the provisional fair value of the group’s existing 50 interest in lewisham gateway development limited was £14m comprising equity of £12m and goodwill 
of £02m the directors determined that the provisional fair value of the preexisting interest in the joint venture was different from its previous carrying value  
of £17m which resulted in a loss on remeasurement of £03m 
the provisional fair values of the identifiable net assets of the whole of lewisham gateway developments limited were as follows
      fair value 
      £m
inventories      25  
other creditors      04
identifiable net assets      21 
on disposal of original interest
     intangible  
   equity goodwill asset total 
   £m £m £m £m
fair value   12  02  –  14  
book value   12 02 03 17
loss on remeasurement of original interest recognised in other gains and losses      03
on acquisition of controlling interest
      £m
fair value of original interest      14  
consideration      04 
      18  
fair value acquired      21
gain on a bargain purchase recognised in other gains and losses      03
the net effect on result for the year is as follows
      £m
loss on remeasurement of original interest      03 
gain on a bargain purchase      03 
      – 
lewisham gateway developments limited contributed revenue and profit of £nil for the period between the date of acquisition and the balance sheet date
if the acquisition had been completed on the first day of the financial year  group revenues for the period would have been £2047  1m and group profit before  
tax would have been £34 1m
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
101
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
27 sharebased payments
the group recognised a total remuneration expense of £02m 201 1  £05m related to equitysettled sharebased payment transactions the group has four 
share option schemes
 i the morgan sindall 1 995 executive share option scheme ‘the 1 995 scheme’ received shareholders’ approval on 24 may 1 995 all options outstanding  
were exercised or lapsed during 201 1
 i the morgan sindall employee share option plan 2007 ‘the esop 2007’ received approval from the board on 7 june 2007  the esop 2007 did not require 
shareholder approval because all options granted and to be granted under it will be settled with market purchased shares options granted under the esop 
2007 are exercisable between three and ten years from the date of grant the period for granting options under the esop 2007 expires on 6 june 201 7 
 i the morgan sindall executive remuneration plan ‘the 2005 plan’ details of which are disclosed in the directors’ remuneration report on pages 52 to 61
 i the morgan sindall savings related share option scheme ‘the saye scheme’ the saye scheme was approved by shareholders on 22 april 2008 and by 
hmrc on 9 may 2008 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 sixmonth period from the proceeds of a monthly savings contract over the relevant period the scheme 
is open to all employees with sixmonths’ continuous service at the invitation date no performance criteria are applied to the exercise of saye options the 
period for granting options under the saye scheme expires on 21 april 2018
the weighted average share price at the date of exercise for share options exercised during the year was £663 201 1  £7 08 the options outstanding at  
31 december 201 2 had a weighted average exercise price of £649 201 1  £609 and a weighted average remaining contractual life of 12 years 201 1  2 1 years 
share awards under the 2005 plan were granted on 21 may 201 2 the estimated fair value of the awards granted was £25m 201 1  £08m for options and 
£15m for share awards options were granted under the esop 2007 on 2 april 201 2 the estimated fair value of the options was £0 1m 201 1  £03m
a modified blackscholes model has been used to value the options under the esop 2007 and the share awards under the 2005 plan with eps and roce 
conditions a stochastic valuation model has been used to value the share awards under the 2005 plan with a tsr condition the inputs into these models  
are as follows
 share awards under 2005 plan
a
   
   options awards  awards awards 
   under 2007 with tsr with eps with roce 
   esop condition condition condition
2005 plan shares        
number of shares granted    40000   192522  192522  1 1 2693  
weighted average fair value at date of grant per share   £139 £450 £650 £650 
weighted average share price at date of grant   £678 £650 £650 £650 
expected term from date of grant   3 years 3 years 3 years 3 years 
expected volatility
b
   2920 2920 na na 
expected dividend yield
c
   000 000 000 000 
riskfree rate   040 040 na na
a
  on 21 may 201 2 385044 share awards were granted to group and divisional management under the 2005 plan of these 1 92522 had a tsr performance 
condition and 1 92522 had an eps performance condition on the same date 1 1 2693 share awards with a roce performance condition were granted to 
other divisional management 
b
  for the options under the 2007 esop and the share awards under the 2005 plan with tsr performance conditions this is assumed to be equal to historical 
volatility of the company’s share price over the period prior to grant equal in length to the expected term
c
  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 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
102
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 27 sharebased payments continued
the following tables provide a summary of the options granted under the group’s employee share option schemes during the current and comparative year 
2012 
 balance at end of year
    
 
     balance 
     at the       proceeds 
    exercise beginning options options options options   received £ 
  exercisable expiry price of year granted lapsed forfeited exercised in issue exercisable net of 
 grant date on or after date £ no no no no no no no settlements
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  32000  –  –  –  –  32000  32000  –  
 20 dec 07 20 dec 10 19 dec 17 1051  54000  –  –  –  –  54000  54000  –  
 15 apr 08 15 apr 1 1 14 apr 18 1003  50000  –  5000  –  –  45000  45000  –  
 27 may 08 27 may 11 26 may 18 992  50000  –  5000  –  –  45000  45000  –  
 28 oct 08 28 oct 11 27 oct 18 436  37 500  –  –  –  22500  15000  20000  96339  
 3 mar 09 3 mar 12 2 mar 19 535  94000  –  –  –  57 605  36395  36395  1 10467  
 28 may 09 28 may 12 27 may 19 636  761 10  –  161 10  –  –  60000  60000  –  
 17 mar 10 17 mar 13 16 mar 20 555  58000  –  –  –  –  58000  –  –  
 24 may 10 24 may 13 23 may 20 529  50000  –  –  –  –  50000  –  –  
 2 mar 1 1 2 mar 14 1 mar 21 658  195000  –  –  –  –  195000  –  –  
 30 mar 1 1 30 mar 14 29 mar 21 657  10000  –  –  –  –  10000  –  –  
 21 apr 1 1 21 apr 14 20 apr 21 686  30000  –  –  –  –  30000  –  –  
 24 may 11 24 may 14 23 may 21 690  20000  –  –  –  –  20000  –  –  
 2 apr 12 2 apr 15 1 apr 22 677  –  40000  –  –  –  40000  –  – 
2005 plan            
 20 may 05 20 may 08 19 may 15 7 24  318024  –  –  –  –  318024  318024  –  
 5 apr 06 5 apr 09 4 apr 16 1259  228752  –  –  –  –  228752  228752  –  
 30 mar 09 30 mar 12 29 mar 19 580  503018  –  503018  –  –  –  –  –  
 17 mar 10 17 mar 13 16 mar 20 555  630776  –  18192  –  –  612584  –  –  
 30 mar 1 1 30 mar 14 29 mar 21 657  325570  –  22893  –  –  302677  –  –  
 16 may 11 16 may 14 15 may 21 690  224536  –  –  –  –  224536  –  – 
2008 saye scheme            
 1 jul 08 1 sep 11 28 feb 12 7 02  887 435  –  883586  –  3849  –  –  27 020  
 27 sep 11 1 nov 14 1 may 15 496  1579342  –  –  209596  6300  1363446  –  31248 
total     5477 063  40000  1453799  209596  90254  3763414  862171  265074 
the 80 105 options exercised in the year 2007 scheme were settled by a distribution from the morgan sindall employee benefit trust
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
103
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
27 sharebased payments continued
2011 
 balance at end of year
    
 
     balance 
     at the       proceeds 
    exercise beginning options options options options   received £ 
  exercisable expiry price of year granted lapsed forfeited exercised in issue exercisable net of 
 grant date on or after date £ no no no no no no no settlements
1995 scheme            
 25 feb 04 25 feb 09 24 feb 1 1 420  10000  –  5819  –  4181  –  –  209  
 14 sep 04 14 sep 09 13 sep 1 1 438  60000  –  37 162  –  22838  –  –  1142 
2007 scheme            
 13 aug 07 13 aug 10 1 2 aug 17 1676  23000  –  –  –  –  23000  23000  –  
 24 sep 07 24 sep 10 23 sep 17 1581  37 000  –  5000  –  –  32000  32000  –  
 20 dec 07 20 dec 10 19 dec 17 1051  94000  –  40000  –  –  54000  54000  –  
 15 apr 08 15 apr 1 1 14 apr 18 1003  50000  –  –  –  –  50000  50000  –  
 27 may 08 27 may 1 1 26 may 18 992  50000  –  –  –  –  50000  50000  –  
 28 oct 08 28 oct 1 1 27 oct 18 436  42500  –  3998  –  1002  37 500  37 500  4365  
 26 nov 08 26 nov 1 1 25 nov 18 475  25000  –  15159  –  9841  –  –  46755  
 3 mar 09 3 mar 1 2 2 mar 19 535  94000  –  –  –  –  94000  –  –  
 28 may 09 28 may 1 2 27 may 19 636  90000  –  10003  –  3887  761 10  –  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 1 1 2 mar 14 1 mar 21 658  –  195000  –  –  –  195000  –  –  
 30 mar 1 1 30 mar 14 29 mar 21 657  –  10000  –  –  –  10000  –  –  
 21 apr 1 1 21 apr 14 20 apr 21 686  –  30000  –  –  –  30000  –  –  
 24 may 1 1 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 1 259  228752  –  –  –  –  228752  228752  –  
 9 apr 08 9 apr 1 1 8 apr 18 1039  309582  –  309582  –  –  –  –  –  
 16 jun 08 16 jun 1 1 15 jun 18 742  25048  –  25048  –  –  –  –  –  
 30 mar 09 30 mar 1 2 29 mar 19 580  503018  –  –  –  –  503018  –  –  
 17 mar 10 17 mar 13 16 mar 20 555  630776  –  –  –  –  630776  –  –  
 30 mar 1 1 30 mar 14 29 mar 21 657  –  325570  –  –  –  325570  –  –  
 16 may 1 1 16 may 14 15 may 21 690  –  224536  –  –  –  224536  –  – 
2008 saye scheme            
 1 jul 08 1 sep 1 1 28 feb 1 2 702  1020619  –  –  133184  –  887 435  887 435  –  
 27 sep 1 1 1 nov 14 1 may 15 496  –  1607 1 19  –  27 777  –  1579342  1814  – 
total     3724319  241 2225  456771  160961  41749  5477 063  1682525  77 204 
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
104
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 28 related party transactions
t ransactions between the company and its subsidiaries which are related parties have been eliminated on consolidation and are not disclosed in this note 
t ransactions 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 in relation to joint ventures are as follows
 provision of goods amounts owed byto 
 and services related parties
 
 
 
 
   2012  201 1  2012  2011  
   £m £m £m £m
joint venture 
claymore roads holdings limited   –  –  –  04  
community solutions investment partners limited
a
   17  21  –  03  
renaissance miles platting limited   01  01  –  –  
blue light holdings limited
a
   –  03  –  –  
ashton moss developments limited   –  –  01 02 
bromley park limited   –  –  06 06 
ecf general partner limited   14  20  –  –  
lewisham gateway developments limited
b
   –  –  –  02  
the compendium group limited   45  37  20  06  
access for wigan holdings limited   –  195  01  03  
hull esteem consortium psp limited   441  467  19  12  
st andrews brae developments limited   –  28  01  01  
taycare health holdings limited   02  –  01  –  
the bournemouth development company llp   01  01  13  05 
   521  773  48  28 
a
  during the year the group disposed of its interests in community solutions investment partners limited and bluelight holdings limited note 1 3
b
  in 201 2 lewisham gateway developments limited became a wholly owned subsidiary of the group note 26
  amounts owed byto 
  related parties
  
 
      2012  2011  
     £m £m
amounts owed by related parties note 16     55  36  
amounts owed to related parties note 18     07 08
     48  28 
in addition during the year  consultancy services were provided to the company by a wholly owned subsidiary of chime communications plc of which  
simon gulliford is a director  for an amount of £0 1m there were no amounts outstanding at the balance sheet date
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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
105
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 notes to the consolidated financial statements
28 related party transactions continued
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 implementation report section of the directors’ remuneration report on  
pages 52 to 61
     2012  2011  
     £m £m
emoluments     23  32  
social security contributions     04  04  
termination benefits     05  –  
postemployment benefits     02  02 
     34  38 
directors’ transactions
there have been no related party transactions with any director in the year or in the subsequent period to 1 9 february 201 3
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 1 9 february 201 3
29 financial instruments
cash and cash equivalents
cash and cash equivalents comprise cash in hand demand deposits and other short term 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 £294m 201 1  £354m which is the group’s share of cash held within jointly controlled operations
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 twiceyearly 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 
 i credit risk
 i liq u id i t y r i s k
 i m a rk e t ri s k 
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 201 2 were £537m 201 1  £584m
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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
106
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 29 financial instruments continued
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 post completion 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
the ageing of trade receivables at the reporting date was as follows
 2012 2011
 
 
 
 
    provision for  provision for 
   gross trade impairment gross trade impairment 
   receivables  losses  receivables  losses 
   £m £m £m £m
not past due   1 140  –  1203  –  
past due 1 to 30 days   207  –  191  –  
past due 31 to 1 20 days   92  04  76  02  
past due 1 21 to 365 days   52  09  38  01  
past due greater than one year   244  22  1 74  06 
   1735  35  1682  09 
the movement in the provision for impairment losses on trade receivables during the year was as follows
     2012  2011  
     £m £m
balance at beginning of the year     09  20  
amounts recovered during the year     –  08 
increasedecrease in provision recognised in the income statement     26  03
balance at 31 december     35  09 
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 201 2 201 1  £nil
the group does not have any material derivative or nonderivative financial liabilities with the exception of trade and other payables current tax liabilities finance 
lease liabilities and retirement benefit obligations t rade and other payables and current tax liabilities 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 trade and other payables are due to be 
settled in the group’s normal operating cycle an analysis of the maturity profile for finance lease liabilities is contained in note 1 9
the group reports cash balances daily and invests surplus cash to maximise income whilst preserving credit quality the group prepares weekly short term 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 £1 10m of committed loan facilities available until september 201 5
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
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
107
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 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
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 short term 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 £962m 201 1  £1 544m have fixed interest 
payments at an average rate of 479 201 1  455 for periods up until 2041
the group’s share of the fair value of swaps entered into at 31 december 201 2 by joint ventures is estimated at a £23m liability 201 1  £40m 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  
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
a construction project joint venture in which the group participates maintains 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 £24m 201 1  £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 value measurement is classified as level 2 as defined by ifrs 7 ‘financial instruments disclosures’
a 5 reduction in the value of the euro against sterling would result in a £0 1m reduction 201 1  £03m in the fair value of the contracts which would be shown 
in cash flow hedging reserve 
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 32
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 the consolidated statement of changes in equity the cash and cash equivalents are supplemented by the £1 10m  
of bank facilities which are committed until september 201 5
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
there were no significant subsequent events that affected the financial statements of the group
notes to the consolidated financial statements
group consolidated financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the consolidated financial statements
108
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 company financial statements
the company’s financial statements for  
the financial year ended 31 december 2012
1 1 2 independent auditor’s report
1 13 balance sheet
1 14 combined statement of movement  
in reserves and shareholders’ funds
1 15 significant accounting policies
1 1 7 notes to the company financial statements
1 23 shareholder information
morgan sindall group plc annual report and accounts 201 2 
company financial statements
109
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
we have audited the parent company financial statements of morgan sindall 
group plc for the year ended 31 december 201 2 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 1 2 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 t o 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
 i give a true and fair view of the state of the company’s affairs as at  
31 december 201 2 and of its loss for the year then ended
 i have been properly prepared in accordance with united kingdom generally 
accepted accounting practice
 i 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
 i the part of the directors’ remuneration report to be audited has been 
properly prepared in accordance with the companies act 2006
 i 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
 i 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
 i 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
 i certain disclosures of directors’ remuneration specified by law are not made
 i 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 201 2
mark beddy
senior statutory auditor 
for and on behalf of deloitte llp 
chartered accountants and statutory auditor 
london united kingdom 
1 9 february 201 3
independent auditor’s report
to the members of morgan sindall group plc
company financial statements
morgan sindall group plc annual report and accounts 201 2 
independent auditor’s report
110 company balance sheet
at 31 december 201 2
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
     2012  2011  
    notes £m £m
fixed assets       
tangible assets    2  12  08  
investments    3  3741  3741 
     3753  3749 
current assets       
trade debtors     01  01  
amounts owed by subsidiary undertakings       
– due within one year     524  467  
– due after one year     190  190  
other debtors     03  11  
prepayments and accrued income     11  15  
deferred tax asset    4  06  11  
cash at bank and in hand     01  602 
     736  1297 
creditors amounts falling due within one year       
bank overdraft     1003 1287 
trade creditors     10 19 
amounts owed to subsidiary undertakings     2278 2266 
corporation tax payable     22 28 
other tax and social security     01 08 
other creditors     12 07 
accruals     25 62
     3351 3677
net current liabilities     2615 2380
total assets less current liabilities     1138  1369 
creditors amounts falling due after more one year       
finance lease obligations     03 –  
provision for liabilities    8  112 111
net assets excluding retirement benefit obligation     1023  1258  
retirement benefit obligation    5  12 10
net assets including retirement benefit obligation     1011  1248 
shareholders’ funds       
share capital    6  22  22  
share premium account     267  267  
capital redemption reserve     06  06  
own shares     56 58 
special reserve     137  137  
profit and loss account     635  874 
shareholders’ funds     1011  1248 
the financial statements of the company company number 00521 970 were approved by the board and authorised for issue on 1 9 february 201 3 and signed 
on its behalf by
john morgan david mulligan
chief executive finance director
company financial statements
morgan sindall group plc annual report and accounts 201 2 
company balance sheet
111 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
company combined statement of movements in reserves and shareholders’ funds
for the year ended 31 december 201 2
  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 201 2 22  267  06  58 1 37  87 4  1 248  
loss for the year –  –  –  –  –  50 50 
recognition of sharebased payments –  –  –  –  –  02  02  
final dividend for 201 1 –  –  –  –  –  1 27 1 27 
interim dividend for 201 2 –  –  –  –  –  5 1  5 1  
exercise of share options –  –  –  02  –  02 –  
deferred tax charge arising on recognition  
 of sharebased payments note 4 –  –  –  –  –  04 04 
actuarial loss on retirement benefit  
 obligation note 5 –  –  –  –  –  08 08 
deferred tax charge arising on actuarial  
 loss on retirement benefit obligation note 4 –  –  –  –  –  0 1  0 1 
balance at 31 december 2012 22  267  06  56 137  635  101 1 
company financial statements
morgan sindall group plc annual report and accounts 201 2 
company combined statement of movements in reserves and shareholders’ funds
11 2 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
significant accounting policies
for the year ended 31 december 201 2
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 32  
under the historical 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 £0 1m
under financial reporting standard ‘frs’ 1 revised 1 996 ‘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 201 2 
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 4
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 5
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 t ax is 
recognised in the profit and loss account except to the extent that it relates  
to items recognised directly in shareholders’ funds
a 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 t axable 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
b 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 post retirement 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 post retirement 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
company financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
113 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
significant accounting policies
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 straight line 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 ‘sharebased 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 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
related national insurance contributions are accrued on the basis of the 
intrinsic value of outstanding sharebased payments and are remeasured at 
each reporting date
leases
assets held under finance leases which confer rights and obligations similar  
to those attached to owned assets are capitalised as tangible fixed assets  
and are depreciated over the shorter of the lease term and their useful lives 
the capital elements of future lease obligations are recorded as liabilities  
whilst the interest elements are charged to the profit and loss account over  
the period of the leases to produce a constant rate of charge on the balance  
of capital repayments outstanding 
rentals payable under operating leases are charged to the profit and loss 
account on a straight line basis over the term of the relevant lease benefits 
received and receivable as an incentive to sign an operating lease are similarly 
spread on a straight line basis over the lease term except where the period  
to the review date on which the rent is first expected to be adjusted to the 
prevailing market rate is shorter than the full lease term in which case the 
shorter period is used
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
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
company financial statements
morgan sindall group plc annual report and accounts 201 2 
significant accounting policies
114 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
notes to the company financial statements
1 loss 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 £50m 201 1  loss of £59m
2 tangible assets
   owned plant leased plant   
   machinery machinery   
   and and freehold  
   equipment equipment property total 
   £m £m £m £m
cost       
balance at 1 january 201 2   39  –  0 1  40  
additions in the year   09  04  –  13  
disposals during the year   19 –  –  19
balance at 31 december 2012   29  04  0 1  34 
accumulated depreciation       
balance at 1 january 201 2   32 –  –  32 
depreciation charge for the year   08 0 1  –  09 
disposals during the year   19  –  –  19 
balance at 31 december 2012   2 1 0 1 –  22
net book value 
net book value at 31 december 2012   08  03  0 1  12  
net book value at 31 december 201 1   07  –  0 1  08 
the company’s obligations under finance leases are secured by the lessor’s title to the leased assets which have a carrying amount of £03m 201 1  £nil no 
other assets have been pledged to secure borrowings
3 investments
    subsidiary   
    undertakings other 
    shares investments total 
    £m £m £m
cost       
balance at 1 january 201 2    377 3  03  377 6 
balance at 31 december 2012    377 3  03  377 6 
provisions       
balance at 1 january 201 2    35 –  35
balance at 31 december 2012    35 –  35
net book value 
net book value at 31 december 2012    3738  03  37 4 1  
net book value at 31 december 201 1    3738  03  374 1 
4 deferred tax
   accelerated    
   allowances    
   and other    
   shortterm retirement share  
   timing benefit based  
   differences obligation payments total 
   £m £m £m £m
at 1 january 201 1   04  05  13  22  
charge to income   0 1  0 1  –  02 
charge to equity   –  0 1  05 06
at 31 december 201 1   03  03  08  14 
at 1 january 2012   03  03  08  14  
charge to income   0 1  0 1  –  02 
creditcharge to equity   –  0 1  04 03
at 31 december 2012   02  03  04  09 
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
115 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
notes to the company financial statements
4 deferred tax continued
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
     2012  2011  
     £m £m
deferred tax within current assets     06  11  
deferred tax within retirement benefit obligation     03  03 
     09  14 
at 31 december 201 2 the company had unused tax losses of £03m 201 1  £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 23 in april 201 3 affecting the closing deferred tax balance as shown above further reductions in the 
corporation tax rate to 21 are expected but not yet legislated the closing deferred tax asset would reduce by a further £0 1m to £08m if these changes  
were taken into account
5 retirement benefit schemes
defined contribution plan
the morgan sindall retirement benefits plan ‘the plan’ was established on 31 may 1 995 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 201 1  £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 201 2 contributions of £0 1m 201 1  £0 1m 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 1 995 and benefits transferred in from the snape group limited retirement benefits scheme include accruals up to 1 august 1 997 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 201 3 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 201 2 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
key assumptions used
    2012  201 1  2010  
      
discount rate    41  47  54  
expected rate of salary increases    40  4 1  46  
expected return on plan assets    35  38  48  
rate of inflation    30  3 1  36  
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
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
116 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
5 retirement benefit schemes continued
life expectancy
for the disclosures as at 31 december 201 2 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
     2012  2011 
male     871  87 1  
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
     2012  2011 
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  
2011  30
the amount included in the balance sheet arising from the company’s liabilities in respect of the plan is as follows
    2012  201 1  2010  
    £m £m £m
present value of the plan liabilities
a
     104 94 85 
fair value of the plan assets
b
     89  81  66  
deficit in the plan    15 13 19 
related deferred taxation at 23 201 1 25    03  03  05 
liability recognised in the balance sheet    12 10 14
a
  any pension which accrues in respect of service after 6 april 1 997 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
     2012  2011  
     £m £m
interest cost     04 04 
expected return on the plan assets     03  03 
net return     01 01
total amount charged to profit and loss total operating charge less net return
a 
     01  01 
a
 there are no amounts to be included within the operating profit for current or past service costs in 201 2 or 201 1
analysis of the movement in the plan deficit during the year
     2012  2011  
     £m £m
deficit at 1 january     13 19 
interest cost     04 04 
actuarial losses     08 –  
expected return on the plan assets     03  03  
contributions from sponsoring company
a
      07  07 
deficit at 31 december     15 13
a
 the minimum amount of contributions the company expects to be paid to the defined benefit section of the plan in 201 3 is £07m
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
11 7 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
notes to the company financial statements
5 retirement benefit schemes continued
liabilities in respect of pensions in payment account for 30 of the total 201 1  35 the average term to retirement is 7 4 years 201 1  7 4 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 201 1  63 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
 
 
 
 
  2012  201 1  2010  2012  201 1  2010  
  £m £m £m   
fixed interest gilts  41  4 1  33  30  30  42  
corporate bonds  46  40  33  41  47  54  
cash   02  –  –  20  20  20
  89  8 1  66    
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
history of experience adjustments is as follows
 2012  2011  2010 2009 2008
 
 
 
 
 
 
 
 
 
 
   asset    asset   asset   asset   asset  
  or liability  or liability  or liability  or liability  or liability 
 £m value £m value £m value £m value £m value
difference between the 
 expected and actual  
 return on the plan assets 02  22  07  86  02  25  02  35  04 66 
experience lossgain  
 arising on the plan liabilities 10 96 07 7 4 06  64  08 90 02  19 
total actuarial lossgain 08  –   08   06  02 
actuarial lossesgains recognised in the combined statement of movements in reserves and shareholders’ funds
    2012  201 1  2010  
    £m £m £m
actuarial lossesgains recognised during the year    08 –  08 
cumulative actuarial losses recognised during the year    38 30 30
6 share capital
 2012 2011
 
 
 
 
   no ‘000s £’000s no ‘000s £’000s
issued and fully paid 
at the beginning of the year   43215  2160  43188  2159  
exercise of share options   10  –  27  1 
at the end of the year   43225  2160  43215  2160 
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 timetotime 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
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
118 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
6 share capital continued
shares
10 1 49 shares were issued during 201 2 in respect of options exercised under the company’s saye scheme for a total consideration of £58268 201 1  no shares 
were issued no shares were issued in respect of the company’s 1 995 scheme 201 1  27 01 9 shares for a total consideration of £135 1  all options exercised 
under the 1 995 scheme during the prior year were settled on a net basis
no other shares were issued during the year 
share options
the weighted average share price at the date of exercise for share options exercised during the year was £663 201 1  £7 08 the options outstanding  
at 31 december 201 2 had a weighted average exercise price of £649 201 1  £609 and a weighted average remaining contractual life of 12 years  
201 1  2 1 years 
share awards under the 2005 plan were granted on 21 may 201 2 the estimated fair value of the awards granted was £25m 201 1  £08m for options and 
£15m for share awards options were granted under the esop 2007 on 2 april 201 2 the estimated fair value of the options was £0 1m 201 1  £03m
own shares
own shares at cost represent 723970 201 1  77671 4 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 t rust 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 201 2 of £5 1 5 201 1  £594 the market value of the shares was £3728446 201 1  £4554281 
7 dividends
for details of dividends paid during the year and proposed but not approved by shareholders at the balance sheet date refer to note 8 of the consolidated  
financial statements
8 provisions
    employee insurance 
    provisions provisions total 
    £m £m £m
at 1 january 2012    07  104  1 1 1  
utilised    –  24 24 
additions    –  28  28  
released    03 –  03
at 31 december 2012    04  108  1 12 
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 post retirement obligations the majority of the provisions are expected to be utilised within five years
9 lease commitments
the company has finance lease commitments due between two and five years for £03m 201 1  £nil 
the company has an operating lease commitment in respect of land and buildings expiring in two to five years for £02m 201 1  £0 1m expiring in less than  
one year lease payments recognised as an expense in the year amounted to £02m 201 1  £02m
10 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
1 1 subsequent events
there were no subsequent events that affected the financial statements of the company
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
119 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
12 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 lovell plc specialist in office design and build 
morgan sindall plc construction and infrastructure 
morgan sindall investments limited project investments 
morgan sindall professional services ltd design services 
morgan sindall underground professional services ltd infrastructure design services 
muse developments limited urban regeneration 
newman insurance company limited insurance 
overbury plc fitting out and refurbishment specialists 
 
joint ventures 
access for wigan holdings limited 50 investment in public services centre 
ashton moss developments limited 50 inner city regeneration 
bromley park limited 50 residential development 
claymore roads holdings limited 50 infrastructure services 
english cities fund 1 25 inner city regeneration  
hb community solutions holdco limited 50 development of supported living facilities 
hub west scotland limited 33⅓ delivering public sector health and education  
  projects in the glasgow area 
hull esteem consortium psp limited 33⅓ investment in the development of education facilities 
isis waterside regeneration 50 waterside 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 bournemouth development company llp 50 mixedtenure development 
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 details of 
which are shown in the consolidated financial statements note 1 3 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
notes to the company financial statements
company financial statements
morgan sindall group plc annual report and accounts 201 2 
notes to the company financial statements
120 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
financial calendar 2013
financial year end 31 december 201 2 
preliminary results announcement 19 february 201 3 
annual general meeting 9 may 201 3 
interim management statement 9 may 201 3 
final dividend 
exdividend date 1 may 201 3 
record date 3 may 201 3 
payment date 24 may 201 3 
 
half year results announcement august 201 3 
interim dividend payable october 201 3 
interim management statement november 201 3
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 computershare investor services plc the pavilions  
bridgwater road bs99 6zz
by telephone 44 0 870 707 1695 lines are open from 830am  
to 530pm uk time monday to friday
by email webcorrescomputersharecom
online wwwinvestorcentrecoukcontactus
registering on the registrar’s website enables you to view your shareholding  
in morgan sindall group plc including an indicative share price and valuation 
check your holding balance and transactions change your address or bank 
details and view or request outstanding payments if you wish to view your 
shareholding please log on to wwwinvestorcentrecouk and select sign in if 
you already have an investor centre user id or click register if you are a new 
user  then follow the instructions
dividend mandates
shareholders who do not currently have their dividends paid directly to a uk 
bank or building society account and wish to do so should complete a mandate 
instruction available from the registrar on request or at wwwinvestorcentre
couk within the downloadable forms section
website and electronic communications
the 201 2 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  1 5 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 uptodate 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 wwwinvestorcentrecouk
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
shareholder information
company financial statements
morgan sindall group plc annual report and accounts 201 2 
shareholder information
121 directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120
if you receive any unsolicited mail or investment advice
 i make sure you get the correct name of the person and organisation
 i check the fsa register at wwwfasgovukfasregister
 i use the details on the fsa register to contact the firm
 i call the fsa consumer helpline on 0845 606 1 234 if there are no contact 
details on the register or you are told they are out of date
 i search the list of unauthorised firms and individuals to avoid doing  
business with 
 i report a share scam by telling the fsa using the share fraud reporting form 
at wwwfsagovukscams
 i if the unsolicited phone calls persist hang up 
 i if you wish to limit the amount of unsolicited mail you receive contact  
the mailing preference service freepost 29 lon20771   
london w1e 0zt or visit the website at wwwmpsonlinecouk 
if you deal with an unauthorised firm you will not be eligible to receive 
payment under the financial services compensation scheme if you have 
already paid money to share fraudsters you should contact action fraud on 
0300 1 23 2040
more detailed information on this or similar activity can be found on the 
consumer financial education body website wwwmoneymadeclearfsagovuk
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 also 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 of £1 5 sales are carried out on a 10day 
settlement basis with purchases on a fiveday basis when purchasing shares 
payment must be made by debit card at the time of dealing for further 
information please call 0845 601 0995 and quote reference low co 1 40
analysis of shareholdings at 31 december 2012
 number of  of total  number of  of total 
 accounts accounts shares shares
up to 1000 877 5338 434 1 10 101 
1001 to 5000 470 286 1 102305 255 
5001 to 100000 228 1 388 5753033 1 331 
100001 to 1000000 59 359 18 1 56595 4200 
over 1000000 9 055 1 7 77941 1 41 1 3
 1643 10000 43225454 10000
shareholder communication
email enquiriesmorgansindallcom 
telephone 020 7307 9200
registered office
kent house 1 4 1 7 market place london w1 w 8aj  
registered in england and wales no 00521 970
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
independent auditor
 d e lo it t e llp 
london
shareholder information
company financial statements
morgan sindall group plc annual report and accounts 201 2 
shareholder information
122 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 dispositions
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 morgan sindall group plc
kent house 
 14 1 7 market place 
london w1w 8aj 
company number 00521970
twitter morgansindall 
morgansindallcom


Summary:
 chief executive’s review
it’s about an enduring 
strategy for the long term
“  i am fortunate in the broad base of 
expertise that i can call upon within  
the board and senior management 
there are undoubtedly some very  
exciting opportunities ahead for the  
group and i look forward to ensuring 
we are in the best shape to leverage  
our expertise and track record”
statement in summary
 i group made steady progress despite tough market conditions
 i increased our focus on growth sectors of infrastructure 
markets
 i investment in regeneration to drive growth from 2014
 i continue tight management of working capital and overheads
 i 201 3 to remain challenging 2014 outlook improving
 i sound forward order book and regeneration pipeline
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
chief executive’s review
20
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 i am delighted to return to the position of chief executive as a founder 
of the business i have steered the group through prosperous years and 
through downturns and i intend to draw on this experience to lead the 
group through the current challenging market conditions and ensure we 
are positioned to take advantage of the opportunities that lie ahead we 
have made progress in 201 2 but there is always scope for improvement
i believe our strategy is robust and our aim is to remain focused on those 
uk markets where we can develop a leadership position my priorities are 
on improving margins focusing on our strengths in delivering complex 
projects appropriate capital allocation driving increased collaboration 
across the group and developing new and emerging opportunities 
i am fortunate in the broad base of expertise i can call upon within  
the board and senior management there are undoubtedly some very 
exciting opportunities ahead for the group and i am looking forward  
to ensuring we are in the best shape to leverage our expertise and  
track record
managing market conditions
revenue £m
 
£2047m
12 2047
11 2227
8
profit before tax amortisation 
and nonrecurring items £m
 
£47 1m
12 471
11 453
4
profit before tax and amortisation £m
 
£37 1m
12 371
11 439
15
profit before tax £m
 
£342m
12 342
11 400
15
the group has made steady progress throughout 201 2 despite market 
conditions remaining tough revenue fell to £20bn 201 1 £22bn and 
profit before tax and amortisation reduced to £37  1m 201 1 £439m  
a £100m charge for reorganisation costs has been incurred during the 
year as we refocused our construction and affordable housing activities 
and these are shown as nonrecurring items profit before tax 
amortisation and nonrecurring items was £47  1m 201 1 £453m 
which includes a £7 0m gain on the disposal of our medical properties 
investment in july 201 2
adjusted earnings per share before amortisation of intangible assets 
were 793p 201 1 867p the group’s constructionrelated revenue  
fell in 201 2 which led to an increase in working capital this coupled  
with a modest increase in the level of investment in our regeneration 
businesses meant that average net debt was as expected £40m 
201 1 £23m average net cash the year end cash balance was  
£504m 201 1 £1089m
we continue to face challenges including reductions in public spending 
deferred investment decisions and higher levels of competition rigorous 
risk management processes are in place to identify monitor and where 
possible mitigate potential risks our strategy remains to invest the cash 
generated from our constructionrelated activities in our regeneration
related activities namely affordable housing and urban regeneration 
this strategy is being tested by a drop in construction revenues and 
tighter payment terms from clients we are therefore being more 
selective in the regeneration schemes we invest in and are identifying 
construction opportunities that best suit our market knowledge and 
specialist skills this includes our exposure to growth infrastructure 
markets where we already have a proven track record
we are positioning the group to come out of the downturn stronger  
by realigning resources we have reshaped the construction business 
within the construction and infrastructure division as we have become 
increasingly selective in our contract bidding we are also focused  
on growing its infrastructure business where there are market 
opportunities in noninfrastructure sectors including the education  
and commercial sectors we are increasing our focus on longterm 
frameworks changes have also been made to the affordable housing 
division to improve its operational efficiency and to match the level  
of resources with its current and mediumterm workload
growing market share in infrastructure
we have increased our focus on growth sectors of the infrastructure 
market in particular the energy and transport markets which offer 
longerterm opportunities and enhanced returns due to the complexity 
and scale of projects our reputation within these markets is improving 
significantly as we have established the required track record scale and 
expertise we are increasingly working on larger infrastructure projects 
as our integrated approach enables us to reduce complexity for our 
clients we are also enhancing our ability to deliver more complex 
projects through joint ventures as demonstrated by our appointment  
in joint venture by sellafield ltd as its delivery partner for a potential 
1 5 year £1 1bn contract 
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
chief executive’s review
21
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 chief executive’s review 
unlocking land values for regeneration partners
our growing investment in regeneration is closely aligned with the 
government’s agenda to release underutilised land assets to stimulate 
local economies and create jobs this approach allows local authorities 
and landowners to unlock land values and create opportunities at no 
significant upfront cost to the public sector land is often retained by  
our partners allowing us to use our capital efficiently and avoid the risk  
of buying land on the open market our growing expertise in complex 
local asset backed vehicles ‘labvs’ driven by public sector land 
release has led to our investments division being appointed as the 
preferred joint venture partner for slough borough council’s labv  
this longterm joint venture is expected to deliver one of the country’s 
most ambitious regeneration schemes completing developments up  
to a total value of £10bn over a 1 5year period
there are high barriers to entry in regeneration as success lies in 
experience expertise commitment and trust it is these credentials 
which take years to develop that have enabled our regenerationrelated 
divisions to embed themselves deeply within this market this year our 
urban regeneration division has demonstrated its expertise by securing 
£45m of government funding that will play a critical role in kickstarting 
seven projects for our clients as tightening fiscal constraints persist  
our collaborative approach will remain in strong demand as local 
authorities continue to seek partners with a track record financial 
strength and the ability to provide funding solutions to regenerate 
worndown communities
it’s about our  
track record
in june 201 2 the construction and infrastructure division completed work on the  
new £75m stateoftheart mental health facilities on the murray royal hospital site 
in perth undertaken for nhs tayside the development provides integrated healthcare 
facilities for general adult psychiatry psychiatry of old age and medium secure 
patients the division’s extensive healthcare experience was instrumental in ensuring 
the safety of patients as well as visitors and resulted in a delighted client
construction and infrastructure
murray royal hospital nhs tayside 
scotland
directors’ report business review
morgan sindall group plc annual report and accounts 201 2 
chief executive’s review
22
directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 in 201 2 we increased our interest in a key joint venture isis waterside 
regeneration from 25 to 50 which will underpin mediumterm 
growth and we are excited about the opportunities that this brings  
we anticipate returns from our investment in regeneration to drive 
growth from 2014 as urban regeneration increases the level of 
construction activity onsite in 201 3
honing our competitive advantage
the uk construction industry output is forecast to show a drop of 9  
in 201 2 and is forecast to contract further by around 5 in 201 3 with 
output shrinking bidding is more aggressive and pressure on margins has 
increased we continue to carefully select the contracts we bid for and 
maintain a tight control of resources we also continue to focus on the 
areas where we can secure competitive advantage and on improving 
what we offer to clients our unique and differentiating approach is 
rooted in our philosophy of perfect delivery which lies at the heart of 
our operations driving us to achieve ever higher standards of quality
the group aims to develop competitive advantage through its integrated 
capabilities increasingly we are maximising our offering through 
packaging together our capabilities and providing clients with the added 
value of two or more of our specialist divisions working together we 
have strength in our breadth of capabilities and in our ability to integrate 
different skills to provide excellent service as demonstrated within south 
northamptonshire council’s £38m towcester regeneration and civic 
accommodation project the investments division will deliver the project 
in partnership with affordable housing who will deliver the residential 
development and construction and infrastructure who will build the 
commercial development
revenue £m
 
£1 1 68m
12 1168
11 1268
8
operating profit £m
 
£1 97m
12 197
11 211
7
margin 
 
17
12 17
11 17
0
forward order book £bn
 
£15bn
12 15
11 16
6
construction and infrastructure
as expected construction and infrastructure’s revenue fell by 8 to 
£1 168m 201 1 £1268m with a corresponding fall in operating profit 
to £197m 201 1 £21 1m this was a creditable performance given the 
market pressures with margin steady at 17 201 1 17
falling public sector and weak private sector demand will inevitably 
impact on construction volumes going forward however in line with  
the group’s strategy the division has successfully implemented a shift  
in the balance of its work as it increases its focus on the growing 
infrastructure markets this is significantly offsetting the anticipated  
drop in demand and has enabled the division to largely maintain its  
order book despite the overall market decline
through the division’s commitment to perfect delivery it sets the 
highest standards of service and consistently delivers against them  
it innovates by bringing a fresh approach to challenging projects driving 
down client costs in many different ways including identifying cutting 
edge building techniques or through its expertise in value engineering 
the division’s project team working on the £1 36m joint venture to 
deliver the m62 managed motorway contract clearly demonstrated its 
expertise when it identified £48m of value engineering and efficiency 
savings for its client before work commenced
nine of the uk’s top 1 5 airports have benefited 
from the division’s specialist skills this year and the 
sector especially values its integrated design and 
construction approach to complex projects
shaping the uk’s infrastructure
the highly regulated energy market offers significant potential to  
the group as the division has extensive experience and expertise in 
transmission and distribution and is broadening its capability in power 
generation the division’s reach into the nuclear sector has been 
extended with the award of the contract at sellafield to provide a range 
of essential infrastructure asset services our relationship with national 
grid has deepened further with two awards in joint venture including a 
fiveyear contract extension to deliver major enhancements to the uk’s 
electrical transmission infrastructure
within the rail market significant ongoing work has been undertaken for 
network rail throughout the year as part of the multi asset framework 
agreement which runs until 2014 and is expected to deliver £200m  
of work in joint venture in addition the division has been awarded the 
£20m north doncaster chord project on the east coast main line  
the aviation market has considerable barriers to entry as it demands  
the highest standards in technical expertise consistent delivery security 
and safety nine of the uk’s top 1 5 airports have benefited from the 
division’s specialist skills this year and the market especially values its 
integrated design and construction approach to complex projects major 
projects have been secured under existing frameworks at gatwick and 
heathrow airports including a £31m runway rehabilitation contract at 
heathrow airport 
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the division is wellpositioned within the highways market to benefit 
from the government’s continuing commitment to infrastructure 
investment allocated work from the highways agency frameworks  
is expected to start in 201 3 and approval has been provided to 
commence work in joint venture on upgrading the a1 to motorway 
standard between leeming and barton
within the water market the amp 5 framework agreement with 
yorkshire water services has provided £76m of joint venture contracts 
to improve bathing water quality at both scarborough and bridlington 
drawing on the division’s tunnelling expertise and to design and  
build a pioneering new energy scheme at the esholt waste water 
treatment works
construction and infrastructure is working for uk power networks on  
a £14m cable tunnel project between whitechapel and finsbury market 
in order to strengthen london’s electricity supplies work also continues 
in joint venture for thames water on east london’s lee tunnel the 
capital’s deepest ever tunnel and for crossrail on projects including 
c510 whitechapel and liverpool street station tunnels where the joint 
venture is now two years into the fiveyear £235m contract
performing across a breadth of sectors
the division’s construction profile remains high as it focuses on  
sectors where it can benefit from its respected track record in particular 
education remains an important market 201 2 saw the launch of the 
division’s innovative standard designs for primary and secondary schools 
that are fully supported by funding options to ensure projects are 
financially viable it has also been allocated a further £45m project to 
construct nine new primary schools over the next three years in the 
latest phase of south lanarkshire council’s £1 50m primary school 
modernisation programme
despite the commercial market remaining subdued the division has 
enjoyed success it has been appointed to deliver the £70m longbridge 
town centre development in birmingham and has also successfully 
established a foothold in london including winning £55m of building  
and refurbishment contracts and completing a £65m commercial 
development for legal and general property
encouraging forward order book
with little improvement anticipated in economic and market conditions 
in the shortterm we do expect the division’s revenue operating profit 
and margin to reduce further in 201 3 however we are encouraged by 
the division’s forward order book standing at £15bn 201 1 £16bn  
with projects at preferred bidder stage valued at £05bn 201 1 £03bn 
we are confident that the division’s track record in infrastructure its 
expertise in operating frameworks and its wide range of skills will 
continue to provide it with a level of resilience as it continues to adapt  
to changing market conditions
revenue £m
 
£427m
12 427
11 438
3
operating profit £m
 
£1 13m
12 113
11 124
9
margin 
 
26
12 26
11 28
7
forward order book £m
 
£1 70m
12 170
11 216
21
fit out
fit out’s revenue was marginally down on 201 1 at £427m 201 1 
£438m with operating profit at £1 13m 201 1 £1 24m and margin 
softening slightly to 26 201 1 28 the division has performed 
steadily given it is operating within a highly competitive and price 
sensitive market the division’s consistent delivery and quality is valued 
and has led to 40 of the division’s workload comprising repeat business 
from valued clients 
maintaining its leadership position
the division has made a major contribution to the group’s strategy of 
creating leading positions in its chosen markets it has maintained its 
leadership position in the commercial office market increasing market 
share to 30 and has delivered the year’s largest project in the fit out 
market for a global professional services firm the division has maintained 
its focus on the more resilient sub£1m project market where it expects 
continued growth in 201 3 whilst the market continues to be impacted 
by a significant shortage of major projects the strong trend towards 
refurbishment plays to the division’s strengths as specialists in the 
refurbishment of occupied buildings as demonstrated this year by the 
refurbishment of freshfields bruckhaus deringer llp’s london office 
whilst under occupation 
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 broadening capabilities 
in line with our strategy to broaden our capabilities in existing markets 
our design and build fit out business morgan lovell has significantly 
strengthened its offering this year by establishing a new workplace 
consultancy team demand for this extended offering has been proven 
with work already secured with leading organisations including linkedin 
and sas
progress in core markets
the division has made progress in its core growth markets of retail 
banking higher education and leisure securing a further retail banking 
framework appointment means that the division is now working in 
partnership with three of the four largest uk banks in the leisure market 
a major completion includes the fit out of the largest premium gym in 
london owned by american operators equinox current major clients  
in higher education include imperial college london where the division  
is drawing on the group’s integrated capability leading a joint venture 
with construction and infrastructure 
growing regional presence
the division has increased its balance of work outside of london and 
reported a solid regional performance underpinned by a new office 
opening in leeds projects include a 60000 sq ft fit out of itv’s new 
office at mediacity uk in salford and the delivery of the uk’s only 
leadership energy and environmental design ‘leed’ gold and silver 
assessment for sustainable office fit out accredited office building for 
autodesk in farnham major projects are also underway in scotland for 
hewlett packard and scottish power
improving mediumterm outlook
moving into 201 3 the division remains committed to realising its 
ambition to be the trusted property partner of choice and to reaching  
its target of securing 100 of its workload through recommendation  
its objectives include securing more work directly from existing clients 
and frameworks and winning work from international clients its order 
book currently stands at £1 70m 201 1 £216m and we expect similar 
market conditions in 201 3 to those experienced in 201 2 the market is 
expected to improve in the mediumterm driven by an expected surge 
in lease expiries and new office development
it’s about the quality 
of our service
the division transformed 45000 sq ft of the london headquarters of mobile money 
specialists monitise a time lapse video of the site was filmed so that the client could 
show the project build to its stakeholders the project was delivered on time and  
on budget fit out
monitise 
london
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revenue £m
 
£386m
12 386
11 462
17
operating profit £m
 
£1 15m
12 115
11 185
38
margin 
 
30
12 30
11 40
25
forward order book £bn
 
£13bn
12 13
11 15
13
affordable housing
it has been a challenging year for affordable housing with revenue  
falling by 1 7 to £386m 201 1 £462m with operating profit down  
to £1 15m 201 1 £185m and margin at 30 201 1 40 this 
reflects difficult market conditions with newbuild social housing being 
particularly hard hit as well as lower than normal returns from a small 
number of older mixedtenure regeneration projects
consequently we have restructured the business in response to  
tough competition and continuing pressure on margins open market 
house sales have improved and the division has continued to develop  
its marketleading response maintenance offering providing local 
authorities and housing associations with a nationwide service  
this investment has led to over £1 10m of contract awards this year  
and a far greater contribution to the division’s overall performance
affordable housing is responding to the demanding environment by 
focusing on securing major longterm regeneration schemes and more 
work via framework agreements across all its operations as the uk’s 
complete affordable housing solutions specialist its track record and its 
ability to forge strong longterm relationships has enabled the division  
to capitalise on major opportunities
complex regeneration projects
the division is playing a key role in our strategy to focus on major 
regeneration opportunities its expertise allows it to take on highly 
complex housingled regeneration projects either solely or working in 
collaboration with other group divisions in 201 3 it starts construction  
of the £100m castleward urban village regeneration development 
through compendium its joint venture with riverside housing 
association eventually delivering 850 new homes it is working on major 
longterm projects with other group divisions including the potential 
delivery of the first £105m tranche of housing within the £1bn slough 
borough council labv other group regeneration collaborations include 
the £38m towcester regeneration and civic accommodation project 
with the investments division and the second phase of residential 
development at northshore stocktonontees with our urban 
regeneration division
a slowdown in affordable housing starts has had a significant impact on 
the division’s newbuild social housing programme the new affordable 
housing regime introduced gave registered providers until the end of 
march 201 5 to complete their programmes a number of clients are  
yet to commence their building programmes which has resulted in a 
significant slowdown in the market however those with grant funding 
are expected to deliver the targeted homes in time so the division is 
anticipating an increase in activity over the next 18 months as projects 
commence onsite to meet this deadline
open market sales volumes improving
despite the limited mortgage availability subduing the market house  
sale volumes have improved throughout the year with completed  
sales totalling 383 in 201 2 201 1 332 the division’s reputation for 
consistent delivery of highquality sustainable homes is enabling it to win 
significant contracts despite the increasingly competitive environment 
the division is working on one of scotland’s largest newbuild council 
housing sites delivering 1 50 council homes in a £1 2m scheme for west 
lothian council further improvement in its pipeline of opportunities is 
expected next year as the division works with partners to commit 
funding allocations to meet the homes and communities agency’s 
deadline of march 201 5
response and refurbishment markets
the response maintenance market remains steady albeit competitive  
a highlight has been the £50m repairs contract awarded by accord 
group reinforcing the division’s marketleading position there is a 
growing number of opportunities in the south of england with the 
division currently bidding for over £200m of contracts to be awarded  
in early 201 3
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 in the planned refurbishment market the division continues to support 
social landlords upgrading their ageing housing stock it has been 
appointed as one of two contractors to share equally the delivery of  
a £35m decent homes improvement programme in leicestershire  
and has also begun work on the vale of glamorgan framework  
providing a platform to progress further work in wales
national need for affordable housing 
with a forward order book of £13bn 201 1 £15bn the division is  
well placed to continue helping partners and clients meet the uk’s crucial 
need for highquality affordable housing it is also targeting major 
housing regeneration schemes which will drive economic and social 
renewal and enable growth in the mediumterm
revenue £m
 
£62m
12 62
11 57
9
operating profit £m
 
£27m
12 2127
11 39
31
regeneration pipeline £bn
 
£19bn
12 19
11 16
19
urban regeneration
it’s about offering clients 
innovative solutions
the division’s expertise and ability to offer different crosssubsidy funding solutions 
enabled this development to proceed and provided much needed housing for london
affordable housing
finsbury park  
london
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urban regeneration saw a rise in the level of activity in 201 2 with 
revenue increasing to £62m 201 1 £57m operating profit was down 
to £27m 201 1 £39m the operating profit was impacted by the 
subdued market conditions as well as an increased share of the costs  
of the isis waterside regeneration joint venture during the year the 
division increased its interest in isis from 25 to 50 in the shortterm 
the division will recognise a greater share of the operating costs but will 
enjoy 50 of the future profit as opportunities are developed in the 
mediumterm
overcoming barriers to success
overall the division has made solid progress this year the momentum  
it has built up across its portfolio of 35 schemes and the award of new 
development agreements are all significant factors in our confidence  
that returns from our investment in regeneration will start to increase  
in 2014
our confidence is further strengthened by the fact that the division has 
capitalised on its reputation and secured £45m of government funding 
to unlock stalled housing development these funds will help kickstart 
seven projects within the division’s portfolio and funding conditions 
include an accelerated timetable of delivery this will result in a number 
of residential elements within the division’s mixeduse schemes being 
brought forward and delivered over the next two years
sentiment remains subdued
investor and tenant sentiment remains stable but subdued as economic 
recovery continues to stall the lack of speculative development in  
the commercial office market together with tenants exercising lease 
breaks is expected to lead to an uplift in demand for new grade a 
accommodation the division believes it is in a good position to respond 
to this uplift due to its landholdings secured through development 
agreements
new development agreements 
in 201 2 £340m of schemes were converted from preferred developer 
status into contracted agreements the division has entered into two 
development agreements with basingstoke and deane borough council 
to deliver its £200m regeneration project developing in excess of 
700000 sq ft on councilowned land parcels the first planning 
application is targeted for mid201 3 with work onsite expected to 
commence later in the year stockport council has also selected the 
division to deliver its £140m office quarter and the first phase of 
development is due to start onsite early 201 3 progress has also been 
made in finalising development agreements to deliver major mixeduse 
schemes in warrington and hucknall
planning secured
planning consents for new development valued at over £300m have 
been secured in 201 2 these include consent for the second phase of 
residential development at its northshore development to deliver 76 
residential units in partnership with our affordable housing division 
planning has been secured for a 60000 sq ft grade a office building 
prelet to kpmg this development is the first newbuild office in leeds 
city centre since 2006 approximately £95m of construction contracts 
have been awarded on sites this year construction has started on the 
1 1m sq ft £220m mixeduse talbot gateway central business district 
scheme in partnership with blackpool council work is also underway  
on the largescale £350m regeneration of swindon town centre
tentative lettings market 
fragile occupier confidence has meant that the lettings market remains 
subdued in addition to kpmg in leeds significant deals have been 
completed including leasing 140000 sq ft in two major distribution 
centres at eurocentral in scotland and over 14000 sq ft of grade a 
office space to santander at no 4 st paul’s square liverpool
completions include the new £20m civic offices in doncaster an 
element of the city’s £300m civic and cultural quarter the division  
has also delivered 271 new homes as part of the £180m 680000 sq ft 
rathbone market regeneration scheme in canning town east london 
working within the english cities fund partnership with the critical need 
for housing in the capital the first phase of this new development has 
proved successful with only 21 units currently unreserved
maintaining momentum
whilst market constraints will continue in the shortterm an increased 
emphasis on residential especially in the south has served to further 
balance the division’s mixeduse activity through maintaining 
momentum across its portfolio commencing 1 5 further development 
projects with an end value of £190m the division has good visibility of 
how it will contribute to the group’s profitability in 2014 and beyond  
its forward development pipeline stands at £19bn 201 1 £16bn with  
a further £03bn 201 1 £06bn at preferred developer status the 
group’s strong balance sheet and the division’s track record will enable it 
to identify and create new longterm partnership opportunities with the 
public and private sectors enabling the division to continue unlocking 
land values and playing a leading role in regeneration
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£32m
12 32
11 49
35
investments carrying value £m
 
£1 82m
12 182
11 232
22
operating profitloss £m
 
£7 4m
12 74
39 11
investments investments’ mandate is to create valuable investments for the group 
and to unlock prime longterm construction opportunities for other 
divisions the division delivered a profit in 201 2 of £7 4m 201 1 
operating loss of £39m this was driven in particular by the £7 0m 
profit from the £24m sale of the division’s medical property investments 
and from a healthy performance from our investments portfolio during 
the year of £57m 201 1 £16m the sale was in line with our strategy 
to realise investments as they mature to redeploy capital into new 
projects
creating opportunities for the group
investments has capitalised on its reputation and experience gained from 
the complex bournemouth town centre labv and has been appointed 
preferred partner by slough borough council for its labv joint venture 
the labv will benefit from the strength of our integrated capability and 
will procure work from our affordable housing and construction and 
infrastructure divisions over the lifetime of the partnership
it’s about having  
capable teams
in doncaster the urban regeneration team worked closely with the council to develop 
efficient new civic offices to breeam excellent rating that would help them reduce 
costs and improve service delivery
urban regeneration
commercial and cultural quarter 
doncaster
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the division has also been appointed preferred developer for south 
northamptonshire council’s £38m towcester regeneration and civic 
accommodation project and has secured planning consents for a 
residential development student accommodation and a multistorey  
car park in the 20year £500m bournemouth council labv scheme
scotland has an extensive public private partnershipbased investment 
programme and is therefore an area of strategic importance for the 
division the western territory hub programme board has recently 
selected an investmentsled joint venture the wellspring partnership  
to deliver a pipeline of £160m public sector health and education 
projects over the next 10 years the wellspring partnership will deliver 
new facilities for a number of public sector bodies in the glasgow area  
in east scotland the £95m tayside acute adult mental health 
development scheme has been completed through the group’s 
integrated capability with design and construction services provided  
by our construction and infrastructure division 
positive pipeline of opportunities
the division has carried out a review of the changes to pfi announced in 
the government’s launch of its successor pf2 in the autumn statement 
whilst clarification is being sought around how particular aspects of the 
announcement will work in practice it is considered to be a positive 
development pf2 will be applied to the £2bn priority schools building 
programme expected to come to the market in spring 201 3 and this  
is a major target for investments as it hopes to leverage its track record 
within the education market and identify further opportunities for our 
construction and infrastructure division it is anticipated that other 
government departments will start to release a pipeline of schemes 
procured under this initiative later in the year providing further 
opportunities for investments and other group divisions
it’s about  
developing talent
three more schools were successfully handed over for the first day of january 2013 
school term and investments in conjunction with their partners are 90 towards 
their target of 200 apprenticeship opportunities across the life of the project
investments
building schools for the future programme 
hull
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directors’ report business review 02–42 directors’ report governance 43–66 group consolidated financial statements 67–108 company financial statements 109–120 whilst current economic conditions persist local authorities will need 
support from the private sector the division will continue to identify 
innovative ways to structure and finance deals to allow its partners  
to realise the potential of underutilised property assets secure 
efficiencies and promote economic growth and social wellbeing  
the division expects to realise further investments in 201 3 in order  
to recycle capital to create revenue for the group and provide a 
sustainable return on investment
sustainability 
during 201 2 we continued to embed our roadmap for sustainability 
and work towards merging the group’s procurement and sustainability 
functions to create a new team headed by the director of group 
sustainability and procurement this will take effect from february  
201 3 the group spends a significant amount through its supply chain 
each year and a closer alignment of the two functions will drive 
improvements in the group’s sustainability performance the group 
achieved a significant reduction in its carbon emissions and increase in 
the tonnage of waste diverted from landfill during the year the group’s 
total commitment to ensuring that we offer a safe working environment 
for all employees is demonstrated by our health and safety performance 
this is the third consecutive year in which the group achieved its aim of 
less than 100 reportable incidents
measuring success
we measure success in many ways we track our performance using 
traditional indicators including measuring growth in market share and  
in our regeneration pipeline achieving quality margins and maintaining  
a healthy order book in addition in line with our philosophy of perfect 
delivery we place equal importance on measuring success through  
nonfinancial metrics our safety record sustainability performance  
and client satisfaction are all critical to the group’s future prosperity 
to read more about our kpis 
see pages 1 2 and 1 3
managing responsibly
rigorous reviews of the business are undertaken regularly as we 
continue to carefully manage it through challenging times robust 
management of overheads cash and working capital are prioritised  
to ensure we have sufficient cash resources to increase our investment  
in regeneration 
stringent credit checks and due diligence are undertaken to assess  
the financial health of clients to minimise bad debt and our supply chain 
members are also scrutinised to ensure we deliver maximum benefits  
to our clients the supply chain is managed closely and we choose to 
build longterm relationships with suppliers and subcontractors who 
share our values and commitment to sustainability and safety so that 
together we provide a superior quality service
outlook
the market will remain challenging in the shortterm with little sign  
of improvement expected as economic recovery continues to be slow  
we will maintain our focus on careful contract selection perfect delivery 
and tight management of overheads
we have positioned the group to capitalise on growth markets with 
barriers to entry and in the longer term the opportunity for superior 
returns we will continue to pursue opportunities in these markets 
promoting the synergies created by our integrated capabilities
whilst cautious over the shortterm outlook we are encouraged  
by the opportunities that exist in our chosen markets with a sound 
forward order book of £3 1bn 201 1 £34bn with a further £05bn 
201 1 £03bn at preferred bidder stage and a regeneration pipeline  
of £2 1bn 201 1 £18bn we believe the group is wellpositioned  
to maximise opportunities throughout the next year and beyond 
john morgan
chief executive 
19 february 201 3
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