Strategy
The overall shape of the Group was re-determined following the disposal of our Civil Engineering and Mining businesses in 2001. We deliberately focused our efforts during 2002 on consolidation following the significant investment in the business over recent years. The timing of our next corporate move will depend on market conditions becoming less heated and the identification of opportunities providing real and sustainable benefit for the Group.

Property
2002 was the most active trading year for some considerable time. We delayed selling several completed retail developments in 2001 anticipating an improvement in the market. This proved to be a judicious decision and as a result we produced an excellent result especially given the weakness in the underlying occupational markets.

We remain a trader and a generalist developer seeking to adjust our portfolio according to where we see the strengths and weaknesses of each sector. Maintaining a balance in both deal size and risk profile is important as we strive to deliver regular and sustainable profits.

The most significant deal of the year was being named Preferred Bidder for the £400m NHS Estates portfolio, where we are in joint venture with Bank of Scotland.

Housing
The Housing result was very encouraging with operating profits increasing 38% to £28m and margins moving to 10%. Further margin improvement is anticipated this year as we drive out cost with more consistent design and build processes throughout our eight businesses. In the short-term we intend to concentrate on growing our present businesses organically to improve returns. In conjunction with an increasing number of trade joint ventures we have the potential to deliver turnover in excess of £400m from existing operations. The geographic markets in which we operate remain strong with little evidence that the weakening that has been experienced in the South East will spread across the rest of the country.

Construction Services
A solid performance was delivered building on the progress made in 2001, with operating profits rising by 24% to £6.2m representing a margin of 2.4%, a creditable performance. We established new offices in the North West and West Midlands, together with building up our existing East Midlands operation. We have increased capability to deliver our strategy of ‘national delivery built on regional strength’ specifically servicing our national partnering clients such as Sainsbury. This continues to generate good predictable results with some large projects being secured of up to £50m across the country from East Kilbride to Maidstone. The PPP unit had a busy year with Glasgow and Edinburgh Schools in operational phase, and the £55m Mulberry Schools project in East London was secured. The Glasgow Schools project is a testament to the advantages of PPP with real public sector innovation coupled with private sector delivery skills. £230m of construction was completed in a 28 month period with 28,000 school children relocated. The project was completed on time with 13 schools actually delivered ahead of schedule.

Information Technology
We have invested heavily in IT over recent years truly seeking a competitive advantage and more efficient collaboration with corporate clients, customers, sub contractors and suppliers, whilst internally facilitating speedier communication between offices and sites.

Our Group and Homes web sites have been further developed to allow customers to gain more detailed useful information on our product range and each of our developments. Our Group intranet is being used as an interactive repository for project information from which our clients and suppliers may be given open access to review up to date progress and
to receive the latest project technical information. This is an important tool in developing true partnering relationships with our supply chain.

Environment
The Board takes its responsibility towards the environment very seriously and supports the government’s drive to utilise brownfield development ahead of the greenbelt. 56% of our Housing sales in 2002 are from brownfield locations - this is expected to rise to 67% in 2003. Our Property business also has an important role in enhancing the environments in which it operates. It is actively involved in major regeneration schemes in London, Birmingham, Manchester, Leeds, Nottingham, Glasgow and Edinburgh.

Health and Safety
Safety is at the forefront of Group policy. Our policy is to ensure that all employees have adequate information and training to ensure that our offices and operational sites provide a completely safe environment for direct employees, subcontractors and the general public.

As a member of the Major Contractors Group, we are committed to the MCG Health and Safety Charter. We are investing significant time and resource to promote safety awareness throughout our supply chain together with ensuring the appropriate qualifications are attained.

Our safety procedures are subject to continuous audit by our appointed safety advisers and in the medium term will be linked to our management systems.

Outlook
Market conditions are more difficult than this time last year and the outlook is weaker with all of the world’s major economies reporting only modest growth. However, with a base of £234m of forward Housing sales, a quality contracting order book of £300m and a strong portfolio of development projects we remain confident of continued profitable growth.

Keith M Miller Group Chief Executive