The Company in 2005
I am pleased to say that the Company continued to make very satisfactory progress during 2005. Profits and earnings moved ahead. Operating cash flows were strong and fully backed our profits. Our balance sheet is strong. Our order books continued to expand.
The proportion of our business deriving from long-term partnerships and alliances with major customers who rely on us for an increasing range and depth of expertise continued to grow. As a result, our revenues and profits are becoming more sustainable and have better long-term forward visibility.
Our performance in non-financial terms also showed significant improvements. Our accident frequency rate fell to a new low. Our measures to reduce our contribution to global warming, our generation of waste and our energy consumption all showed the positive signs of the close management attention which they receive. Our fifth Safety, Environment and Social Report will be published in May.
Although the beginning of the year marked a change in Chief Executive, there has been no deviation from our core principles. We remain careful in our selection of what to bid and how to bid it; proud of our first-class project management, the quality of our engineering judgements and our general attention to detail. We continue to focus very closely on the management of cash.
We are, as a group, very much aware of the full range of responsibilities which we have in running and growing our business. In 2005, we restated and recommunicated our core principles and the commitments we make to all our stakeholders. We also made clear what is expected of both individual employees and our operating companies in terms of their responsibilities and behaviour.
We continued to make progress in the quality of our risk management. Our everyday currency is in identifying, mitigating, pricing and managing risks of all shapes and sizes. We continue to improve in this respect.
It was gratifying to be voted the most admired contruction company in the 2005 Management Today survey and to be the 20th most admired quoted company overall in the UK.
Strategy
We service markets which are largely conditioned by GDP growth rates. In order to grow our business at rates acceptable to our shareholders, we need both a clear picture of our own strengths and key differentiators and the financial flexibility to take opportunities to change and develop the business mix so as to lead in superior growth markets.
In conjunction with the new Chief Executive, and senior Group management, the Board’s principal focus this year has been a major strategic review. This has not been an exercise in blue-sky thinking, but a thorough, detailed analysis of what makes us successful and in which business areas we should be concentrating our financial and management capital. Ian Tyler describes the principal outcomes of this exercise in his Chief Executive’s Review.
I believe the review has given us a clear way forward and will help ensure we continue to deliver shareholder value growth.
The Board
In December, Group Managing Director, Alistair Wivell, CBE, retired from the Board and the Company after 42 years’ service to the Group. He made an enormous contribution to Balfour Beatty and we thank him sincerely for his efforts and offer him every good wish for his retirement.
During the year, both Richard Delbridge and Sir David Wright also announced their retirement as non-executive Directors. Both made a substantial contribution to the affairs of the Group and leave with both our thanks and our good wishes.
Steven Marshall joined the Board as a non-executive Director on 1 November 2005. Steven has held board positions in three major PLCs and has extensive senior management experience at three others. He brings comprehensive experience both as an executive and non-executive director and is thoroughly familiar with construction and support services.
The particular areas of expertise of each of the Directors is shown in the Directors’ Report.
People
Our continued leadership in infrastructure markets depends on our ability to recruit, retain and motivate the best people. This year, we have thoroughly updated our succession plan and are improving our recruitment and rentention methods to ensure we can continue to meet the challenge of growth. We have a strong cadre of talented, highly motivated employees upon whose efforts the success of the business rests. I am sure that, once again, shareholders will wish to join me in thanking all of our people for their efforts and achievements in 2005.
The future
We remain committed to the continuous improvement of all aspects of our performance as a business. We believe that shareholder value will continue to grow in 2006. 
Sir David John KCMG
Chairman