I am delighted to report a year of outstanding success for the Group with profit before tax rising to £38.2m from £20.5m last year. Operating profits increased by 33% to £39.3m and we disposed of our Civil Engineering and Mining businesses creating an additional gain of £19.6m. As a result of this strong operational performance and strategic repositioning, Shareholders’ Funds have increased by 25% to £142m. The Board is pleased to recommend a final dividend of 12.9 pence per share (2000-11.1 pence per share), giving a total for the year of 18.6 pence per share (2000-16.2 pence per share). This represents a 15% increase from 2000.

Business Review
2001 was a challenging year for our Property business but in spite of weakening tenant demand the business recorded an excellent performance making a significant contribution to Group profits. Several major and prestigious projects were won within the year in the face of strong international competition and this has considerably enhanced the reputation of the Group both within the property sector and beyond.

Housing turnover grew by 48% to £235m while operating profits increased by 55% to £20.3m. Growth was achieved from a combination of continued organic expansion in our established regions and incremental contribution from the acquisitions made in 2000. Our average selling price increased by 29% to £112,000 and we continue to be focused on the better quality locations where we can generate higher margins.

Construction Services turnover increased by 55% on a like for like basis, with profits rising fivefold to £5.0m, demonstrating that the business is now able to deliver margins comparable to those generated by the sector’s market leaders. Further geographical expansion of our Partnering and PPP capabilities has also been made with a view to sustaining this level of profitability.

Economy
The Group enjoyed favourable market conditions even after taking into account the appalling events of September 11 which had a temporary impact on visitors and orders. The commercial property investment market was patchy with the reduction in institutional investment being offset by growing funds invested by overseas and private company investors.

Consumer confidence levels remained high due to the combination of low unemployment and low interest rates. This stable environment ensured our Housing business experienced good trading conditions across all of its regions. The Construction Services business enjoyed healthy orders with a well-established PPP programme now delivering regular work, and our corporate customers maintaining their investment programmes.

People
The strategic repositioning of the Group has been well received by our Staff, who recognise the strength of the Group and its unique position to tackle many of the large urban regeneration schemes that are in prospect. The Board thanks each and every employee for playing their part in the most successful year in the Group’s history and is delighted to see that 7% of the company’s shares are either owned or held under option by its employees.

Geoff Potton resigned from the Board effective 31 March 2002. On behalf of the Board, I would like to thank Geoff for his contribution to the success of the Group and wish him well for the future.

Pensions
In response to the sale of two major businesses and continuing stock market weakness, the Board and Trustees decided to bring forward the triennial valuation of the Pension Fund by 12 months. As at 1 July 2001, on the Minimum Funding Rate (MFR) basis, the Scheme’s assets covered 92% of its accrued liabilities. This had fallen from 102% in 1999 mainly as a result of poor investment returns. This is a feature not unique to our scheme, and reflects general stock market returns over the period. After discussion with the Trustees and the Scheme’s Actuary, the Group has substantially increased its contributions with a view to restoring the Scheme’s MFR level to 100% by 2007.

The transitional provisions of the new financial reporting standard FRS 17 came into force for the first time this year, and are dealt with in the Finance Director’s Review. There is no doubt that the new standard will have far reaching implications for defined benefit schemes in particular and the pension industry in general.

Corporate Governance
Like many others, we have watched with disbelief the events at Enron and no doubt fundamental changes will be forthcoming, particularly in the accounting profession. Your Board adopts the highest levels of Corporate Governance embracing The Turnbull Report to ensure a proper risk management culture is positively embraced by management.

Joint ventures are fundamental to our strategy of growth, and we seek such opportunities proactively for the commercial benefit of the Group. These partnerships provide the opportunity for both parties to combine complementary skills and share risks in a market where deals are becoming ever more complex. The quality, reputation and financial strength of our partners are all closely assessed at the outset and we always insist that the Group’s prudent profit and cost recognition policies are rigorously applied.

Prospects
The UK economy appears to be riding the downturn better than our European or American counterparts and most commentators agree we will have a soft landing.

We have made an excellent start to 2002 with Housing sales at a record level. Whilst it is difficult to forecast market conditions with absolute confidence, the strength of our management teams, our strong commercial and residential land bank, quality order book, and substantial forward Housing sales, provide a solid foundation for further growth in the year ahead.

Bob Speirs Chairman