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People making a difference.

Annual report and accounts 2004

Contents

1 Our year in brief 2 Chairman’s statement 4 Chief Executive’s review 8 Finance Director’s review 10 Our people 12 Directors13 Directors’ report 15 Health, safety, environmental and quality

16 Corporate governance statement 20 Directors’ remuneration report25 Statement of Directors’ responsibilities26 Independent auditors’ report 27 Consolidated profit and loss account28 Consolidated balance sheet 29 Consolidated cash flow statement30 Analysis of net debt

30 Statement of total recognised gains andlosses

30 Reconciliation of movements inshareholders’ funds

31 Company balance sheet32 Notes to the accounts49 Corporate directory49 Financial calendar

Enterprise plc is a major supportservices company operating in theutility, public and private sectors.Clients work with us to find abetter way.

Enterprise people constantly strive to

make the services we deliver as good

as can be. We work right across the UK

and have long-term relationships with

the utility companies and larger urban

authorities, along with other private sector

organisations. These relationships include

innovative joint ventures and partnerships.

01

Our year in brief

0

5

10

15

20

25

2004 2003 Up

Turnover £m 426.6 315.6 35%

Operating cash inflow £m 20.3 9.6 111%

Profit* £m 25.3 21.1 20%

Earnings per share** p. 22.3 20.0 12%

Dividend per share p. 6.9 6.2 11%

* Profit before tax and before exceptional items of £13.8m and goodwillamortisation of £5.9m.

The Group’s statutory profit before tax was £5.6m.

** Fully diluted earnings per share adjusted for exceptional items and goodwillamortisation net of tax. Basic Earnings per Share was 7.3p.

Enterprise plc annual report & accounts 2004

I am pleased to be able to reportupon a year of many significantachievements for Enterprise.

The Group has continued to grow steadily,building upon the foundations which we havelaid and the success we have achieved overrecent years.

Total operating profit, before exceptional items,for the financial year ending 31 December 2004was £20.8m (see page 27), an increase of £3.8m(22%) from 2003, on a turnover of £426.6m(£315.6m 2003). Adjusted diluted earnings pershare increased by 12% to 22.3p per share (seepage 37). Cash generation was strong, with anoperating cashflow of £20.3m (up £10.7m on lastyear). Our net debt position at the year end wasbetter than expected, being up only £1.0m on last year (despite a net debt increase of £11.2mon acquisitions) at £23.4m. The acquisitions whichwere made during the period are performing well, and in accordance with expectations.

Accordingly the Board is recommending a finaldividend of 4p per share, making a total for thisyear of 6.9p, an increase of 11% from 2003.

On 8 November 2004 Enterprise shares wereadmitted to the Official List, by means of theexempt listing procedure available to companieswhose shares are traded on the AlternativeInvestment Market ("AIM"). Enterprise was afounder member of AIM, and it is a market whichhas served the Company and its shareholdersvery well. Enterprise had become one of thelargest and most actively traded AIM stocks, andour migration to the main market was not only amajor milestone in our development as a publiccompany, but also the opportunity to welcomemany new investors.

As a consequence of Admission to the Official Listmany of our senior managers had the opportunityto exercise share options which were grantedsome years ago and which were a feature of thecomplex transaction by which Enterprise andARM achieved a successful merger. As Chairman,but also as a major shareholder, it was gratifyingfor me to see people who have made a majorcontribution to our success enjoying materialrewards and also now holding the best of allincentives, shares in our Company.

I decided in November that the time had comefor me to relinquish my executive responsibilitiesto our new Chief Executive Officer, Jack McGrory,who was appointed in March last year and, as you will see, is actively engaged in planning and implementing the next stages of ourdevelopment as a Group. My new position asNon-Executive Chairman, with the attendantseparation of functions between Chairman and Chief Executive, is in accordance with bestpractice standards for Corporate Governance. Mycolleague and fellow director Mike Hynes, himselfa former Chief Executive of Enterprise, was alsoappointed Non-Executive Deputy Chairman atthis time. One of our existing Non-ExecutiveDirectors, Nick Woollacott, agreed to take up theposition of Senior Independent Non-ExecutiveDirector, a role for which he is well equipped by virtue of his experience as a former director of a FTSE 100 listed company (Lattice Group plc). I believe we have a carefully balanced Board,which blends experience, independence andnew ideas, and which relishes the challengeslying ahead of us.

You will see in the Chief Executive's Report areview of the many notable achievements duringthe period. There are two which I would like tosingle out, because they so well illustrate what is the theme of this document and a guidingprinciple in our Company, namely that PeopleMake a Difference.

Chairman’s statement

02

The secret of our successOne of the keys to our success is the continuity of our senior management and their wealth of experience and understanding.

Turnover

up35%Pre tax profit (pre exceptional item)

up22%Dividend

up11%Operating cash inflow

up111%


The year began with a request from Liverpool City Council to assistit by taking a novation of a contract for the maintenance of theBuilt Environment in Liverpool, which deals with planned andreactive maintenance for Liverpool's social housing stock ofapproximately 19,000 houses. This contract had, for historic reasons,been beset with difficulties. We saw that it could only be effectivelymanaged, and levels of service improved, if a partnership approachwere to be adopted. We enjoy a successful partnership withLiverpool City Council, through Enterprise-Liverpool. Partnerships, in the truest sense, are about people. They are about buildingmutual understanding, building communication at all levels, beingprepared to share problems and solutions, and the achievement of transparency and trust. In less than a year of full operation underour management the service has improved significantly. It is anEnterprise-Liverpool success story.

We also successfully completed a re-tender for BT, our longeststanding client, for whom we have completed over 40 years of outsourcing service in the maintenance of the UK fixed linetelecommunications network. Whilst the market for these servicesexists in a highly competitive modern environment, and servicestandards have transformed since I was first involved many yearsago, I believe that one of the keys to our success is the continuity of our senior management, and the wealth of experience andunderstanding they have of what it means to work for and with BT. If it is to be more than a convenient phrase used in tenderdocuments "Client Focus" is about people who are focused ondelivering what the client needs, and who are prepared to live and breathe the quest for excellence. We are fortunate to have so many working for our organisation.

The two examples I have given are interesting in that they reflectthe origins of the growing successful public company which wehave become. Those origins lie in ARM Services Group, a provider ofsupport services to utility companies, and in Lancashire Enterprisesplc, arguably one of the pioneering examples of a public-privatepartnership. It is the coming together of people with backgroundsin the public and private sectors, forming a unique culture andrange of capabilities, which makes Enterprise so special. Ourcapabilities are deep rooted within our organisation and it is ourstrategy to address markets where our capabilities can be deployedto best effect.

The process of building Enterprise into a major support services company has involved a great deal of change, and themanagement of organic and acquisitive growth has been a majorundertaking. At our celebration to mark our Admission to theOfficial List what pleased me most was to see how so many newpeople had been so swiftly integrated and embraced into theorganisation, to share our values and our aspirations for the future.I was also able to announce an offer to our entire workforce to take up options under a share save plan, and the response across all grades of employees has been very gratifying.

Our commitment to maintaining the highest standards of healthand safety practices in our working environment remains a priority.As recent storms and floods have so vividly demonstrated, themaintenance of electricity, gas, water, telecommunications andpublic services is essential work, and sometimes maintaining andrepairing these services can be dangerous work. The “Target Zero”health and safety initiative is continuing to deliver improvements,but we will never be satisfied until we can eliminate accidents ordangerous occurrences from the workplace.

This is my fifth report as Chairman, and in each precedingstatement I have talked about the challenges of the future. Thatdoes not change. Our markets, providing outsourced services to utilities and the public sector, are huge, growing, and in theirinfancy. We are also at the start of a process of broadening ourservice offering to other large organisations, a field in which JackMcGrory has a great deal of experience. The future does hold manychallenges but we are confident in the ability of our people to meetthose challenges. Trading in this first quarter is in line with ourexpectations, and we look forward to a further successful year.

Owen McLaughlin

Chairman

03

systems supporting people


It is a privilege to be able to report upon my firstyear as Chief Executive of Enterprise in a yearwhere so much has been achieved. I joined a company built upon solid foundations,with a strong management team, which hasalready achieved many major successes, andwhich is positioned well in markets we know and understand. As the Chairman has commented, the strength ofEnterprise lies in the fact that it is the product of amerger between two organisations, one originallypublic sector, the other private sector, whosebusiness paths have converged. This hasproduced a blend of skills and capabilities which I believe to be unique.

Group StrategyThe core strategy of Enterprise, set out four years ago at the birth of today’s business, is tobecome the supplier of choice in the efficientmanagement and delivery of outsourced supportservices in our target market sectors. It is our jobto work with our clients in partnership to makeconstant improvements in the quality of service,to drive down costs, and to eliminate waste. The end product of much of what we do isessential to the daily life of everyone. It is that anappropriately trained and qualified person willarrive in the right place, at the right time, with the right tools and materials, and do his or her job safely, to a high standard, right first time. Thatsounds simple, but it requires expertise over awide range of skill sets if it is to be done properly. The efficient management and delivery of servicesfor our clients is the result of a process whichencompasses a detailed understanding of theregulatory or commercial environment in whichour clients function, engagement in theirplanning and budgeting operations, by theutilisation of process re-engineering and mappingskills, the application of leading edge technology,and rigorous attention to all of the details of thesupply chain. In the best sense the heart of ourorganisation is management, and what makes forgood management is the commitment anddedication of our expert workforce.There will be no change in the strategic directionEnterprise has taken. We have a strong strategy

which has served the Company, its clients,employees and shareholders well. Our chosenmarkets are Utilities, the Public Sector and,increasingly, outsourced services for largerorganisations in the Private Sector. These are bigmarkets, which are growing, where the need forthe skills Enterprise has to offer is clear. We willcontinue to have a clear-sighted view of areaswhere our skills can be enhanced, and to be alertto the possibilities of creating greater added value for our clients by broadening the range and scope of our services.

I see my role as being to lead a skilled andcommitted workforce to achieve its full potential.Enterprise will continue to strive for best in classperformance. By a combination of the controlledorganic growth of existing resources, and theselective acquisition of new skills and capabilitieswe will continue to build a service offering which makes a difference.

New Operating StructureOne of my first tasks as Chief Executive was toreview and bring to completion a new operatingstructure which is focused on the client groupswhich constitute our divisional businesses.

Managing Directors have been appointed in eachof the operating divisions, and in October last yearwe completed a detailed strategic review of eachdivision, and its place within the Group Strategy.We note significant opportunities for growth ineach of our divisions, and our management teams are focused on achieving success.

Introduction to Main MarketThe Company’s move to the main market of theLondon Stock Exchange last November progressedsmoothly, and I would like to thank our advisoryteam who successfully steered us through theprocedure. I was particularly pleased that so manyof our managers who became full shareholders forthe first time following the exercise of their shareoptions chose to retain shares in the Company.With the introduction of further incentive schemes,approved by shareholders at that time, we aim toretain and enhance a management team with theskills and experience to meet the future challengesand opportunities identified in our strategic review.

Chief Executive’s review

04

Our strategy is to become the supplier of choicein the efficient management and delivery of outsourcedsupport services in our chosen market sectors.

Market sector

Public sectorPrivate sectorUtilities

Enterprise services

Network maintenanceGrounds maintenanceHighways maintenanceProperty maintenanceProject managementInstallation servicesEnvironmental servicesEducation servicesICT managementConsultancy and advisory services


Enterprise CapabilitiesWe have continued to invest throughout the year in developing our systems and infrastructure. Significant progress has been madeon a number of innovative IT projects, and the range of bridgingapplications between our WorkManager operating system andexternal client systems is continually widening.

The Enterprise business model is both resilient and adaptable. Thishas allowed us to accommodate significant growth in the scope and size of activities we undertake for clients, as well as to managethe effective integration of businesses we have acquired.

Our Direct Service Provider (“DSP”) network continues to thriveacross a range of clients and services. DSPs are separate andindependent businesses, which are closely aligned with Enterprise,and benefit from our systems, buying power and processes. It is theirindependence, and the strict relationship between performance and financial reward, which underlies much of our flexibility andstrength. Our work in ensuring quality, customer focus, andcompliance with our health and safety policies and procedures iscontinual, and has the highest priority within our organisation.However, we are not solely managers of DSPs. Many of ouroperatives are now directly employed in subsidiary companies, but the processes and systems which continue to ensure high levels of efficiency and productivity across the workforce are muchthe same.

The Enterprise business model is a range of techniques adapted tothe needs of each individual client and directed towards an agreedset of desired outcomes.

AcquisitionsIn July 2004 we acquired Jarvis MPC Limited, which has beenrenamed Enterprise MPC Limited, and in September 2004 weacquired MRS Environmental Services Limited. The cost of these acquisitions was £3.7m and £7.7m (net of £6.7m clean cash on acquisition) for the respective businesses.

Enterprise MPC adds critical mass to an existing Enterprise businessproviding ICT services to schools. We can expect a transformation,over the next few years, in the scale and scope of investment byschools in ICT equipment and services. What Enterprise expects todeliver, in partnership with other specialist providers, is a managedservice to schools. We are now well positioned to meet theopportunities presented by the Building Schools for the Future programme.

Our IT platform is being built in partnership with organisations such as Microsoft and Dell. Because we will not be involved inconstruction activities we are free to partner with a number oforganisations who are bidding for the construction elements of themany projects which are being funded over the coming years.

05

We will continueto build a service offeringwhich makes a difference.


MRS strengthens our skill set in street cleaning,refuse collection and other environmental servicesincluding processing for waste recycling. It alsobrought new relationships with a number of LocalAuthorities, only a few of which were existingclients. This business fits well and complementsour existing environmental and “street scene”services, and positions us very well for theincreasing number of multi-service bundledcontracts which we expect many Local Authoritiesto outsource over the next few years followingBest Value service reviews. MRS is continuing toperform well and in line with our expectations. I am very pleased to be able to say that not onlyhas it secured the extension or renewal of anumber of its contracts and won a new contractwith Maldon District Council, but through it weare associated with helping the City of London toachieve the “Britain’s Cleanest City” award for thesecond time.

I would also like to mention two further acquisitionsthat have occured after the year end.

Heating and Building Maintenance CompanyLimited was acquired in February 2005 for £0.3m(plus a working capital injection of £1.2m). It is abusiness which provides heating and buildingmaintenance services to a number of localauthority and large private sector businesses. Thisis a very good example of a business which weacquired in order to broaden the range of serviceswe can provide to clients where that broadeningis a natural extension of existing skills andcapabilities and is managed in fundamentally thesame way as existing services. This acquisitionalready shows signs of opening up exciting newmarkets and client relationships.

CCMR Limited and its subsidiary, DBI ConsultingLimited (“DBI”) were acquired on 16 March 2005.DBI provides a range of outsourced consultancy/advisory and training services to various centralgovernment departments including the Ministryof Defence, Home Office, DFES and NHS. Workstreams include security/risk/continuity andrecovery management, business strategyimprovement and change, procurement, projectand interim management. It’s skills will beinvaluable in widening our product offering andproviding cross selling opportunities to and fromour existing public sector base. Turnover in DBI inthe year to December 2004 was £10.3m with a

profit before tax of £0.7m. Cost of acquisition was £7.5m (of which £1.5m was settled in shares)with an amount of up to £4.5m over 3 yearsdependent on increased levels of profitability. Netassets on acquisition were £0.7m.

OPERATIONS REVIEWAs always the retention of key clients over thisperiod has been of great importance to theGroup. There have been a number of otherimportant developments.

UtilitiesThe Telecoms division successfully renewed the framework agreement with British Telecomand we continue to provide infrastructuremaintenance and replacement services for BT’sfixed line network. The strategic relationship withBT is important to our business and we aim toprovide a quality service that looks for efficienciesand continuous improvement for our customer.

There have been a number of successes acrossthe Water Division during the past year. ThamesWater confirmed Enterprise as its supplier for the clean water and repair contracts for North West and North East London and added customer leakage side contracts.

The Subterra acquisition has been integrated into the wider business and enabled the Groupto become preferred supplier of survey andmaintenance works for Trans4M, a serviceprovider to Metronet. The division was alsoawarded contracts by Three Valleys Water forrepair and maintenance, and the main layingcontract for North London and Eastern regions.

Public SectorEnterprise-Liverpool is one of the leadingexamples of public private partnerships in action in the UK. In February 2004 the Companyexpanded its core competencies to include social housing repairs for Liverpool City Council’ssocial housing portfolio. Following an AuditCommission Review of the service in September2004, six months after we took over responsibilityfor the services, LCC was awarded one star ratingand promising prospects for improvement statusto mark the improvements which have been made.We have applied business process techniques toimprove the efficiency of service and to focus

Chief executive’s review continued

06

The people who work in our organisationare the foundation upon which our success has been built.

Highlights of the Year

Feb 04

Awarded £60m LiverpoolHousing Contract

April 04

Awarded £650m of watercontracts

June 04

Renewed BT Contract for £250m

July 04

Acquired JMPC educationtechnology business

September 04

Acquired MRS EnvironmentalServices

November 04

Transferred from AIM to FullListing on London StockExchange


07

We are focused on the achievementof our strategic goals.

resources much more directly on the needsof the tenants. We are also implementing a leading edge strategic mobilecommunications solution on this contract.

Field engineers are being equipped withGPRS enabled Personal Digital Assistants toproduce wireless real time and integrateddata exchange. This enables work schedulingteams at Head Office to view live progress ofwork instructions as they are programmed byfield workers and to track jobs at every stage.

This solution fully integrates people, processand system and is provided as a module ofour proprietary WorkManager system.

The grounds maintenance team was awarded a contract with Gosport Borough Council andrecently South Staffordshire Council, with anumber of other contracts which were duefor renewal being successfully retained.

ConsultancyEnterprise has for many years providedconsultancy services to the public sectorincluding regeneration, policy guidance and implementation, business process re-engineering and benchmarking services.The team has recently won a number ofcontracts in Harrow, Leeds, Sheffield, Oldhamand North East Lincolnshire. We plan to buildon this success in a growing market place.Consultancy services are the initial linkbridging our service offerings and are asignificant differentiating value added factorin our dealings with our clients.

Corporate and Social ResponsibilityThe Group is committed to developing anumber of initiatives through a defined policyand process across the business. The Groupsupports a number of community basedschemes both nationally and locally, givingpositive help to the communities in areaswhere our businesses operate.

The Group has developed a formalpartnership with Corpus Christi High Schoolin Preston. The scheme will allow teachersand pupils to experience at first hand some of the work in which we are involved.

The initiatives include supporting theapplication for ‘specialist’ school status; work experience opportunities; developingteachers understanding of industry andsupporting the ‘young enterprise’ scheme.The benefits to the Group include access tothe knowledge and experience of educationexperts to support the development of ourproduct offering.

Our PeopleI recognise that the people who work in ourorganisation are the foundation on which our success has been built. I thank everyonein the organisation for their commitment,dedication and hard work over the past year. It is my personal commitment to doeverything I can to support and develop the potential of all those who work within the Group.

Health and Safety and QualityI was pleased to note the impressive safetyrecord of the Enterprise Group and that it isthe holder of the RoSPA Gold Award.

Our Target Zero campaign continues to lead the way in the challenge to eradicateaccidents and unsafe working practices.Excellence of performance in all respects of health and safety best practice remains our top priority and is a key part of ourintegration plans whenever we win newcontracts or acquire new businesses.

ProspectsTrading in the current year is proceedingsatisfactorily and in line with ourexpectations. Our strategy for the future isclear and we are focused on the achievementof our strategic goals. I relish the challengesand opportunities which lie ahead.

Jack McGrory Chief Executive


Overview

2004 has been yet another successful and

eventful year for the Group, with substantial

growth in turnover and operating profit, a

reinforced healthy order book and continued

tight control of working capital. The Group is

built on a firm financial foundation and we

can look forward to building even stronger

shareholder value in the years to come.

In the second half year we were able to finalise

an increased £110m bank facility and make two

exciting acquisitions, MPC and MRS. Both of these

organisations enhance the services we can offer

existing clients and the strong management

teams we have acquired will have our full support

in expanding their market penetration under the

Enterprise umbrella. Financially, they have both

performed to expectation in the period post

acquisition and we welcome their management

and staff to the Group.

Turnover

Turnover rose by 35% in the year with the

new acquisitions MPC and MRS contributing

£8.2m and £8.4m respectively. Excluding these

acquisitions, turnover was up by 30% (£94m) on

2003. Of this increase, £24m can be attributed

to the novation of the Social Housing contract

in Liverpool. £56m represents the conclusion of

the first full year of trading by Subterra (including

ramp up of sales under Trans4M by £7.4m to

£8.5m) and the balance represents additional

organic growth within the Group.

Operating result

Total operating profit (excluding the exceptional

item) was up 22% at £20.8m (see page 27)

and EBITA up 20% at £26.7m. MPC and MRS

collectively contributed £1.0m to operating

profit (before the amortisation of goodwill).

Earnings Per Share

In note 9 to the accounts we report earnings per

share after adjustment for goodwill amortisation

and non recurring charges to give a clearer

interpretation of underlying earnings performance.

Given the management incentives in the Company

the adjusted diluted earnings per share continues

to be the most relevant and this increased by

12% in the period to 22.3p (see note 9).

Interest

The interest charge in the year of £1.4m is 27%

up on the prior year due to the increased level

of debt associated with funding the acquisition

of Subterra for a full year and the more recent

acquisitions of MPC and MRS.

Exceptional Item

The exceptional charge to the profit and loss

account of £13.8m is mainly a non cash charge

related to the options awarded over shares in

the ARM Group EST and under the 2002

Unapproved Plan which, following shareholder

approval, became exercisable on Admission to

the Official List. The charge is analysed in note 19.

As there is an associated tax credit of £7.2m, the

profit and loss account has suffered a net post tax

charge of £6.6m whilst net worth increases by the

tax credit less the costs of Admission. This is due

to the fact that the pre-tax effect of option

exercise is recycled through reserves.

Taxation

The Group’s tax rate excluding the impact of the

exceptional item and goodwill amortisation was

30% (previous year 28%).

Finance Director’s review

08

We can look forward to building even stronger shareholder value in the years to come.


Dividends

The Board recommends a final dividend of 4.0p, making a total for

the year of 6.9p, an increase of 11% on the prior year. The total

dividend cost of £5.3m is covered more than 3 times by post tax

earnings (excluding goodwill amortisation and non cash

exceptional items).

Cash

Underlying cash flows were encouraging with net inflow from

operating activities in the year of £20.3m. The overall movement

in net debt in the year was restricted to an increase of just £1.0m

despite an increase in a net debt of £11.2m on acquiring MPC and

MRS (cost of acquisition less cash and net debt acquired) .

Year end net debt of £23.4m is better than expected but did

benefit from tax payments in the year reduced by £3.3m due

to the tax credit of £7.2m relating to the exceptional item. The

remainder of that exceptional tax credit is expected to benefit

the cash flow in 2005.

Bank Facility

As noted above the Group has secured an increase in its bank

facility from £51m to £110m, comprising of a £70m 3 year term

loan, a £30m 364 day facility and a £10m uncommitted overdraft

facility. This increased funding will support the continuing growth

of the business.

Pensions

The Group has limited exposure to pensions under funding with

FRS17 disclosures contained in note 24. Reporting under IFRS

will result in an adjustment to opening reserves in respect of

accrued liabilities.

International Financial Reporting Standards (“IFRS”)

In 2005 Enterprise plc will be required to produce its financial

statements in accordance with IFRS. The process regarding the

endorsement of IFRS by the EU commission is on going and there

may therefore be changes prior to IFRS being adopted by the

Company. The first numbers to be reported in this format will be

in respect of the six month period ending 30 June 2005. This will

include appropriate comparatives for 2004. The areas considered to

have the most significant impact for Enterprise plc results in 2005

are in respect of goodwill and accounting for share based

payments.

The goodwill charge in respect of 2004 was £5.9m. Under IFRS the

accounting treatment will change from amortisation over 20 years

to maintenance of the carrying value at cost but subject to an

annual impairment review. Existing goodwill will, therefore, be

carried forward and reviewed annually.

Under IFRS the fair value of options is to be expensed through

the profit and loss account. As noted in our circular to shareholders

dated 20 October 2004, a new Company Share Ownership Plan

was introduced and a Long Term Incentive Plan was proposed.

The latter has not yet been approved by the shareholders and

shares, or options, have yet to be issued under either scheme.

The impact on results will be monitored as options are issued.

We believe that these are the major adjustments to the profit and

loss account which will arise in the transition to IFRS. As there is still

work to do to finalise a range of minor adjustments and to review

the completeness of the adjustments it is therefore possible that

other adjustments may come to light which will impact the

Company in the preparation of the first full set of IFRS financial

statements for the year ending 31 December 2005.

Neil Kirkby

Finance Director

09

Underlying cash flows were encouraging.


We recognise and value the commitment of our people to support the development and growth of the organisation.

Our people

10

Throughout the Enterprise Group we recognise and valuethe commitment of our people to support the developmentand growth of the organisation. The principles of bestpractice are adopted to ensure that the relationship ispositive and these are regularly reviewed and updated. This has recently included changed requirements for flexible working, dispute resolution, discipline and grievance, age discrimination and accommodation ofpotential changes in the Working Time Directive.

Training and DevelopmentWe are committed to ensuring all employees receiveeffective training and development in order to maximiseperformance and a structured mechanism for career andpersonal development. The Group has in place a formal androbust succession planning system to support the ongoingneeds of the business as it continues to develop.

Communicating with our EmployeesOpen and regular communication with employees throughboth formal and informal processes is important across ourbusiness. As part of this commitment we continue todevelop our internal communication processes including‘The Pulse’ newsletter, the ‘Intranet information site’ and theuse of ‘Team Briefs’. Our ‘Employee Council’ also meets fourtimes a year and provides the vehicle for employees to beinvolved in the future growth of the Group and to expresstheir views on activities relating to their jobs and the Group.

Reward and RecognitionAcross the business we have well established reward andrecognition practices that reinforce business goals andincentives. Involvement in the Group is encouraged throughmeans such as the implementation of the SAYE Sharesavescheme which gives employees the opportunity toparticipate in the financial success of the Group. The Groupalso launched 'Lets Connect' providing employees with theopportunity to obtain low cost, high-quality, internet-readycomputer packages.

DiversityThe Group recognises and values the diversity of ouremployees, customers and the general community in whichwe operate. We are committed to eliminating discriminationand prejudice and to promote equality of opportunityregardless of people’s gender, race, colour, ethnic or nationalorigin, nationality, disability, sexual preference, marital status,responsibility for dependants, religion, trade union activityand age. We believe that everyone is different and unless wetake diversity seriously then we will fail to recruit, retain andengage the pool of talented employees needed to sustainand improve business performance.

The Group encourages the recruitment and training andcareer development of disabled people on the basis of theiraptitude and abilities, and the retention and re-training ofemployees who become disabled.


11Enterprise plc annual report & accounts 2004

Directors

12

1

6 5

2

7

3

4

1 Owen McLaughlin (aged 45)

Non-Executive Chairman – responsible for the overallstrategy of the Company. He has over 25 years experienceof supplying support services to the utility industries.

2 Jack McGrory (aged 51)

Chief Executive – has a wealth of experience in the services industry including health, oil, catering and insurance services. His operational knowledgeinvolves the provision of services both to commercial and local authority clients.

3 Neil Kirkby (aged 40)

Finance Director – responsible for all financial aspects ofthe business. A chartered accountant with many yearsexperience operating in a fully listed plc environment.

6 Nick Woollacott (aged 57)

Senior Independent Non-Executive Director – with wideexperience in the energy and technology sectors. Formerlya board member of the FTSE 100 top 50 company LatticeGroup plc.

7 Alistair Hetherington (aged 61)

Non-Executive Director – a retired chartered accountantand former partner of Ernst & Young.

5 Michael Hynes (aged 58)

Non-Executive Deputy Chairman – an economist withextensive experience of working in and for the publicsector and local authority service provision.

4 John Gavan (aged 49)

Commercial Director – a corporate lawyer with experienceof all aspects of contract negotiation, corporategovernance and mergers and acquisitions.


The Directors submit their report together with the audited

financial statements of the Group and Company for the year

ended 31 December 2004.

Principal Activities

The principal activities of the Group during the year continued

to be the provision of support services to utility companies,

local authorities, educational establishments and other large

organisations in both the public and private sectors.

Business Review

The Chairman’s Statement, Chief Executive’s Review and Finance

Director’s Review on pages 2 to 9 contain a detailed review

of the operations of the Group during the year together with

a commentary on its state of affairs, financial position and

prospects for the future.

Results for the Year

The Group made a profit for the year, after taxation, of £5.3m

(2003: £10.0m).

Dividends

On 15 October 2004 an interim dividend of 2.9p per share was

paid. The Directors recommend a final dividend of 4p per share

making a total for the year of 6.9p per share (2003: 6.2p).

The final dividend, if approved, will be paid on 9 May 2005 to

ordinary shareholders whose names are on the register on

15 April 2005.

Share Capital

In the year ended 31 December 2004, 5,436,256 ordinary shares

were issued pursuant to the exercise of share options which

had been granted under existing Group Share Option Schemes.

121,480 ordinary shares were issued as part consideration for the

acquisition of Enterprise MPC (formerly JMPC) Ltd. Details of

changes in share capital are detailed in note 19 to the accounts.

Directors

The names and the biographical details of the current Directors

of the Company are shown on page 12.

The Directors who have served during the period are:

Current Directors Date of Appointment

Owen McLaughlin

Jack McGrory 15 March 2004

John Gavan

Michael Hynes

Neil Kirkby

Alistair Hetherington

Nick Woollacott

Former Director Date of Resignation

Sean Keogh 20 January 2004

The Directors to retire by rotation at the Annual General Meeting

in accordance with the Company’s Articles of Association are

Owen McLaughlin and John Gavan and, being eligible, they each

offer themselves for re-election.

The interests of the Directors in the share capital of the Company

are disclosed in the Directors’ Remuneration Report on pages 20

to 24.

Corporate Governance

A Corporate Governance Statement is on pages 16 to 19.

Health & Safety, Quality and Environment

The Group’s policy on health and safety, quality and the

environment is set out on page 15.

Employment

A statement on the Group’s policy on employment, including that

relating to employee involvement and the employment of disabled

persons is set out in the “Our People” section on page 10.

Substantial Shareholdings

As at 7 March 2005, the following shareholdings representing

3% or more of the Company’s issued share capital, had been

notified to the Company:

Anglo Irish Trust Company Ltd 8.82%

Aegon UK plc Group of Companies 4.57%

Enterprise plc annual report & accounts 2004 13

Directors’ report

Annual General Meeting

The notice of and related information on the Company’s Annual

General Meeting to be held on Wednesday 4 May 2005 is included

in the separate circular to shareholders. The circular incorporates

the notice of AGM together with an explanatory letter dealing with

each of the proposed resolutions.

Policy on Payment to Suppliers

It is the Company’s policy to agree the terms and conditions under

which business transactions are conducted with each supplier.

The Company will abide by the payment terms where the supplier

has provided goods and services in accordance with the terms and

conditions of the contract. Trade creditors of the Company as at

31 December 2004 were equivalent to 33 days (2003: 31 days)

purchases, based on the average daily amount invoiced by suppliers

during the year.

Charitable and Political Donations

During the year charitable contributions amounted to £10,640

(2003: £8,859). No contributions were made to any political

parties during the year.

Going Concern

The Directors have a reasonable expectation, after making due and

careful enquiries, that the Company and the Group have adequate

resources to continue in operational existence for the foreseeable

future. For this reason, they have adopted the going concern basis

in the accounts. In forming this opinion the Board has reviewed the

Group’s budget and cash flows for 2005 and projections for the

following year.

Auditors

Deloitte & Touche LLP have expressed their willingness to continue

in office as Auditors to the Company and a resolution proposing

their appointment and authorising the Directors to determine their

remuneration will be proposed at the Annual General Meeting.

For and on behalf of the Board

John Gavan

Secretary

18 March 2005

Directors’ report continued

14 Enterprise plc annual report & accounts 2004

Health and Safety PolicyThe Health and Safety of our employees, contractors and those who may be affected by our operations remains paramount throughout theGroup. Effective health and safety management and the prevention of risks, accidents and incidents and the promotion of safe workingenvironments forms an integral part of the Company’s, the Directors and Senior Managers targets and objectives with the ultimate goal ofreducing reportable accidents and incidents to zero.

The Board of Directors recognise and acknowledge the fundamental importance of health and safety and have taken the following actionas an integral part of their commitment to health and safety and their commitment to gaining continual improvement: -

l The Board of Directors have appointed the Chief Executive Officer Jack McGrory as the executive director responsible for health andsafety throughout the Group.

l The Board have also appointed an Executive Board member to be directly responsible for the development of all corporate health andsafety policies, procedures and associated control measures and for monitoring / auditing compliance throughout the Group via adedicated team of health and safety professionals. This Executive Board member provides direct feedback to the Executive andOperational Boards on a monthly basis.

l The Chief Executive Officer has appointed each Managing Director to be the Director responsible for health and safety within theirrespective Divisions.

InitiativesThe Board of Directors launched their “Target Zero” campaign in June 2003 which is primarily aimed at reducing RIDDOR Reportableaccidents and incidents to zero via the elimination of unsafe acts and unsafe conditions within the work place. Thus effectively enabling us to eliminate the conditions that ultimately give rise to accidents and incidents.

Awards and AccreditationsThe Company operates a dedicated health and safety management system that was externally certificated against the requirements ofOHSAS 18001 in January 2003.

The Company gained the British Safety Councils prestigious 5 Star Award on our inaugural audit in November 2001 in recognition of itscompliance against the requirements of the Health and Safety Executives Guidance Document “HS(G)65 Successful Health and SafetyManagement Systems.”

In recognition of our ability to continually reduce accidents and incidents within the workplace, the Company has gained the RoSPA GoldAward for the last four consecutive years.

Environmental PolicyThe Company is committed to minimising the impact of our operations on the environment and community at large. An integral part of this commitment was the development and implementation of our dedicated environmental management system that gainedexternal accreditation in March 2000 against the requirements of ISO 14001. The systems and associated control measures are presentlybeing reviewed and updated in order to meet the requirements of the newly issued ISO 14001:2004 version of the internationalenvironmental management standard with a view to gaining accreditation against the revised standard by February 2006 well ahead of the May 2006 deadline.

QualityThe Company is fully committed to the delivery and provision of a quality product and service and continually strives to meet the evolvingand growing needs of our Clients and Customers. The Group operates a dedicated quality management system that has been externallyaccredited against the requirements of ISO 9001:2000.


Health, safety, environmental and quality

Following admission of the entire issued share capital of the Company to the Official List of the UK Listing Authority and to trading on the London Stock Exchange market for listed securities on 8 November 2004 (“Full Listing”), the Directors are now required to submit a statement on compliance with the 2003 FRC Combined Code (“the 2003 Code”).

Previously, as a company listed on AIM from 1995, the Board had sought to embrace many of the principles of the Combined Code.Following the introduction of the 2003 Code and, in preparation for Full Listing, the Board reviewed and updated its Corporate Governanceframework.

Statement of Compliance with the Combined CodeThe Board supports the 2003 Code and confirms that the Group’s policy is to conduct its business in accordance with the Principles of Good Governance as set out in the 2003 Code.

The Company has been in compliance with the provisions set out in Section 1 of the 2003 Code throughout the year with the exception ofthe following areas:

2003 Code provision A.2.1: For the period from 20 January 2004 to 15 March 2004 the roles of Chairman and Chief Executive were temporarilycombined as an interim measure pending the appointment of Jack McGrory as Chief Executive. Apart from this interim arrangement, therehas been a clear division of responsibility between the Chairman and the Chief Executive. The Chairman is responsible for the running ofthe Board and the Chief Executive is responsible for managing the business and for implementing Board strategy and policy.

2003 Code provision A.6.1: The Board currently conducts a rigorous informal evaluation of the Board and individual Directors but isconsidering options for a more formal system of performance evaluation.

2003 Code provisions B.2.1/C.3.1: Although all Committees are now formed entirely of Non Executive Directors, not all of those Directors canbe classed as independent, since Mr McLaughlin and Mr Hynes were formerly Executive Directors. The Board takes the view that the currentcomposition is appropriate to the size and nature of the organisation. The Nomination Committee comprises a majority of independentNon-Executives whilst the Audit and Remuneration Committees have independent Non-Executive Directors as the principal members whocall upon the advice and experience of the other Non-Executive Directors to ensure the most effective discharge of their responsibilities.

Operation of the 2003 CodeTaken together with the Directors’ Remuneration Report presented on pages 20 to 24, the statements explain how the Company hasapplied the principles of good corporate governance set out in the 2003 Code.

The BoardThe Board currently consists of three Executive Directors and four Non-Executive Directors:

Mr Woollacott and Mr Hetherington are considered to be the Non-Executive Directors who are independent of the management and affairsof the Group. Additionally, and in accordance with the recommendation of the 2003 Code, Mr Woollacott has been identified as the SeniorIndependent Non-Executive Director of the Company.

Prior to Full Listing there had been two Non-Executive Directors, both of whom were independent. Mr McLaughlin had held the position of Executive Chairman, and Mr Hynes had held the position of Executive Director but the Board considered that, given the considerablegrowth of Enterprise in recent years and the move to the Official List this was an appropriate time to make changes at Board level.Consequently Mr McLaughlin and Mr Hynes accepted invitations to become Non-Executive Directors (Chairman and Deputy Chairmanrespectively) of the Company upon Full Listing following which the Board comprised a majority of Non-Executive Directors.

Biographical details and the responsibilities of each Director are set out on page 12.

The Non-Executive Directors meet with the Chairman separately during the year. Non-Executive Directors have also attended certainmeetings with major investors and this is seen as an increasingly important role.

Board meetings are held at regular scheduled intervals and the Directors are supplied in a timely manner with information necessary todischarge their duties. Directors may, from time to time in the furtherance of their duties, take independent professional advice at theCompany’s expense, while also having access to the advice and services of the Company Secretary who additionally provides details ofsuitable training opportunities.

Corporate governance statement


A formal schedule has been adopted by the Directors of matters that are specifically reserved for consideration by the Board and this issubject to regular review. The schedule of matters reserved for the Board includes the determination of overall group strategy, approval of business plans and annual budgets, major capital investments acquisitions and disposals, risk management strategy, the approval offinancial statements and shareholder circulars and treasury policy.

The Board’s strategy is implemented via the Executive Management Board, comprising senior executives, such as the Health and SafetyDirector, who assist the Chief Executive in the management of the operations of the Group as a whole. Chaired by Jack McGrory, the Executive Management Board meets on a monthly basis and has additionally held strategy sessions. Detailed operational activity is the focus of the operational boards.

In accordance with the Company’s Articles of Association, one third of the Board is required to retire by rotation each year. In addition, allthose appointed during the year will stand for re-election at the next General Meeting, ensuring that each board member faces re-electionat regular intervals.

A Resolution under the Articles of Association to re-elect John Gavan, who retires by rotation, will be put to the forthcoming AnnualGeneral Meeting. Mr Gavan has a service agreement with the Company which is terminable by one year’s notice from the Company.

ChairmanAs previously stated, upon Full Listing Owen McLaughlin, the Chairman, became Non-Executive Chairman of the Company. Mr McLaughlinhad been the Executive Chairman since August 2000. Since becoming a Non-Executive Director he normally spends at least two days per week on the business of the Company. The Board considers that his other commitments do not hinder his ability to discharge hisresponsibilities to the Company effectively.

A resolution will also be put to the forthcoming Annual General Meeting concerning the re-election of Owen McLaughlin who retires byrotation. The Board are of the opinion that Mr McLaughlin should be re-elected as a Director at the forthcoming Annual General Meetingsince rigorous evaluation has confirmed that his performance continues to be effective, and committed.

Board CommitteesThe Board’s Committees meet regularly to enable them to discharge their responsibilities. Each Committee has formal Terms of Referencewhich are reviewed regularly by the Board. Copies are available upon request from the Company Secretary, who is the secretary to all of the Committees, and can be found on the Company’s website at www.enterprise.plc.uk.

The Audit CommitteeThe members of the Audit Committee consist solely of Non-Executive Directors, Mr Hetherington, Mr Hynes and Mr McLaughlin. AlistairHetherington, a Chartered Accountant and former partner with Ernst & Young is the Chairman of the Committee and is deemed to have relevant financial experience under the 2003 Code. Biographical details of the members of the Committee are set out on page 12. The purpose of the Committee includes discussing the scope of the external audit, reviewing the Company’s internal audit function, toreceive direct reports from the external and internal auditors and to review the half yearly and annual financial statements before they arepresented to the Board, focusing in particular on accounting policies and compliance, areas of management judgement and estimates, andthe effectiveness of internal control procedures. Other areas of activity during 2004 included a review of the impact of the implementationin 2005 of International Accounting Standards and a review of the effectiveness of the risk management process within the Group.

The Committee also reviews the cost effectiveness and independence of the Group’s auditors, Deloitte & Touche LLP.

The Committee reviews all non-audit services provided by the external auditors to ensure that there is no threat to the objectivity andindependence of the auditors arising from the provision of these services. An analysis of auditors fees incurred in 2004 is set out in note 3on page 35. In the year ended 31 December 2004 the Committee has reviewed and obtained confirmation of the auditor’s independence.

Having reviewed, and being satisfied with, the level of fees, objectivity, independence, expertise, resources and general effectiveness ofDeloitte & Touche LLP, the Committee recommends (and the Board agrees to propose) their reappointment as auditors of the Company atthe forthcoming Annual General Meeting.

The Nomination CommitteeThe Nomination Committee was established in 1998. During the current year the Committee’s Terms of Reference were reviewed andupdated to reflect the 2003 Code.


The Nomination Committee consists of three Non-Executive Directors, a majority of whom are independent. The members are Mr McLaughlin; Mr Woollacott and Mr Hetherington. Biographical details of the members of the Committee are set out on page 12. TheCommittee is chaired by Owen McLaughlin except when his own succession is being discussed at which point Nick Woollacott chairs themeeting as the Senior Independent Director. The purpose of the Committee is to make recommendations to the Board on all new Boardappointments including natural and planned transitions. This was the case when Mr Woollacott (who was not personally involved in thenomination process) was appointed as the Senior Independent Non Executive Director in readiness for Full Listing. The Committee alsoconsidered the proposals for the transition of Mr McLaughlin and Mr Hynes from Executive to Non-Executive Directors.

Whilst there have been no board appointments from external sources during the year (the selection of Jack McGrory as Chief Executivehaving been undertaken towards the end of the previous year) the Committee regularly considers whether or not the Board needsstrengthening and considers that the Board is adequate and balanced at present.

The Remuneration CommitteeDetails of the constitution and function of the Remuneration Committee are contained within the Directors’ Remuneration Report on pages 20 to 24.

Details of the Group’s policy in respect of Directors’ remuneration, the remuneration and pension benefits pertaining to each of theDirectors and details of Directors’ interests under the Company’s Save as You Earn Scheme and share option schemes, together with details of Directors’ service agreements are contained within the Directors’ Remuneration Report on pages 20 to 24.

Board and Committee AttendanceThe following table details the number of Board and Committee meetings held during the year ended 31 December 2004 and theattendance record of each Director. Additionally the Board has held three strategy sessions dealing exclusively with the strategic focus of the Group.

Remuneration Audit Nomination Attendance Board Committee Committee Committee

Number of Meetings held in year 7 5 2 1Owen McLaughlin 7 5 2 1Michael Hynes 7 5 2Jack McGrory 7 1*Neil Kirkby 7 2*John Gavan 7 1*Nick Woollacott 7 5 2* 1Alistair Hetherington 6 4 2 1

Note: * Attendance at the request of the Committee

System of Internal Control

The Directors are responsible for the maintenance of the Group’s system of internal controls and risk management and reviewing theireffectiveness. The Board recognises that any system of internal control can only provide reasonable and not absolute assurance againstmaterial misstatement or loss. The key procedures that are in place to provide effective internal control are as follows;

Allocation of responsibilities – the Board has clearly defined delegations of authority which is visible throughout the Group. Compliancewith this is reviewed as part of the Internal Audit process.

Risk management and internal control – a formal review is undertaken on a six monthly basis of all risks facing the Group which aredeemed to be material and controls in operation to mitigate those risks where applicable. This review is performed by the Executive Boardtogether with senior management and reviewed at the plc Board meeting. In addition a monthly board pack is produced which hascontent provided by each operating division and support function highlighting any risks/issues and appropriate actions being undertaken –action logs are agreed at those meetings.

Corporate governance statement continued


A monthly meeting is held which is attended by the executive members of the plc Board as well as senior operational management. Thismeeting covers risk management and review of the ‘board pack’ as noted above and full review of financial performance. Financial reportingis against budget, previous forecast and last year actual. The year to date financial position is reviewed each month together with the latestfull year forecast (which is updated monthly). A summary financial report is copied to the Non-Executive Directors.

IT systems – controls and procedures are in place to maintain integrity of system access and data content. Disaster recovery plans are inplace and have been tested in the period covered by the report.

Internal Audit – Internal Audit is undertaken using both external and internal resource. An independent firm of accountants reviews the risk management reports produced by the business, holds appropriate discussions with senior management and reports directly to theAudit Committee. In addition an internal audit function is in existence – this has been operational for nearly two years now. In its first year of operation this function reported on financial controls operated by the core Enterprise business. In the last six months the scope of thisfunction has been rolled out considerably to include reporting on operational, commercial, and financial controls across the whole Group, including acquisitions in the period. The scope of these audits will be increased further in the new financial period based on detailed process mapping techniques. Health and safety/quality audits were already in place as a fundamental part of the risk management process.

The Directors confirm that, in applying the principles of Good Governance, the Group has complied throughout the accounting period andup to the date of approval of the financial statements with the Code of best practice as set out in part C.2 of the Combined Code.

Relations with ShareholdersThe Company conducts periodic meetings with its principal shareholders in order to discuss relevant issues, including remunerationarrangements. During 2004 there was a series of meetings to consult with major shareholders on the proposed new Company share optionplans and in respect of the arrangements for the exercise of existing share options which arose upon Full Listing.

The Company communicates with its wider shareholder base through general meetings and through its website. The investor website isintegrated into the Company’s corporate website and is designed to communicate key aspects of financial performance. During the year, the Investor Relations website was re-launched to broaden the scope of information made available to shareholders and to fit a refreshedbranding style. Copies of the Annual and Interim Reports are posted on the website as are announcements (RNS) relating to corporateactivity. Through our IR partner, Investis, Enterprise has been entered for the IR Society Online Best Practice Awards in the category "IR BestPractice Website Smaller Quoted Company Award."

At general meetings, each issue is the subject of a separate resolution and all proxy votes are counted and disclosed after each resolutionhas been dealt with on a show of hands. The Annual General Meeting is held at a site close to the Group’s headquarters.

A regular dialogue is also maintained with institutions and analysts.

CommunicationsDuring 2004 the establishment of a corporate strategic team to focus on business development resulted in a complete overhaul of theGroup Intranet and other communication systems. The Intranet provides a wealth of information accessible across the Group includingnews, processes and results. An internal staff newsletter, “The Pulse” was also launched during the year.

The Board recognises that the Annual Report is the principal way in which the Directors make themselves accountable to the shareholders.To this end, the Report is intended to present a balanced and clear view of the Group’s operations and prospects.

For and on behalf of the Board

John Gavan Secretary

18 March 2005


This report has been compiled in accordance with the Directors’ Remuneration Report Regulations 2002, which introduced new statutoryrequirements for the disclosure of Directors’ remuneration in respect of periods ending on or after 31 December 2002. This report alsomeets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the Board has applied thePrinciples of Good Governance relating to Directors’ remuneration. As required by the Regulations this report will be put to the shareholdersfor approval at the Annual General Meeting on 4 May 2005.

The Regulations require the auditors to report to the Company’s members on certain parts of the Directors’ remuneration report and tostate whether, in their opinion, those parts of the report have been properly prepared in accordance with the Companies Act 1985 (asamended by the Regulations).

The information marked * has been audited by the independent auditors Deloitte & Touche LLP.

Composition of the Remuneration CommitteeThe Remuneration Committee of the Board of Directors (“the Committee”) consists solely of the Company’s Non-Executive Directors, underthe Chairmanship of Nick Woollacott, Senior Independent Director.

Members of the Committee are:

Nick WoollacottAlistair HetheringtonOwen McLaughlinMike Hynes (from 27 July 2004)

The Board appreciates that, owing to their former executive capacities with the Company, Mr McLaughlin and Mr Hynes are not consideredto be independent Non-Executive Directors. However, their long history with the Company and consequent experience leads the Board tobelieve that their contribution in helping to frame its remuneration strategy, at this key stage in the Company’s development, is especiallyvaluable in delivering success for shareholders.

The purpose of the Committee is to make recommendations to the Board on executive remuneration policy for adoption by the Board and to determine specific remuneration packages for each of the Executive Directors on behalf of the Board. The remuneration of the Non-Executive Directors is determined by the Executive Directors and no Director is involved in determining his own remuneration. Theterms of reference for the Remuneration Committee can be found on the Company’s website at www.enterprise.plc.uk.

During the year the Committee considered proposals for alternative incentive plans to replace the current schemes which would becomeexercisable upon Admission of the Company’s shares to the Official List. The Committee was assisted in this task by the appointment ofMike Hynes as an additional member of the Committee.

The Committee consults the Group Chief Executive and the HR Director where appropriate regarding its proposals and has access toexternal professional advice. In February 2005, the Committee appointed New Bridge Street Consultants LLP as its independentremuneration advisors following a competitive evaluation exercise.

Remuneration PolicyThe Group’s policy in respect of Directors’ remuneration for the forthcoming years is to continue to provide the most effective remunerationand incentive mechanisms to attract, retain and motivate Directors of the quality required in order to achieve the growth targets in theCompany’s three year Business Plan and thereby drive growth in shareholder value. It is also to maintain an appropriate balance betweenbasic salary and bonus potential, and longer term performance based incentives.

The basic salary of the Executive Directors is reviewed each year by the Remuneration Committee. The review is undertaken to ensure thatthe remuneration package and benefits for Executive Directors represents a fair return for the employment. Due consideration is given to performance and reward relative to that of comparable companies. Basic salary and benefits are only part of the total remunerationpackage, which in 2004 included a discretionary bonus of up to 50% of their basic salary for achieving group financial and individualperformance targets, share options, private medical benefits and life assurance.

In order to facilitate the continued delivery of strong returns to shareholders, the Committee undertook a major review of executiveremuneration strategy during the year, the key results of which are outlined below.

Directors’ remuneration report


Future Remuneration StrategyThe Company’s remuneration philosophy, as it applies to Executive Directors and other key senior executives, is to provide modest fixedremuneration with highly competitive levels of incentive-based pay which reward Executive Directors for exceptional business performanceand demonstrably superior returns to shareholders. Following Admission of the Company’s shares to the Official List, the Committee hasgiven detailed consideration as to how to apply this philosophy going forward. After consultation with major shareholders, this strategy will shortly be submitted to shareholders for approval, but the key features are as follows:

Base Salaries – the Remuneration Committee believes that the policy to date of paying, in aggregate, modest base salaries, but withperformance based rewards which, if performance is good enough, can more than make up the shortfall versus market, has served theCompany well. Accordingly, base salaries will continue to be set in this way. However, exceptional circumstances may arise (e.g. specialrecruitment or a post-transaction consolidation) where the Committee should have the scope to pay market levels on a discretionary basis.As an exceptional matter, this approach will form part of the overall strategy.

Annual Incentive Plan – for the achievement of truly stretching financial, operational and key strategy objectives, the maximum bonuspayment to directors will be 100% of base salary. All payments will continue to be subject to demanding performance criteria with thepayment for the achievement of on-target performance being 40% of base salary.

Deferral of Annual Incentive Plan Awards in Enterprise Shares – 50% of bonus, if any, will be in the form of Company shares which will vestafter three years. In the opinion of the Committee, this provides a greater community of interests between executives and shareholders.

Long-term Incentives – subject to shareholder approval, the Committee intends to award a mixture of share options and performanceshares to Executive Directors and senior executives.

The Committee believes that the strategy outlined above will help deliver continued strong results by allowing key talent to share in the financial success of the Company and rewards to shareholders. Further details of these proposals, including the introduction ofshareholding guidelines, will be included in a written communication to shareholders for approval at a future general meeting.

Share Option Schemes:

All Employee Sharesave SchemeShareholders gave approval for an Inland Revenue approved Sharesave Scheme at the EGM held on 5 November 2004 (“the EGM”). Allemployees of the Group were eligible to apply for the Sharesave scheme and on 10 December 2004, applicants were granted options toacquire Ordinary Shares which they will purchase using money saved over a three year period. As permitted under current legislation, theoptions were granted at a 20 per cent. discount to the prevailing market price at the time of grant (i.e. 264p) and each employee isentitled to save up to £250 per month. The Sharesave Scheme is compliant with ABI Guidelines.

The Board supports the principle of employee share participation generally and believes that the Sharesave Scheme will have an importantpart to play in encouraging employees to identify with Shareholders.

Company Share Option Plan (CSOP)Shareholders at the EGM also gave approval for the adoption of a new Company Share Option Plan.

The CSOP provides for options to be granted either as Inland Revenue approved options (which have certain tax advantages) or asunapproved options.

The CSOP was originally intended for the benefit of senior managers within the Group, other than executive directors and senior executives.

Currently options may be granted over shares with a maximum value of up to 100% of salary to an individual in any year.

As noted above, the Committee intends to make option grants to Executive Directors and senior executives as part of the futureremuneration strategy. In order to facilitate this, shareholders will be asked to approve their participation in the CSOP. Further detailsconcerning the terms of such participation will be set out in the written communication to shareholders for approval at a future general meeting.

Currently, the CSOP provides that these options will have a performance target which will require the average growth in the Company's


earnings per share to have out-performed the growth in the Retail Prices Index over a single three year period by at least five percentagepoints on average per annum. Earnings per share for this purpose will be measured on a fully diluted basis and adjusted for exceptional items.

The CSOP gives the Board the opportunity to offer further incentives to senior employees of the Group and to reflect the contribution thatthese individuals can make to the performance of the Group in the future.

Directors’ Service ContractsThe service contracts for Group Board Executive Directors are for an indefinite period and provide for a one year notice period. In addition theservice contracts do not include provisions for pre-determined compensation on termination that exceed one year’s salary and benefits. TheGroup’s policy is for all Executive Directors to have service contracts which terminate upon attainment of the normal retirement age of 60.All Directors are subject to re-election under the Companies Act 1985, every three years. Details of the contracts are set out below.

Executive Directors Date of Contract Notice PeriodJohn Gavan 31 July 2000 12 monthsJack McGrory 15 March 2004 12 monthsNeil Kirkby 07 April 2003 12 months

Non-Executive DirectorsNon-Executive Directors do not have service contracts but letters of appointment. They do not participate in any of the Company’s shareoption schemes, pension arrangements or bonus schemes. Fees are reviewed annually and determined by the Executive Directors. Briefdetails of the letters of appointment between the Company and the Non-Executive Directors are set out below:

Non-Executive Directors Date of Appointment as a Non-Executive DirectorOwen McLaughlin 08 November 2004 (1)

Michael Hynes 08 November 2004 (2)

Alistair Hetherington 26 March 2001Nick Woollacott 30 April 2003

Notes:(1) Prior to 8 November 2004 Mr McLaughlin had been an Executive Director from 21 August 2000 (2) Prior to 8 November 2004 Mr Hynes had been an Executive Director from 3 March 2000.

Retirement BenefitsPension contributions were made in respect of Directors who are members of money purchase schemes.

Performance GraphFor shareholders’ information, the Company’s total shareholder return performance, assuming dividends are re-invested, for the five years to 31 December 2004 is shown in the graph below compared to the return performance achieved by the FTSE Support Services Index. The Company is a member of the FTSE support services sector.

Directors’ remuneration report continued


Directors’ Remuneration*

Director £000 £000Salaries/ Pension 31 Dec Salaries/ Pension 31 Dec

Fees Bonus Cont 2004 Fees Bonus Cont 2003Total Total

Owen McLaughlin 70 – 11 81 119 – 19 138Michael Hynes 145 – – 145 126 – 19 145Jack McGrory 158 79 – 237 – – – –(appointed 15/03/04)

Neil Kirkby 152 79 20 251 101 38 13 152John Gavan 143 72 13 228 132 – 13 145Nick Woollacott 35 – – 35 23 – – 23Alistair Hetherington 35 – – 35 35 – – 35Sean Keogh – – – – 151 – 23 174(resigned 20/01/04)

Total 738 230 44 1,012 687 38 87 812

Directors’ Interests in Shares*The Directors and their related parties held shares of 5p each in the Company as at 31 December 2004 as follows:

Director 31 December 2004 31 December 2003Owen McLaughlin 7,141,867 7,063,932Michael Hynes 1,614,293 549,453Jack McGrory 130,000 –Neil Kirkby 43,750 –John Gavan 435,190 435,190Nick Woollacott 15,000 –Alistair Hetherington 15,000 –Sean Keogh (resigned 20/1/2004) – 7,045,789

There have been no changes in Directors’ interests between the year end (31 December 2004) and 16 March 2005 save that Mr J McGrorypurchased 14,796 ordinary shares on 20 January 2005 taking his total beneficial holding to 144,766 ordinary shares.

The total holding of the Directors in the ordinary share capital of the Company at 31 December 2004 was 9,395,100 (11.76%).


Directors’ Share Options*

Date fromScheme Options as Granted Exercised Options at Exercise which Expiry

Director Name at 01/01/04 in Year in Year 31/12/04 price (p) exercisable Date

Owen McLaughlin – – – – – – – –Michael Hynes EST – 1,800,000 1,800,000 – – – –Jack McGrory 1998 – 500,000 – 500,000 320p 22/03/2007 22/03/2014

1998 – 350,000 – 350,000 314.5p 05/11/2007 05/11/20142002 – 260,000 260,000 – 5p – –SAYE – 3,589 – 3,589 264p 01/02/2008 –

Neil Kirkby 1998 200,000 – – 200,000 245p 07/04/2006 07/04/20131998 – 200,000 – 200,000 314.5p 05/11/2007 05/11/20142002 175,000 – 175,000 – 5p – –SAYE – 3,589 – 3,589 264p 01/02/2008 –

John Gavan 1998 300,000 – 300,000 – 188p 12/10/2004 12/10/20111998 – 350,000 – 350,000 314.5p 05/11/2007 05/11/2014

Nick Woollacott – – – – – – – –Alistair Hetherington – – – – – – – –

Notes: Scheme Names EST = ARM Employee Share Trust1998 = Enterprise plc 1998 Unapproved Share Option Scheme2002 = Enterprise plc 2002 Unapproved Share Option SchemeSAYE = 2004 SAYE Share Option Scheme

The aggregate amount of gains made by Directors on the exercise of share options in the financial year was £7,462,875.

All of the options exercised during the year were exercised on 8 November 2004 when the market value of each share was 317.5 pence.The market value of each share as at 31 December 2004 was 397 pence and the range during 2004 was 276 pence to 397 pence.

The following information is unaudited:

Mr J McGrory, Mr N Kirkby and Mr J Gavan have been granted options under the Enterprise plc 1998 Unapproved Share Option Schemewhich remain exercisable. These options were granted subject to a performance condition, namely that the adjusted basic Earnings PerShare (EPS) of Enterprise plc calculated as from the financial year ended immediately prior to the grant should exceed RPI growth by aprescribed percentage for the three subsequent financial years.

The prescribed percentage growth criteria for the outstanding 1998 Options are as follows:

RPI plus 3% per annum in the relevant 3 year financial period:Mr J McGrory 500,000 optionsMr N Kirkby 200,000 options

RPI plus 5% per annum in the relevant 3 year financial period:Mr J McGrory 350,000 optionsMr N Kirkby 200,000 optionsMr J Gavan 350,000 options

Approval of ReportThe Chairman of the Remuneration Committee, Mr N Woollacott, intends to attend the forthcoming Annual General Meeting and will beavailable to answer any questions shareholders may have concerning the Group’s policy on Directors’ remuneration. In accordance withthe requirements of The Directors’ Remuneration Report Regulations 2002, the Directors will submit the Directors’ Remuneration Reportfor approval by the Company at the forthcoming AGM.

The Remuneration Report was approved by the Board on 18 March 2005 and signed on their behalf.

Nick WoollacottChairman of the Remuneration Committee

Directors’ remuneration report continued


United Kingdom company law and accounting standards require

the Directors to prepare financial statements for each financial

year which give a true and fair view of the state of affairs of the

Company and the Group as at the end of the financial year and of

the profit and loss of the Group for that period. In preparing those

financial statements, the Directors are required to select suitable

accounting policies and then apply them consistently, and make

judgements and estimates that are reasonable and prudent, and

state whether applicable accounting standards have been followed.

The Directors are responsible for keeping proper accounting

records which disclose with reasonable accuracy at any time the

financial position of the Company and enable them to ensure that

the financial statements comply with the Companies Act 1985.

They are also responsible for the system of internal control, for

safeguarding the assets of the Company and hence for taking

reasonable steps for the prevention and detection of fraud and

other irregularities.

Statement of Directors’ responsibilities


We have audited the financial statements of Enterprise plc for the year ended 31 December 2004 which comprise the consolidated profit and lossaccount, the balance sheets, the consolidated cash flow statement, the analysis of net debt, the statement of total recognised gains and losses, the reconciliation of movements in shareholders’ funds, and the related notes 1 to 27. These financial statements have been prepared under theaccounting policies set out therein. We have also audited the information in the part of the directors’ remuneration report that is described ashaving been audited.

This report is made solely to the company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work hasbeen undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and thecompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective Responsibilities of Directors and AuditorsAs described in the statement of directors’ responsibilities, the company’s directors are responsible for the preparation of the financial statements inaccordance with applicable United Kingdom law and accounting standards. They are also responsible for the preparation of the other informationcontained in the annual report including the directors’ remuneration report. Our responsibility is to audit the financial statements and the part of thedirectors’ remuneration report described as having been audited in accordance with relevant United Kingdom legal and regulatory requirementsand auditing standards.

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985.We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept properaccounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regardingdirectors’ remuneration and transactions with the company and other members of the group is not disclosed.

We review whether the corporate governance statement reflects the company's compliance with the nine provisions of the July 2003 FRC Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group'scorporate governance procedures or its risk and control procedures.

We read the directors’ report and the other information contained in the annual report for the above year as described in the contents sectionincluding the unaudited part of the directors’ remuneration report and consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the financial statements.

Basis of Audit OpinionWe conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors’remuneration report described as having been audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of thecompany and the group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide uswith sufficient evidence to give reasonable assurance that the financial statements and the part of the directors’ remuneration report described ashaving been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we alsoevaluated the overall adequacy of the presentation of information in the financial statements and the part of the directors’ remuneration reportdescribed as having been audited.

OpinionIn our opinion: l the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 2004 and of the profit

of the Group for the year then ended; and

l the financial statements and the part of the directors’ remuneration report described as having been audited have been properly prepared inaccordance with the Companies Act 1985.

Deloitte & Touche LLP

Chartered Accountants and Registered AuditorsManchester

18 March 2005

Independent auditors’ reportto the members of Enterprise plc


Before Exceptionalexceptional items 2004 2003

items (note 19) Total TotalNotes £m £m £m £m

TurnoverContinuing operations 410.0 – 410.0 315.6Acquisitions 16.6 – 16.6 –

Group continuing operations and share of joint venture and associate 426.6 – 426.6 315.6Less share of joint venture and associate (10.4) – (10.4) (12.1)

Group turnover 2 416.2 – 416.2 303.5

Operating profit before goodwill amortisationContinuing operations 25.2 (13.8) 11.4 21.4Acquisitions 1.0 – 1.0 –

26.2 (13.8) 12.4 21.4Goodwill amortisation (5.9) – (5.9) (5.2)

Group operating profit 2 20.3 (13.8) 6.5 16.2Continuing operations 19.5 (13.8) 5.7 16.2Acquisitions 0.8 – 0.8 –

Share of profits of joint venture and associate 0.5 – 0.5 0.8

Total operating profit 20.8 (13.8) 7.0 17.0Net interest payable 4 (1.4) – (1.4) (1.1)

Profit on ordinary activities before taxation 3 19.4 (13.8) 5.6 15.9Tax on profit on ordinary activities 6 (7.5) 7.2 (0.3) (5.9)

Profit on ordinary activities after taxation 11.9 (6.6) 5.3 10.0

Dividends 7 (5.3) (4.5)

Retained profit for the year 22 – 5.5

Earnings per share 9Basic 16.3p (9.0)p 7.3p 14.0pDiluted 15.2p (8.5)p 6.7p 13.2p


Consolidated profit and loss accountYear ended 31 December 2004

Restated (note 20)2004 2003

Notes £m £m £m £m

Fixed assetsGoodwill 10 103.5 96.5Tangible fixed assets 11 7.4 5.2Investment in joint venture:

Share of gross assets 3.0 2.3Share of gross liabilities (2.0) (1.7)Loan advanced to joint venture 0.8 –

12 1.8 0.6

Investment in associated undertaking 12 0.1 0.1Other investments 12 0.2 0.3

2.1 1.0

113.0 102.7

Current assetsStocks 14 1.2 1.0Debtors 15 69.2 63.4Cash at bank and in hand 35.9 7.4

106.3 71.8Creditors: amounts falling duewithin one year 16 (69.3) (51.1)

Net current assets 37.0 20.7

Total assets less current liabilities 150.0 123.4

Creditors: amounts falling dueafter more than one year 17 (43.0) (31.2)

Net assets 107.0 92.2

Capital and reservesCalled up share capital 19 4.0 3.7Investment in own shares 20 – (2.6)Shares to be issued 21 – 2.9Share premium account 22 12.9 12.3Merger reserve 22 57.2 53.9Profit and loss account 22 32.9 22.0

Equity shareholders’ funds 107.0 92.2

These financial statements were approved by the Board of Directors on 18 March 2005.

Signed on behalf of the Board of Directors.

J McGrory N R E KirkbyChief Executive Officer Finance Director

Consolidated balance sheetAs at 31 December 2004


2004 2003£m £m £m £m

Cash inflow from operating activities 20.3 9.6

Dividends from joint venture – 0.5Servicing of finance: net interest paid (1.5) (1.1)Taxation paid (2.7) (3.8)Capital expenditure and financial investment

Purchase of tangible fixed assets (1.2) (0.9)Proceeds on sale of fixed assets 0.2 1.5Loans repaid by Venture Funds 0.1 0.1Loan advanced to joint venture (0.8) –

(1.7) 0.7Acquisitions and disposals

Acquisition of businesses (16.4) (19.2)Net cash acquired with acquisitions 8.0 –

(8.4) (19.2)Equity dividends paid (4.8) (4.1)

Cash inflow/(outflow) before financing 1.2 (17.4)

FinancingProceeds from shares issued 0.6 0.6Bank loans drawn 10.0 11.3Asset finance repaid (0.7) (0.4)

9.9 11.5

Increase/(decrease) in cash 11.1 (5.9)

Reconciliation of operating profit to operating cash flowsOperating profit 6.5 16.2

Non-cash exceptional items (note 19) 13.4 –Goodwill amortisation 5.9 5.2Depreciation of tangible fixed assets 1.9 1.6Loss on sale of fixed assets – 0.2(Increase)/decrease in stocks (0.2) 0.3Decrease/(increase) in debtors 1.1 (3.7)(Decrease) in creditors (8.3) (10.2)

Cash inflow from operating activities 20.3 9.6

Reconciliation of net cash flow to movement in net debtIncrease/(decrease) in cash 11.1 (5.9)

Cash outflow from debt financing (10.0) (11.3)Loan and finance leases acquired with subsidiaries (2.8) (0.1)Repayment of finance leases 0.7 0.4

Movement in net debt in the year (1.0) (16.9)

Net debt at the start of the year (22.4) (5.5)

Net debt at the end of the year (23.4) (22.4)


Consolidated cash flow statementYear ended 31 December 2004

AcquisitionsAt beginning (excludes cash At end

of year and overdrafts) Cash Flow of year£m £m £m £m

Cash at bank and in hand 7.4 – 28.5 35.9Overdraft (1.5) – (17.4) (18.9)Debt due within one year (0.3) (0.9) 0.4 (0.8)Debt due after one year (28.0) (1.9) (9.7) (39.6)

(22.4) (2.8) 1.8 (23.4)

Statement of total recognised gains and lossesYear ended 31 December 2004

2004 2003£m £m

Retained profit for the year – 5.5Amount recognised on share options (note 22) 10.9 –

Total recognised gains and losses in respect of year 10.9 5.5

Reconciliation of movements in shareholders’ fundsYear ended 31 December 2004

Restated(note 20)

2004 2003£m £m

Retained profit for the year – 5.5New share capital subscribed 0.9 0.6New share capital issued as a result of acquisitions 0.4 –Amount recognised on share options (note 22) 10.9 –Vesting of shares held by the ARM Share Trust 2.6 –Adjustments to shares to be issued – (0.4)

14.8 5.7

Shareholders funds at beginning of year (as restated) 92.2 86.5

Shareholders’ funds at end of year (2003 as restated) 107.0 92.2

NoteOpening shareholders’ funds as reported 89.1Reclassification of investment in own shares (2.6)

Opening shareholders’ funds as restated 86.5

Analysis of net debtYear ended 31 December 2004


Restated(note 20)

2004 2003Notes £m £m

Fixed assetsInvestments 12 95.4 77.4

95.4 77.4

Current assetsDebtors 15 6.6 30.1Cash at bank and in hand 19.8 3.5

26.4 33.6Creditors: amounts falling due within one year 16 (4.5) (3.4)

Net current assets 21.9 30.2

Total assets less current liabilities 117.3 107.6

Creditors: amounts falling due after more than one year 17 (38.0) (28.0)

Net assets 79.3 79.6

Capital and reservesCalled up share capital 19 4.0 3.7Investment in own shares 20 – (2.6)Shares to be issued 21 – 2.9Share premium account 22 12.9 12.3Merger reserve 22 57.2 53.9Profit and loss account 22 5.2 9.4

Equity shareholders’ funds 79.3 79.6

These financial statements were approved by the Board of Directors on 18 March 2005.

Signed on behalf of the Board of Directors

J McGrory N R E KirkbyChief Executive Officer Finance Director


Company balance sheetAs at 31 December 2004

1. Accounting policiesEnterprise plc and its subsidiary undertakings have adopted the accounting policies set out below. All accounting policies have beenapplied consistently throughout the year and the preceding year, except for the disclosure of the investment in own shares which,following the introduction of UITF38 has required restatement of the comparatives. The effect of the restatement is shown in note 20.

These accounts have been prepared under the historical cost convention in accordance with applicable United Kingdom accountingstandards.

Basis of consolidationThe Group accounts consolidate the accounts of Enterprise plc, its subsidiary undertakings and incorporate the results of joint venturesand associated undertakings.

The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Theacquisition method of accounting has been adopted.

As permitted by Section 230 of the Companies Act 1985, no separate profit and loss account is presented in respect of the Company.

GoodwillGoodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of theconsideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight line basis over its estimated useful economic life, which is 20 years. Provision is made for any impairment.

Goodwill arising on acquisitions in the year ended 31 October 1998 and earlier periods was written off to reserves as a matter ofaccounting policy in accordance with the accounting standard then in force. As permitted by the current accounting standard, the goodwill previously written off to reserves has not been reinstated in the balance sheet. On disposal or closure of a previouslyacquired business, the attributable amount of goodwill previously written off to reserves is included in determining the profit orloss on disposal.

TurnoverTurnover excludes intra-Group transactions and value added tax and represents the invoiced value of services performed.

InvestmentsInvestments in the Company accounts are included at cost. Provision is made for any impairment in the value of investments.

In the Group accounts, investments in joint venture and associate undertakings are accounted for using the equity method. TheConsolidated Profit and Loss Account includes the Group’s share of these undertakings’ profits less losses while the Group’s share of their net assets is shown in the Consolidated Balance Sheet.

Tangible fixed assetsFixed assets are stated at cost less depreciation. Depreciation is calculated to write off the cost of fixed assets over their estimateduseful lives on a straight-line basis as follows:

Computer, office equipment, leasehold improvementsand motor vehicles – 10% to 33% per annum

TaxationCorporation tax payable is provided on taxable profits at the current rate.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date wheretransactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date.

Timing differences are differences between the Group’s taxable profits and its results as stated in the financial statements that arisefrom the inclusion of gains and losses in tax assessments in years different from those in which they are recognised in the financialstatements.

Notes to the accountsYear ended 31 December 2004


1. Accounting policies (continued)A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlyingtiming differences can be deducted.

Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on the sale has been recognised in the financial statements. Neither is deferred tax recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, beingcharged to tax only if and when the replacement assets are sold.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences areexpected to reverse based on tax rates and laws that have been enacted or substantively enacted by the balance sheet date.Deferred tax assets and liabilities have not been discounted.

StocksStocks are stated at lower of cost and net realisable value. In determining the cost of raw materials and consumables, the FIFOmethod is used after making allowances for any obsolete or slow moving items.

ContractsThe activities of the Group are largely undertaken through long-term framework contracts under which profit is recognised in line with each separate supply. Where losses are foreseeable in respect of future supplies committed under those frameworkcontracts, provision is made. In addition, a provision is maintained for future remedial works that may be required in respect ofsupplies already made.

Amounts recoverable on long term contracts which are not framework contracts represent the excess of recorded turnover overpayments on account. Profit is recognised on such contracts where the total profit can be assessed with reasonable certainty.Provision is made for the full amount of foreseeable losses on contracts.

Pension costsContributions to defined contribution pension schemes are charged to the profit and loss account of the accounting year to which the contributions relate.

Contributions to defined benefit schemes are charged to the profit and loss account so as to spread the cost of pensions overemployees’ working lives with the Group.

Actuarial valuations on an on-going basis are prepared every year and contributions are made in accordance with therecommendations of a professionally qualified actuary, using the projected unit method.

The Group has adopted FRS17 in these financial statements in respect of the disclosure requirements contained in the transitionalarrangements. Accounting for pension costs in the primary statements follows SSAP24.

LeasesAssets obtained under hire purchase contracts and finance leases are capitalised in the balance sheet and depreciated over theirestimated useful lives.

The interest element of the repayments is charged to the profit and loss account over the period of the contract and represents a constant proportion of the balance to the capital element outstanding.

Rentals paid under all other leases are charged to the profit and loss account as incurred.



2. Segmental analysisTurnover Operating profit* Net assets

2004 2003 2004 2003 2004 2003

(a) Group companies £m £m £m £m £m £m

Continuing activitiesUtility Services 275.5 207.9 15.5 14.6 96.9 103.9Public Sector Maintenance 116.5 88.0 3.7 0.8 7.4 4.9Consultancy Services 7.6 7.6 0.3 0.8 5.0 4.8

399.6 303.5 19.5 16.2 109.3 113.6Acquired activitiesPublic Sector Maintenance 16.6 0.8 19.0

416.2 303.5 20.3 16.2 128.3 113.6

Cash and overdrafts 17.0 5.9Investments 2.1 1.0Borrowings (40.4) (28.3)

107.0 92.2

(b) Joint venture and associateShare of Careers Enterprise Limited 10.0 11.5 0.5 0.8 1.0 0.6Share of Enterprise Ventures Group Limited 0.4 0.6 – – 0.1 0.1

10.4 12.1 0.5 0.8 1.1 0.7

Turnover arising on activities outside of the United Kingdom is not significant.

Cost of sales in the year of £359.3m related to continuing activities (2003 - £265.8m) leaving a gross profit of £40.3m (2003 - £37.7m).

Administrative expenses which relate to continuing activities were £20.8m (2003 - £21.5m).

Included in acquisitions, were cost of sales of £14.6m, gross profit of £2.0m and administrative expenses of £1.2m.

*Operating profit is before the impact of exceptional items of £13.8m primarily in respect of share based payments in the period

(note 19).

3. Profit on ordinary activities before taxation2004 2003

£m £m

Profit is stated after chargingDepreciation of owned tangible fixed assets 1.9 1.6Amortisation of goodwill 5.9 5.2Auditors’ remuneration – audit services 0.2 0.2

– non audit services 0.3 0.3Operating lease rentals – plant and machinery 0.4 0.4

– other 0.8 0.8Loss on disposal of fixed assets – 0.2Exceptional share based payment charge (note 19) 13.8 –

In accordance with guidance introduced in 2003 the following table sets out an analysis of the fees earned by the auditors during2004. This should be read in conjuction with the Corporate Governance statement on page 17 which sets out how auditorindependence and objectivity have been safeguarded.



3. Profit on ordinary activities before taxation (continued)2004 2003

£m £m

Audit servicesStatutory audit and interim review 0.2 0.2

Further assurance servicesDue diligence and reporting accountant work 0.1 0.1

Tax servicesCompliance services 0.1 0.1Advisory services 0.1 0.1

0.5 0.5

4. Net interest2004 2003

£m £m

Interest payable on bank loans (1.4) (1.4)Interest receivable – 0.3

Net interest payable (1.4) (1.1)

5. Staff costs2004 2003

£m £m

Group employment costsWages and salaries 77.1 39.3Social security costs 7.7 3.7Other pension costs (note 24) 2.7 1.0

87.5 44.0

The average number of employees, including Executive Directors, during the year was 2,980 (2003 - 1,714), 1,731 (2003 - 1,148) ofwhom were management and administration and 1,249 (2003 - 566) of whom were engaged in direct labour.

6. Taxation

(a) Analysis of charge in the year 2004 2003£m £m

Current taxation:United Kingdom corporation tax at 30% (2003 - 30%) 0.6 6.0Joint venture and associate 0.1 0.3Prior year credit (0.3) (0.5)

Total current tax charge (note 6(b)) 0.4 5.8

Deferred tax (note 18)Timing differences origination and reversal (0.1) 0.2Adjustments to the estimated recoverable amounts of deferredtax assets arising in previous years – (0.1)

Tax on profit on ordinary activities 0.3 5.9



6. Taxation (continued)

(b) Factors affecting the tax charge for the year 2004 2003£m £m

The tax assessed for the period is lower (2003 - higher) than the standard rate of corporation tax in the UK. The differences are explained below:

Profit on ordinary activities before tax 5.6 15.9

Tax on profit on ordinary activities at standard rate of corporation tax in the UK of 30% (2003 - 30%) 1.7 4.8

Effect of:Non deductible amortisation of goodwill 1.5 1.4Expenses not deductible for tax purposes 0.5 0.3Timing differences 0.1 (0.2)Prior year credit (0.3) (0.5)Additional deduction regarding share options (3.1) –

Current tax charge for the year 0.4 5.8

7. Dividends2004 2003

£m £m

Interim paid – 2.9p (2003 - 2.6p) per share 2.2 2.0Final proposed – 4.0p (2003 - 3.6p) per share 3.2 2.7Less dividend received and receivable by theARM Group Employees’ Share Trust (0.1) (0.2)

5.3 4.5

8. Parent company result2004 2003

£m £m

Parent company (loss)/profit for the year (9.8) 4.5Dividends (5.3) (4.5)

Retained loss (15.1) –



9. Earnings per shareBasic earnings per ordinary share are calculated by dividing the profit attributable to shareholders of Enterprise plc of £5.3m (2003 - £10.0m) by 72.9m (2003 - 71.3m) ordinary shares, being the weighted average number of ordinary shares in issue during theyear. The earnings for diluted earnings per ordinary share are the same as those for the earnings per ordinary share given above,divided by 78.1m (2003 - 76.0m) ordinary shares being the weighted average number of ordinary shares in issue during the year asadjusted for relevant share options and shares not yet issued.

An adjusted earnings per share figure has been calculated in addition to the earnings per share required by FRS14 and is based onearnings excluding the effects of goodwill and exceptional items. It has been calculated to allow the shareholders to gain a clearerunderstanding of the performance of the Group. Details of the adjusted earnings per share are set out as follows:

2004 2003Basic Diluted Basic Diluted

p p p p

Earnings per share 7.3 6.7 14.0 13.2Adjustments (net of tax)Exceptional Item 9.0 8.5 – –Goodwill amortisation 7.7 7.1 7.3 6.8

Total adjustments 16.7 15.6 7.3 6.8

Adjusted earnings per share 24.0 22.3 21.3 20.0

10. Goodwill – group only2004

£m

CostAt beginning of year 112.0Adjustments* 1.4Acquired (note 13) 11.5

At end of the year 124.9

AmortisationAt beginning of year 15.5Charge for the year 5.9

At end of the year 21.4

Net book valueAt end of year 103.5

At beginning of year 96.5

*The adjustments relate to the finalisation of the provisional fair values arising on the acquisition of Subterra in the previous accountingperiod. These are principally in respect of onerous contracts and recoverability of uninvoiced work.



11. Tangible fixed assetsGroup

£m

CostAt beginning of year 7.9Acquisitions 3.1Additions 1.2Disposals (0.7)

At end of year 11.5

DepreciationAt beginning of year 2.7Provided in the year 1.9Disposals (0.5)

At end of year 4.1

Net book valueAt end of year 7.4

At beginning of year 5.2

Tangible fixed assets comprise computer and office equipment, leasehold improvements and motor vehicles.

The net book value of assets under finance leases at the year end was £2.5m (2003: £0.5m).

12. InvestmentsAt the Share of Loan At

beginning Restatement retained advanced/ end ofof the year (see note 20) profits (repaid) year

£m £m £m £m £m

GroupCareers Enterprise Limited 0.6 – 0.4 0.8 1.8Enterprise Ventures Group Limited 0.1 – – – 0.1Loans to Venture Funds 0.3 – – (0.1) 0.2Ordinary shares in the Company 2.6 (2.6) – – –

3.6 (2.6) 0.4 0.7 2.1

At the beginning Restatement Acquisition At endof the year (see note 20) and Disposal Repaid of year

£m £m £m £m £m

CompanySubsidiary undertakings 77.1 – 18.1 – 95.2Loans to Venture Funds 0.3 – – (0.1) 0.2Ordinary shares in the Company 2.6 (2.6) – – –

80.0 (2.6) 18.1 (0.1) 95.4

The principal subsidiaries and joint ventures of the Company are listed in note 25.

Loans to venture funds represent the carrying value of the Group’s participation in venture funds managed by Enterprise VenturesLimited.



13. AcquisitionsOn 26 July 2004 the Company acquired the entire share capital of Enterprise MPC Limited (formerly JMPC Limited) (“MPC”). In addition, on 7 September 2004, the Company acquired the entire share capital of MRS Environmental Services Limited (“MRS”).

The Company has used the acquisition method of accounting for both acquisitions.

The book and provisional fair value of assets and liabilities acquired were as follows:MPC MRS

£m £m

Tangible fixed assets 0.1 3.0Debtors 3.0 3.9Cash 0.4 7.6Creditors due in less than one year (4.1) (5.4)Creditors due in more than one year – (1.9)

Net (Liabilities)/assets (0.6) 7.2

Goodwill on acquisition 4.3 7.2

Purchase consideration 3.7 14.4

Purchase consideration is analysed as followsCash (including costs) 2.0 14.4Deferred consideration 0.8 –Contingent consideration 0.5 –Shares issued 0.4 –

3.7 14.4

The contingent and deferred consideration is payable in cash. The contingent consideration is dependent on the future profits of the business with the maximum contingent consideration being £1.0m.

There were no material gains and losses for either company in the period from acquisition other than the profit for the period.

The operating cashflow of MRS Environmental Services Limited from the date of acquisition was £2.8m and for Enterprise MPC, £1m.

The summarised audited profit and loss account for the year ended 31 July 2003 and the unaudited profit and loss account for the 13 month period from 1 August 2003 to 7 September 2004 of MRS are set out below:

Period to Year to7 September 31 July

2004 2003£m £m

Turnover 28.6 30.2Operating profit 4.0 3.5Net interest payable – (0.2)

Profit on ordinary activities before taxation 4.0 3.3Tax on ordinary activities (0.7) (1.0)

Profit on ordinary activities after taxation 3.3 2.3

14. StocksGroup

2004 2003£m £m

Raw materials and consumables 1.2 1.0



15. DebtorsGroup Company

2004 2003 2004 2003£m £m £m £m

Trade debtors 58.4 55.2 0.5 0.7Amounts recoverable on contracts 3.9 4.0 – –Amounts owed by subsidiary undertakings – – 4.6 26.1Corporation tax debtor 0.9 – 0.9 2.9Deferred tax (note 18) 0.8 0.9 0.1 0.1Other debtors 3.6 1.7 0.5 0.3Prepayments and accrued income 1.6 1.6 – –

69.2 63.4 6.6 30.1

16. Creditors: Amounts falling due within one yearGroup Company

2004 2003 2004 2003£m £m £m £m

Bank overdrafts (note 23) 18.9 1.5 – –Trade creditors 23.9 25.7 1.1 0.4Corporation tax 2.1 3.2 – –Other taxation and social security 2.2 7.3 0.2 0.2Accruals and deferred income 18.2 10.4 – 0.1Dividend proposed 3.2 2.7 3.2 2.7Obligations under finance leases 0.8 0.3 – –

69.3 51.1 4.5 3.4

17. Creditors: Amounts falling due after more than one yearGroup Company

2004 2003 2004 2003£m £m £m £m

Trade creditors 3.4 3.2 – –Bank loans repayable (note 23) 38.0 28.0 38.0 28.0Obligations under hire purchase agreements 1.6 – – –

43.0 31.2 38.0 28.0

Bank loans and overdrafts are secured by floating charges over the Company’s and certain of its subsidiaries’ assets. Details of interestrates are given in note 23.



18. Deferred taxation

Group 2003 Movement 2004£m £m £m

Provided:Decelerated capital allowances 0.6 – 0.6Short term timing differences 0.3 (0.1) 0.2

0.9 (0.1) 0.8

Not provided:Tax losses 0.1 0.2 0.3

0.1 0.2 0.3

Total deferred tax asset 1.0 0.1 1.1

CompanyProvided:Decelerated capital allowances 0.1 – 0.1

19. Share capitalOrdinary shares of 5p eachNumber Nominal value

£

AuthorisedAt beginning of year and end of year 100,000,000 5,000,000

Allotted, called up, and fully paidAt beginning of year 74,333,103 3,716,655Allotments in year 5,557,736 277,887

At end of year 79,890,839 3,994,542

Allotments in the year represented 121,480 shares issued in respect of the acquisition of JMPC Limited, and 5,436,256 relating to shareoptions exercised (excluding 2,598,763 for options exercised over existing shares held by the trustees of the ARM Group EST).



19. Share capital (continued)

As at 31 December 2004, options outstanding under share option schemes were as follows:

Option price Date Expiry Number of sharein pence exercisable date options

2004 2003

Executive Share Option Scheme 1989 173.0 1998 2005 – 15,000Executive Share Option Scheme 1989 147.0 2000 2005 – 5,000Unapproved Discretionary Share Option scheme 1998 188.0 2004 2011 – 300,000Unapproved Discretionary Share Option scheme 1998 245.0 2006 2013 200,000 200,000Unapproved Discretionary Share Option scheme 1998 301.0 2007 2014 200,000 –Unapproved Discretionary Share Option scheme 1998 320.0 2007 2014 500,000 –Unapproved Discretionary Share Option scheme 1998 316.0 2007 2014 75,000 –Unapproved Discretionary Share Option scheme 1998 314.5 2007 2014 1,217,729 –ARM Group Discretionary Share Option Plan 5.0 To 2010 2010 – 3,104,016SAYE scheme 264.0 2008 2008 656,689 –Unapproved Company Share Option Plan 2002 5.0 To 2013 2013 – 1,576,377Options over shares in the ARM Group EST – 748,763

Total amounts outstanding 2,849,418 5,949,156

Options granted, exercised and lapsed under these share options schemes during the year were:Outstanding at beginning of year 5,949,156Granted 5,289,694Exercised (8,035,019)Lapsed (354,413)

Outstanding at end of year 2,849,418

On 8 November 2004, the company’s shares were admitted to the Official List of the Stock Exchange. On moving to the Official List, options under the ARM Group Discretionary Share Option Plan and, following shareholder approval on 5 November 2004, options under the 2002 Unapproved Company Share Option Plan became exercisable. In addition, options granted over shares in the ARM Share Trust became exercisable.

As a result, the company has incurred a non cash exceptional charge to the profit and loss account in relation to the 2002 options of£5.6 million representing the difference between the option price and the market value of the shares at the date of grant. In addition,the company has incurred a further non cash exceptional charge in respect of the award of options over Enterprise shares in the ARMShare Trust of £7.8 million. Taking into account the costs associated with the move to the Official List of approximately £0.4 million,the profit and loss account for the year has been charged with an amount of £13.8 million. The associated tax credit is £7.2 million.

The impact of the exercise of share options under the Discretionary Share Option Plan has been to increase the merger reserve by £2.9 million and reduce shares to be issued by £2.9 million as a result of these options being part of the acquisition cost of ARM.

20. Investment in own shares2004 2003

£m £m

Investment in own shares – 2.6

UITF Abstract 38 “Accounting for ESOP Trusts” was adopted during the year. As a result the investment of £2.6m which was previouslyincluded in investments on the 31 December 2003 balance sheet has been reclassified as a reduction in shareholders’ funds in thecomparative balance sheet. This has had no impact on the result for either period.

During the year ended 31 December 2004, substantially all of the shares held by the Trust were awarded on exercise of options (see note 19).



21. Shares to be issued – group and company£m

At beginning of year 2.9Shares issued (2.9)

At end of year –

Options over 3,104,016 shares were exercised during the year (note 19).

As these options were accounted for as part of the acquisition of ARM in 2000, the exercise resulted in a transfer from shares to beissued of £2.9m to the merger reserve.

22. Reserves Sharepremium Merger Profit and

account reserves loss account£m £m £m

GroupAt beginning of year 12.3 53.9 22.0Premium on shares issued as part of acquisition – 0.4 –Amount recognised on share options 0.6 2.9 10.9Retained profit for the year – – –

At end of year 12.9 57.2 32.9

CompanyAt beginning of year 12.3 53.9 9.4Premium on shares issued as part of acquisition – 0.4 –Amount recognised on share options 0.6 2.9 10.9Retained loss for the year – – (15.1)

At end of year 12.9 57.2 5.2

23. Derivatives and other financial instruments

The numerical disclosures in this note deal with financial assets and financial liabilities as defined in Financial Reporting Standard 13 – Derivatives and Other Financial Instruments: Disclosures (FRS13). Certain financial assets such as investments in subsidiary andassociated companies are excluded from the scope of these disclosures.

As permitted by FRS13, short term debtors and creditors have been excluded from the disclosures, other than the currencydisclosures. In addition there are trade creditors of £3.4million (2003 - £3.2million) which represent retentions and are included increditors due after more than one year. They do not bear interest and their fair value is not materially different to their book value.

LiquidityThe Group’s overall objective is to ensure that it is at all times able to meet its financial commitments as and when they fall due.

Interest rate profileThe Group’s exposure to interest rate fluctuations is managed by fixing interest rates in the short to medium-term on borrowings.Floating rate assets and liabilities bear interest based on short term bank rates.



23. Derivatives and other financial instruments (continued)

The interest rate profiles on floating rate cash and borrowings are shown below:

2004 2003£m £m

Financial liabilities2004 Sterling loans and overdrafts (including finance leases) 59.3 29.8

Financial assetsSterling cash and deposits 35.0 7.2Euro cash and deposits 0.7 0.2US Dollar cash and deposits 0.2 –

35.9 7.4

Sterling loans and overdrafts include the capital value outstanding on finance leases.

2004Finance Total 2003

Bank loan leases Overdraft £m £m

Maturity profileTotal borrowings are repayable as follows:Within one year – 0.8 18.9 19.7 1.8Between one and two years – 0.6 – 0.6 28.0Between two and five years 38.0 1.0 – 39.0 –

38.0 2.4 18.9 59.3 29.8

BorrowingsDuring the year the Group’s borrowing facilities were increased to £110m comprising a £70m 3 year term loan, a £30m 364 day facilityand a £10m uncommitted overdraft facility.

The interest rate on the facility is subject to a range, at 0.8625% to 1.1625% above LIBOR at draw down.

Draw down on the term loan facility at 31 December 2004 was £38m, and £nil was drawn on the 364 day facility and theuncommitted overdraft facility.

In addition, the Group had committed under the facilities £4.0m (2003 - £0.7m) related to performance bond guarantees.

Currency exposureThe Group’s foreign currency exposure arises mainly from receipts in Euros and US Dollars. Such exposures as at 31 December 2004comprised cash and debtor balances amounting to €1.0m (2003 - €0.2m), and US Dollars of $0.4m (2003 - $nil).

Fair valueThe fair value of financial assets and liabilities is not materially different from their carrying values.

Undrawn facilitiesAt 31 December 2004, the Group had committed undrawn facilities of £62m (2003 - £20.8m).



24. Guarantees and other financial commitments

Capital commitments – Group and Company There were no capital commitments contracted but not provided at year end (2003 - nil).

Lease commitmentsThe amount that the Group is committed to pay in the following year in respect of leases for land and building and plant andmachinery is as follows:

Group Company2004 2003 2004 2003

£m £m £m £m

Leases of land and buildings which expire:Within one year 0.9 0.4 0.3 0.3Within two to five years 0.6 0.3 – –After five years 0.4 – – –

1.9 0.7 0.3 0.3

Other operating leases which expire:Within one year 0.3 0.1 – –Within two to five years 0.3 0.2 – –

0.6 0.3 – –

Pension commitmentsSSAP 24 disclosuresThe Group operates several defined contribution pension schemes. The pension charge represents contributions paid by the Groupto schemes and amounted to £2.5m (2003 - £0.8m).

In addition, a small number of the Group’s employees are members of a Superannuation Fund which provides benefits based on finalpensionable pay. Contributions are calculated for the Scheme as a whole. Consequently the Group cannot identify its share of theunderlying assets and liabilities. This is treated as a defined contribution scheme.

The Group operates a defined benefit scheme in respect of Brophy Grounds Maintenance Limited’s employees. The last full actuarialvaluation was carried out as at 6 April 2004, using the projected unit method, by a qualified independent actuary. This showed assetsof £6.2m and a funding level of 82%. For FRS17 disclosure purposes this was updated to 31 December 2004.

The pensionable charge for the defined benefit scheme for the year was £0.2m (2003 - £0.2m).

2004 2003 2002% % %

The major assumptions used by the actuary were:Rate of increase in salaries 3.00 3.00 3.00Rate of increase in pensions in payment 2.75 2.75 2.50Discount rate 5.30 5.40 5.50Inflation assumption 2.75 2.75 2.50



24. Guarantees and other financial commitments (continued)

Pension commitments (continued)

Additional FRS 17 disclosures Long-term Long-term Long-term rate of return rate of return rate of return

expected 2004 expected 2003 expected 2002 % £m % £m % £m

The fair value of the scheme’s assets and the expected returns on those assets were as follows: Equities & Property 7.00 5.5 7.50 5.4 7.00 4.0Bonds 4.75 0.6 5.25 0.7 4.75 0.7Cash 4.75 0.6 3.75 0.2 4.00 0.6

Total market value of assets 6.7 6.3 5.3Present value of scheme liabilities (8.8) (7.8) (6.9)

Deficit in scheme (2.1) (1.5) (1.6)Related deferred tax asset 0.6 0.5 0.5

Net pension liability (1.5) (1.0) (1.1)

Of the £1.5m net pension liability, provision has been made for the £0.5m deficit existing at the time of acquisition.

The Group will meet funding requirements as and when recommended by the Trustees on advice of the scheme’s actuaries.

Additional disclosures order FRS 17 are as follows:2004 2003

£m £m

Analysis of amounts to be charged to operating profit on adoption of FRS17:Current Service cost (0.2) (0.4)(Loss)/gain on settlements and curtailments (0.1) 0.1

(0.3) (0.3)

Analysis of the amounts to be charged to net finance charges on adoption of FRS17:Expected return on pension scheme assets 0.4 0.3Interest on pension scheme liabilities (0.4) (0.4)

– (0.1)

Analysis of the actuarial gain to be shown in the statement of total recognised gains and losses:Actual return less expected return on pension scheme assets 0.2 0.5Experience gains and losses arising on the scheme liabilities 0.4 0.2 Changes in assumptions underlying the present value of the scheme liabilities (1.3) (0.4)

(0.7) 0.3



24. Guarantees and other financial commitments (continued)2004 2003

£m £m

Movement in scheme deficit during the yearAt beginning of year (1.5) (1.6)Current service costs (0.2) (0.4)Contributions 0.4 0.2Net finance income – (0.1)(Loss)/Gain on curtailment (due to redundancies) (0.1) 0.1Actuarial (loss)/gain (0.7) 0.3

At end of year (2.1) (1.5)

Profit & loss reserveProfit & loss reserve excluding pension liability 32.9 22.0Creation of pension reserve (1.5) (1.0)Less release of provision 0.5 0.5

Profit and loss reserve 31.9 21.5

The history of experienced gains and losses has been:Difference between expected and actual return on Scheme assets:Amount (£m) 0.2 0.5Percentage of Scheme assets 3.0% 7.9%

Experience gains and losses on Scheme liabilitiesAmount (£m) 0.4 0.2Percentage of present value of Scheme liabilities 4.5% 2.6%

Total amount recognised in statement of total recognised gains and losses (£m) (0.7) 0.3Amount Percentage of present value of Scheme liabilities 8.0% 3.8%



25. Principal subsidiaries and joint venture Country of % of nominalregistration share capital held

Utility ServicesEnterprise Managed Services Limited England and Wales 100%*Enterprise Utility Services (TBC) Limited England and Wales 100%Enterprise Utility Services (DCE) Limited England and Wales 100%

Public Sector Maintenance ServicesMRS Environmental Services Limited England and Wales 100%Brophy Grounds Maintenance Limited England and Wales 100%*Enterprise Lighting Services Limited England and Wales 100%*Enterprise Maintenance Services Limited England and Wales 100%*Enterprise Public Services Limited England and Wales 100%*Enterprise-Liverpool Limited England and Wales 80%***

Consultancy ServicesEnterprise MPC Limited England and Wales 100%Enterprise Business Solutions 2000 Limited England and Wales 90%**

Joint VentureCareers Enterprise Limited England and Wales 50%

*Interests held by a subsidiary.

**Whilst the Group has 90% of the shareholding, it is entitled to the whole of the profits of the company.

***Interest held by a subsidiary. Whilst the Group has 80% of the shareholding, it is entitled to 76% of the profits of the company.

26. Related party disclosures

During the year a subsidiary of Enterprise plc advanced a loan of £0.8 million to Careers Enterprise Limited, the Group joint venture,to enable the purchase of Guidance Enterprise Group Limited. The loan was outstanding at 31 December 2004.

There were no other related party transactions requiring disclosure.

27. Post balance sheet events

Heating and Building Maintenance Company LimitedOn 4 February 2005 the Company acquired the entire issued share capital of Heating and Building Maintenance Company Limited(“HBM”) for a consideration of £250,000.HBM are an established provider of reactive mechanical and electrical services to private and public sector clients.

CCMR LimitedOn 16 March 2005 the Company acquired the entire issued share capital of CCMR Limited, and therefore its subsidiary DBI Consulting Limited (“DBI”), for a consideration of up to £12m.

DBI is one of the UK’s leading independent management and business consultancies focused almost exclusively on the UK public sector for over 20 years.



Secretary John Gavan

Registered Office Lancaster House Centurion Way LeylandLancashire PR26 6TX

Registered Number 2401383

AuditorsDeloitte & Touche LLP Manchester

Financial & Corporate Dresdner Kleinwort Wasserstein 20 Fenchurch StreetLondonEC3P 3DB

Close Brothers Ltd 10 Crown Place Clifton StreetLondonEC2A 4FT

Brokers & Nominated Advisers Dresdner Kleinwort Wasserstein 20 Fenchurch StreetLondonEC3P 3DB

KBC Peel Hunt Ltd111 Old Broad StreetLondonEC2N 1PH

BankersBank of Scotland Barclays Bank plc 19/21 Spring Gardens 51 Mosley Street Manchester Manchester M2 1FB M60 2AU

Allied Irish Bank (GB) The Royal Bank of Scotland86 King Street 1 Exchange FlagsManchester LiverpoolM2 4WQ L2 3XN

LawyersDLA Piper Rudnick Gray Cary UK LLP Turner Parkinson 101 Barbirolli Square Hollins Chambers Manchester 64a Bridge Street M2 3DL Manchester

M3 3BA

Financial RelationsWeber Shandwick Square MileFox Court14 Grays Inn Road LondonWC1X 8WS

Registrars Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA

Website www.enterprise.plc.uk


Corporate directory

Financial calendar

Annual General Meeting 4 May 2005

Final Dividend Payment 9 May 2005

Lancaster HouseCenturion WayLeylandLancashire PR26 6TX

Telephone. +44 (0)1772 819000Facsimile. +44 (0)1772 819001

email. [email protected]

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