735427 pp21-pp22 6/4/04 12:58 pm Page 21 Alfred McAlpine plc | Annual Report & Accounts 2003 Report of the Directors 21 Report of the Directors The Directors present their Annual Report and the audited accounts for the year ended 31st December, 2003. Principal Activities The Group provides infrastructure, construction and business services, principally in the UK. The operations of the Group are reviewed on pages 6 to 17 of this report. Profits and Dividends The Group profit for the year attributable to shareholders amounted to £22.8m (2002: £14.4m) after tax and goodwill. The Directors recommend the payment of a final dividend of 6.5p per ordinary share which, together with the interim dividend of 4.5p already paid, makes a total of 11p per ordinary share for the financial year. If approved at the Annual General Meeting (‘AGM’) to be held on 20th May, 2004, the final dividend will be paid on 28th May, 2004 to those shareholders on the register at close of business on 7th May, 2004. After provision for these ordinary dividends and dividends of £0.4m paid to preference shareholders, the retained profit of £11.5m (2002: £3.6m) has been transferred to reserves. Post Balance Sheet Event On 6th February, 2004, the Group acquired the entire issued share capital of UK Power Construction Limited for a total cash consideration of £5.2m. Substantial Interests At 22nd March, 2004, the following interests in 3% or more of the Company’s ordinary share capital had been notified to the Company: Number of shares Percentage held % Fidelity International Limited 5,262,986 5.13 Zurich Financial Services 5,105,000 4.98 Aviva plc 4,185,713 4.08 Legal & General Group Plc 3,538,268 3.45 Standard Life Investments 3,159,675 3.08 Directors Present members of the Board are shown on pages 18 and 19. Mr R E Hough and Mr P H Swatman were appointed as Non-Executive Directors on 13th March, 2003. Mr A M Robb retired as a Non-Executive Director on 22nd May, 2003 and Mr J Hume resigned as a Director on 30th October, 2003. Mr D Lavelle was appointed as a Director on 30th October, 2003. With the exception of Mr P V Carolan, who was not appointed until after the year end, the other Directors served throughout the year. Mr I M Grice was appointed Group Chief Executive on 10th August, 2003, and since that date Mr G O Whitehead has served as Non-Executive Chairman. In accordance with the Company’s Articles of Association, Mr Whitehead and Mr M D Swan retire by rotation and, being eligible, offer themselves for re-election. Mr Lavelle, having been appointed by the Board during the year, offers himself for re-appointment, as does Mr Carolan, who was appointed by the Board on 11th March, 2004. Details of the Service Contracts of the Directors standing for re-election or re-appointment appear in the remuneration report on page 25. None of the Directors had a beneficial interest in any contract or arrangement of significance to which the Company or any of its subsidiaries was a party during the year. Details of the Directors’ interests in shares in the Company appear in the remuneration report on pages 23 to 27. The Group maintains Directors’ and Officers’ liability insurance. Related Party Transactions Details of transactions with related parties undertaken by the Group during the year are disclosed in note 28 on page 55. Employees It is the Group’s policy to communicate with and involve employees on matters affecting their interests at work, and inform them of the performance of the business. Further details of the Group’s policy on this can be found in the Human resources review on pages 12 and 13. It is also Group policy to treat all employees and potential employees equally and to give full consideration to suitable applications for employment from disabled persons, where they have the necessary abilities and skills for the position, and wherever possible to re-train employees who become disabled, so that they can continue their employment in another position. The Company operates an all-employee savings-related share option scheme, the principal aim of which is to encourage eligible employees to purchase shares in the Company. On 6th August, 2003, invitations to participate in this scheme were issued to all UK employees who had joined the Group on or before 1st May, 2003. Options over a total of 2,583,832 shares were granted to 1,788 participants on 27th August, 2003. At 31st December, 2003 there were 1,800 (2002: 315) employees participating in this scheme, full details of which are set out in note 21 on page 50. 735427 pp21-pp22 6/4/04 12:58 pm Page 22 Alfred McAlpine plc | Annual Report & Accounts 2003 22 Report of the Directors | continued Donations Charitable donations of £36,000 (2002: £56,106) were made during the year. These included: £10,000 to Crisis at Christmas; £9,000 to CRASH; and £4,000 to The Lighthouse Club – these latter two donations were to charities directly associated with the construction industry; and donations ranging from £25 to £2,000 were also made to a wide variety of other charities. No political donations were made. Share Capital On 25th June, 2003, 507,324 shares were allotted as part-consideration for the acquisition of AIMS Group Services Limited. Since the last AGM, no other offer has been made or agreement entered into which would require shares to be issued, other than in connection with the Executive Share Option Schemes, the Savings Related Share Option Scheme and the Restricted Share Plan. During the year, 350,000 ordinary shares were purchased by the Trustee of the Alfred McAlpine Employee Benefit Trust for a total net consideration of £938,750 (nominal value £87,500). A further 1,269,880 shares were subscribed for at par by the Trustee and allotted on 4th December, 2003. At 31st December, 2003, the Trustee held 2,450,340 ordinary shares, being approximately 2.39% of the Company’s issued ordinary share capital. At 31st December, 2003, the authority granted at the AGM held on 22nd May, 2003 to enable the Company to purchase up to 10,323,490 ordinary shares, representing 10% of its then issued ordinary share capital, was still valid. During the year, 3,555,000 ordinary shares with a nominal value of £888,750 and representing 3.5% of the Company’s issued ordinary share capital as at 22nd May, 2003 were purchased for an aggregate net consideration of £9,537,800 and subsequently cancelled under this authority. The authority expires at the conclusion of the AGM to be held on 20th May, 2004, and a resolution to renew the authority in full will be put to shareholders at that meeting. Auditors PricewaterhouseCoopers LLP have confirmed their willingness to continue in office, and a resolution concerning their re-appointment and remuneration will be proposed at the AGM. Supplier Payment Policy It is the policy of both the Company and the Group to make payment on their standard terms to suppliers unless alternative terms are agreed. The Company and the Group both seek to abide by these payment terms, provided that they are satisfied that the supplier has complied with the agreed terms and conditions. The Company’s average creditor days during the year were 30 (2002: 33). Annual General Meeting The AGM of the Company will be held in the Redgrave Suite at the Barbican Centre, Silk Street, London EC2 on 20th May, 2004 at 12 noon. Full details of the business of the meeting, together with an explanatory note on the resolutions proposed, are contained in the enclosed Notice of Meeting. By Order of the Board G J Forster Group Company Secretary 22nd March, 2004 735427 pp23-pp27 6/4/04 12:59 pm Page 23 Alfred McAlpine plc | Annual Report & Accounts 2003 Remuneration report 23 Remuneration report The auditable part of the remuneration report is set out on pages 26 to 27. INFORMATION NOT SUBJECT TO AUDIT Membership and Constitution of the Remuneration Committee The Remuneration Committee, comprising the Non-Executive Directors (Mr C D Collins, Mr R E Hough, Mr P H Swatman and, until his retirement on 22nd May, 2003, Mr A M Robb), makes recommendations to the Board on the Company’s overall framework for the remuneration of Executive Directors and certain key senior executives, and also determines their individual remuneration packages (including pension rights and compensation payments). The Committee consults the Group Chief Executive on the remuneration of the Executive Directors and senior executives, and is assisted by the Group Company Secretary. Inbucon-Meis Limited act as advisor to the Committee and also, when required, to the Company in respect of executive remuneration and share schemes. Mercer Human Resources Consulting Limited advise the Company on pension matters. Inbucon-Meis and Mercer do not provide other services to the Group and neither the Committee nor the Company is aware of any conflict of interest. Compliance The Committee is constituted and operates in accordance with the provisions of the Combined Code, as adopted by the UK Listing Authority and annexed to the Listing Rules (‘the Code’). In preparing this report the Board has complied with the provisions of the Code. Executive Remuneration Policy and Structure The Group’s aim is to provide remuneration packages that are sufficient to attract, motivate and retain Executive Directors of a high calibre. To this end, surveys and external advice are instrumental in the annual review of salary and benefits packages.