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Corporate governance statement

The Board continues to support and remain committed to high standards of corporate governance. However, it believes that such governance must reflect the unique nature of the Company, the composition of its shareholders, many of whom have strong family ties, as well as other stakeholders' interests and, above all, must assist in the effective attainment of corporate objectives.

The Directors take comfort in the fact that The UK Corporate Governance Code ('the Code') (previously known as The Combined Code on Corporate Governance) issued by the Financial Reporting Council recognises that not all of the provisions are necessarily relevant to smaller listed companies and those who wish to evaluate the Company's corporate governance are reminded that the Code states that departures from its provisions should not automatically be treated as breaches.

In applying the principles of the Code, the corporate governance policies adopted by the Board broadly follow the Code's guidelines in so far that they assist the overall wellbeing of the Company and its shareholders' interests. Pragmatism also constitutes a very important element in the Board's approach and adoption of all the supporting principles of the Code is not an objective as such.

The Listing Rules require companies to make a disclosure statement in two parts in relation to the Code as follows:

PART 1: THE APPLICATION OF THE PRINCIPLES OF THE CODE

A. DIRECTORS

1. THE BOARD

Details of the Directors of the Company are set out in the Directors' Report and their biographical details are set out in the Board of Directors section. J E Brown is the Senior Non-executive Director.

The main strategy of the Company is set by the Board as a whole, after consultation with, and assessment of, principal stakeholders' objectives. The Board retains a Schedule of Reserved Matters which is reviewed annually to ensure that strategy and key elements that might affect the implementation of corporate goals are adhered to.

Those serving as members of the Audit Committee throughout 2009 were J E Brown (Chairman), M I Gunston and J S Reis. The Committee met three times during the year, with the Company's auditors in attendance for part of each meeting, during which it reviewed, amongst other matters, the Half-yearly and Annual Reports, the review of internal controls, the annual management report of the auditors, the level of fees charged by the auditors for non-audit services, the independence and objectivity of the auditors and the proposed nature and scope of their work before the audit commenced. Details of fees paid for non-audit services are set out in note 3 to the Financial Statements. The level of these fees and the services provided are reviewed by the Committee to ensure that they do not threaten auditor objectivity and independence.

At the end of the year, taking into account the fact that the current auditors, Hawsons, Chartered Accountants, have held their position for a number of decades, the Committee agreed that the position of auditors to the Company should be the subject of a tender process and a number of firms, including the current auditors, were invited to make submissions for the position. After a comprehensive and in-depth selection process, the Committee's recommendation to the Board was that PricewaterhouseCoopers LLP (PWC) be proposed as auditors to the Company and accordingly a resolution (Resolution 4) appointing PWC will be proposed at the AGM of the Company to be held on 28 May 2010. Hawsons have confirmed that they will not seek re-appointment as auditors and that they will cease to hold office at the conclusion of the AGM.

Those serving as members of the Remuneration Committee in 2009 were M I Gunston (Chairman), J E Brown and J S Reis. E J Boot attended in an advisory and supportive role. The Committee met twice in the year to review the Executive Directors' performance, levels of pay, bonuses, Long-Term Incentive Plan (LTIP) grants and awards and to consider other remuneration and employment matters as deemed appropriate from time to time.

All the Directors attended the seven Board meetings, the three Audit Committee meetings, the two Remuneration Committee meetings and the AGM held during the year of which they were entitled to attend.

2. CHAIRMAN AND CHIEF EXECUTIVE

The roles of the Non-executive Chairman, J S Reis, and the Managing Director, E J Boot, are clearly defined and they act in accordance with the main and supporting principles of the Code.

3. BOARD BALANCE AND INDEPENDENCE

J E Brown and M I Gunston are the independent Non-executive Directors and, with the Company as a 'smaller company' defined by the Code, they meet the requirement for having two such Directors. J S Reis, who has served as Chairman since 1996, is not deemed to be independent. He has a significant shareholding in the Company and has family ties with E J Boot, the Managing Director, as well as with other shareholders. However, this is seen in a positive light as obviously he aligns his interests with that of the Company's ongoing success.

4. APPOINTMENTS TO THE BOARD

There is currently no formal Nominations Committee. The last appointments to the Board were made in 2006, of J E Brown and M I Gunston as Non-executive Directors and of J T Sutcliffe as Finance Director and Company Secretary, and were dealt with by the then Board as a whole.

5. INFORMATION AND PROFESSIONAL DEVELOPMENT

All Directors are offered the opportunity and are encouraged to continue their professional development and update their commercial and Company knowledge as required. All have access to the Company Secretary and there is in place a written procedure for all Directors to take independent professional advice.

6. PERFORMANCE EVALUATION

The Executive Directors' performance is reviewed annually by the Remuneration Committee to ensure that they continue to contribute effectively to the Group's overall objectives. The Non-executive Directors' performance and commitment is kept under review throughout the year by the Executive Directors. During the year the Non-executive Directors met with the Group Managing Director to review the composition of the Board after the retirement of D Greaves in June 2010. It was agreed that, at present, it was appropriate for the Board to consist of two Executive Directors and three Non-executive Directors, including the Chairman, from that date.

In 2008 the Board undertook a formal written evaluation of the performance of the Board as a whole and the outcome of these evaluations was collated and presented to the Board for further consideration. A number of action points were identified to strengthen the effectiveness of the Board which were incorporated into Board procedures. No changes to this were considered necessary in 2009.

7. RE-ELECTION

All Directors are required to be re-elected at intervals of no more than three years and newly appointed Directors are subject to election at the AGM following their appointment.

B. REMUNERATION

1. THE LEVEL AND MAKE-UP OF REMUNERATION; AND

2. PROCEDURE

Details of the work of the Remuneration Committee and the policies and procedures adopted with regard to Directors' remuneration are set out in the Directors' Remuneration Report.

C. ACCOUNTABILITY AND AUDIT

1. FINANCIAL REPORTING

Details of the Directors' responsibilities and the Directors' Responsibility Statement are contained within the Directors' responsibilities section. The Independent Auditors' Report is given within the Independent Auditors' Report section.

The Directors' statement in respect of the business as a 'going concern' is provided in the Directors' Report.

2. INTERNAL CONTROL

The Board operates and maintains a system of internal controls which is reviewed regularly for its effectiveness and which broadly accords with the Turnbull Committee guidance thereon. Whilst the system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve the Company's business objectives, it can only provide reasonable, not absolute, assurance against material misstatement or loss. The system is, and has been, an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. It has been in place for the year under review and up to the date of the approval of the Annual Report and Financial Statements.

The following key processes are considered by the Board to provide effective management of significant risks to the business:

• the business organisation and structured reporting framework – each of the Company's activities is monitored through bi-monthly management meetings and formal bi-monthly subsidiary company Board meetings. The latter are attended by all the Board's Executive Directors and chaired by the respective Board Executive Director with direct responsibility for that activity. Formal lines of responsibility and levels of authority are in place within each subsidiary company. Annual plans, budgets (with two out-post years) and performance criteria for each business are set by the Executive Directors and performance against these targets is reviewed monthly by the Board. Out-turn forecasts are produced each quarter. Operations on the ground are also monitored frequently by way of visits to sites, depots, properties and regional offices by the Executive Directors;
• centralised operations – specific risks and compliance issues associated with health and safety, treasury and banking operations, company secretarial, pensions, legal, human resources and training, public and investor relations, information communication technology and insurance are managed centrally and report functionally to the appropriate Executive Director responsible for that particular operation. Each operation reviews its own system of internal controls and reports twice a year to the Audit Committee;
• business procurement – development appraisals, land purchases, options and construction contracts above a certain value require the authority of the Executive Directors to proceed. A strict routine covering the authorisation of capital expenditure is in place and Board approval is required for any corporate acquisition or disposal; and
• day-to-day operations – responsibility for running the day-to-day operations and for reviewing the associated systems of control is devolved to each subsidiary company Managing Director. Policy and procedure manuals cover major areas of their operations, including safety, purchasing, estimating, marketing, production and quality. The subsidiary company Managing Directors review and report to the Audit Committee on the effectiveness of the systems of internal controls in place and any matters of concern are raised at Board meetings.

3. AUDIT COMMITTEE AND AUDITORS

The terms of reference of the Audit Committee fully incorporate the Code's provisions in relation to the role and responsibilities of audit committees and are available for inspection at the Company's registered office.

Past experiences of using a formally appointed internal audit function have not resulted in added value to the business, although this is reviewed annually.

D. RELATIONS WITH SHAREHOLDERS

1. DIALOGUE WITH INSTITUTIONAL SHAREHOLDERS

The Company is active in communicating with its thousand or so private and institutional shareholders and likewise receives feedback from them. It is this close relationship with shareholders which is seen as one of the particular strengths and characteristics of the Company. During the year a number of formal presentations were made by members of the Board to institutional shareholders. Our website is used to aid a two-way communication process with both present and potential investors and includes all London Stock Exchange announcements, presentations to analysts and press releases over the last twelve months and links to the websites of our four principal operating subsidiaries.

2. CONSTRUCTIVE USE OF AGM

The attendance and participation of all shareholders at the AGM is much encouraged. At the AGM held in May 2009 proxies were received representing 69% of the number of shares in issue and is a demonstration of shareholder activism which has been at this level for a considerable number of years.

PART 2: COMPLIANCE WITH THE PROVISIONS OF THE CODE

The Company has complied with the vast majority of the provisions of the June 2008 version of the Code but has not complied in full or in part with the following during the year:

A.1.2, A.4.1, A.4.2, A.4.3, A.4.6

There is no Nominations Committee in place as the Board as a whole deals with the appointment of any new Director.

A.1.3

It is not felt that separate formal meetings of purely Non-executive Directors are of particular value, although they do meet informally. The performance of the Chairman is appraised by the Executive Directors, as are the other Non-executive Directors.

A.7.2

The Chairman, J S Reis, who has served longer than nine years as a Non-executive Director, is not subject to annual re-election. The Board's view is that re-election every three years is still appropriate in view of his connections with the Company.

B.1.1

This provision refers to Schedule A of the Code and Clause 6 of the Schedule states that, in general, only basic salary should be pensionable. This is contrary to precedents established within the Company prior to the introduction of the Code and any change therein would have contractual implications in the case of E J Boot. Following contractual negotiations with E J Boot this situation will change towards compliance in 2010.

B.2.1

The Chairman is a member of the Remuneration Committee, notwithstanding the fact that he was not considered independent at the time of his appointment as Chairman. However, his appointment as Chairman took place when the Code was not in place. The view is that he has a valuable role to play on this Committee.

B.2.2, B.2.3

With the Chairman as a member of the Remuneration Committee, along with the other two Non-executive Directors, their remuneration is set by the Executive Directors.

On behalf of the Board

J T SUTCLIFFE

COMPANY SECRETARY

1 APRIL 2010

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