Governance
Other statutory information

Requirement for 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 2009 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 and in the chairman and chief executive’s statement and in the business review section of the directors’ report. The liabilities of the directors in connection with this report shall be limited as provided by applicable English law.

The Group’s principal activities

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

Results and dividends

The Group’s profit before tax for the year amounted to £44.7m (2008: £62.3m). An interim dividend of 12.0p (2008: 12.0p) per share amounting to £5.0m (2008: £5.1m) was paid on 18 September 2009. The directors have declared a second interim dividend in place of a final dividend for the year of 30.0p (2008: 30p) per share amounting to £12.7m (2008: £12.7m) payable on 1 April 2010 to shareholders on the register at close of business on 12 March 2010.

Share capital and shareholders’ rights

As at 22 February 2009, the Company’s issued share capital comprised a single class of ordinary shares of 5p each (‘shares’). During the year 156,561 shares were allotted and issued on the exercise of options under the Company’s employee share option schemes. No other shares were issued during the year. Details of the Company’s share capital and capital structure, including the rights attaching to the shares, are set out in note 24 of the consolidated financial statements. Note 24 also gives details of shares held by the Morgan Sindall Employee Benefit Trust, voting rights of which are exercisable at the discretion of the trustees and dividends in respect of which have been waived.

The following description summarises certain provisions of the Articles and applicable English law concerning companies. Certain amendments to the Articles will be proposed at the annual general meeting on 6 May 2010, primarily to deal with the implementation of the Shareholder Rights Directive in the UK on 3 August 2009 and the implementation of the remaining provisions of the Act on 1 October 2009. In addition, it is proposed that the maximum number of directors which the Company may have be increased from 10 to 12. Details of these proposed changes will be set out in the circular to shareholders accompanying this document.

Subject to applicable statutes (in this section the ‘Companies Acts’), 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 Articles may decide. Subject to the Articles, the Companies Acts and other shareholders’ rights, unissued shares are at the disposal of the Board.

Voting

Subject to any other provisions of the Articles, every member present in person or by proxy at a general meeting has, upon a show of hands, one vote and, upon a poll, one vote for every share held by him or her. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.

No member shall be entitled to vote at any general meeting in respect of any share held by him if any call or other sum then payable by him 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 Acts.

No person has any special rights of control over the Company’s share capital and the directors are not aware of any agreements between holders of shares which may result in restrictions in the transfer of shares or on voting rights.

Dividends and other distributions

The Company may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Board. Subject to the Companies Acts, 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 0.25%. 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 Companies Acts.

Variation of rights

Subject to the Companies Acts, rights attached to any class of shares may be varied with the written consent of the holders of not less than three-fourths 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.

Restrictions on transfer of securities in the Company

There are no restrictions on the transfer of securities in the Company, except:

• that certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws); or
• pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the Company require the approval of the Company 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.

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.

Appointment and replacement of directors

The directors shall be not less than two and not more than ten in number. The Company may by ordinary resolution vary the minimum and/or 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 following annual general meeting of the Company and is then eligible for reappointment.

At every annual general meeting of the Company any director who has been appointed by the Board since the last annual general meeting, or who held office at the time of the two preceding annual general meetings and who did not retire at either of them, shall retire from office and may offer himself for reappointment by the members. The Company may by special resolution remove any director before the expiration of his period of office. The office of a director shall be vacated if: (i) he resigns or offers to resign and the Board resolve to accept such offer; (ii) his resignation is requested by all of the other directors and all of the other directors are not less than three in number; (iii) he is or has been suffering from mental ill health and the Board resolves that his office be vacated; (iv) he is absent without the permission of the Board from meetings of the Board (whether or not an alternate director appointed by him attends) for six consecutive months and the Board resolves that his office is vacated; (v) he becomes bankrupt or compounds with his creditors generally; (vi) he is prohibited by a law from being a director; (vii) he ceases to be a director by virtue of the Companies Acts; or (viii) he is removed from office pursuant to the Articles.

Powers of directors

Subject to the Articles, the Companies Acts 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.

Powers in relation to the Company issuing its own shares

The directors were granted authority at the annual general meeting on 30 April 2009 to allot relevant securities up to a nominal amount of £716,731. That authority will apply until the conclusion of this year’s annual general meeting and a resolution to renew the authority will be proposed at the forthcoming annual general meeting, as explained further in the circular to shareholders accompanying this document.

A special resolution will also be proposed to renew the directors’ power to make non-pre-emptive issues for cash, as explained in the circular accompanying this document.

Purchase of own shares

At the annual general meeting on 30 April 2009, a resolution was passed giving the directors authority to make market purchases of its shares up to 4,300,385 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 30 April 2010 and a resolution to renew the authority will be proposed at the forthcoming annual general meeting, as explained further in the circular to shareholders accompanying this document.

Significant agreements

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

Directors

The names of the directors as at the date of this report are set out below under Directors’ interests. All of these directors held office throughout the year except for Patrick De Smedt, who was appointed as a non-executive director with effect from 1 December 2009. Jon Walden will be retiring at the annual general meeting and will not be seeking re-election. Bernard Asher retired at the annual general meeting in April 2009 and so is not listed in the table below.

Patrick De Smedt, having been appointed by the directors during the year, will retire and stand for election at the annual general meeting. In addition, Simon Gulliford, having been appointed with effect from 1 March 2010, will retire and stand for election at the annual general meeting. Their biographical details, including details of significant external commitments, are set out in the Board of directors section.

Directors’ interests

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

There have been no changes in the interests of the directors between 31 December 2009 and 22 February 2010.

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

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.

Substantial shareholdings

As at 22 February 2010, the Company had been notified of the following interests in voting rights attaching to the Company’s shares in accordance with the Disclosure and Transparency Rules:

Research and development

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

Employment

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

Information on the Group’s employment policies and practices, including its policies on equal opportunities for disabled employees and employee involvement are included in the sustainability review. Details of the Company’s share option schemes are set out in note 24 of the consolidated financial statements.

Supplier payment policy

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

As at 31 December 2009 the Group’s number of creditor days outstanding was equivalent to 23 days’ purchases (2008: 24 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 £118,950 (2008: £79,105), 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 sustainability review.

No contributions were made to any political parties during the current or preceding year.

Fixed assets

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

Disclosure of information to the external auditors

The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are 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 auditors are aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Act.

External auditors

Deloitte LLP has expressed its willingness to continue in office as external auditors and a resolution to reappoint it will be proposed at the forthcoming annual general meeting.