Report on Corporate

Governance (continued)

Audit committee

The Audit Committee is chaired by Richard Madden.  Its other members are

Keith Young and John Parcell.  Meetings may also be attended, by invitation,

by the chief executive officer and the finance director.  The committee meets

at least twice a year and provides a forum for reporting by the Group's

external auditors.

Relationship with

Communication with shareholders is given high priority.  The Chairman's

shareholders

Statement, and the Operating and Financial Review on pages 3 to 7 includes

a detailed review of the business and future developments.  There is regular

dialogue with institutional shareholders including presentations after the

Group's preliminary announcements of the interim and year end results.  The

Company's website carries reproductions of the Group's annual reports and

announcements.

The Annual General Meeting provides a further forum for private and

institutional shareholders to communicate with the Board and their active

participation is welcomed.  Details of resolutions to be proposed at the

Annual General Meeting are set out in the Notice of Meeting attached.

Internal control

An ongoing process for identifying, evaluating and managing the significant

risks faced by the Group was put in place progressively during the financial

year and has remained in place up to the approval date of the annual report

and accounts.  That process is regularly reviewed by the Board and accords

with the Internal Control: Guidance for Directors on the Combined Code

produced by the Turnbull working party.  During the financial year procedures

were being established to meet the requirements for the system of internal

control.

The Board intends to keep its risk control procedures under constant review

particularly as regards the need to embed internal control and risk

management procedures further into the operations of business, both in the

UK and overseas, and to deal with areas of improvement which come to

management's and the Board's attention.

Financial reporting

There is a comprehensive budgeting system with an annual budget approved

by the Board.  Monthly trading results, balance sheets and cashflow

statements are reported against the budget and prior year.  Updated

forecasts are presented in the light of the reported trading performance.

Operating control

Each executive director has defined responsibility for specific aspects of the

Group's operations.  Formal delegated authorities are in place for all

operating companies and central control is exercised over key operational

areas.  The executive directors, together with key senior executives, meet

regularly to discuss day to day operational matters.

Investment appraisal

Capital expenditure is controlled via the budgetary process and set levels of

authorisation.  For expenditure beyond a specified level, a written proposal is

submitted to the Board for approval.

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