Our goal is to continue to deliver enhanced shareholder value through long-term earnings growth and our strategy to deliver this is to:

• maintain a balanced business in long-term growth markets
• achieve leadership positions through market-led innovation
• achieve operational excellence in all parts of the business and maintain a flexible cost base
• selectively acquire businesses with strategic fit

Progress on strategy - financial year 2010

Balanced business in long-term growth markets

We continue to expand the business into related markets outside the marine newbuild segment that has been the historical core of the Group, our focus being upstream oil & gas, after sales and opportunities driven by the need to meet new environmental legislation.   We have expanded our technology offering in both the upstream oil & gas and environmental markets during the year both by acquisition and organic development. We have continued to develop our Aftersales business and strengthened the Group executive committee with the recruitment of a Group Aftersales Director to lead this business across all divisions. Whilst sales to the marine newbuild market fell by 27% compared to the prior year, sales to markets outside new shipbuilding remained at the same level and now represent 50% of total Group sales (2009: 42%).

Leadership through market-led innovation

We seek to achieve leading market positions in our chosen sectors and to support this we continue to increase our investment in research and development across the Group. This investment focuses on not only the development of new products but also the improvement of our existing products as both are key to the long-term success of the business. In the period, investment in internally-funded research and development grew by 33.7% to £3.9 million. Every division increased research and development expenditure as a proportion of sales and we have continued to invest in the technologies brought into the Group through acquisition over the last year.

Margin improvement through operational excellence

Operating margins, cost efficiency and operational excellence remain a key focus. Despite lower turnover and an increase in research and development expenditure, Group operating margin remained at 9.1%. Good progress was made during the year in improving our operational effectiveness, in particular in procurement where we have strengthened our low-cost sourcing team located in China and introduced a group-wide category management system for our key components and materials. This will enable us to realise the benefits of our scale in procurement whilst maintaining the flexibility of our decentralised operating structure.

In addition to the headcount reductions carried out in March 2009 in our Gas Systems business in Norway and Water Systems business in Germany, we have taken further steps to reduce costs in all four of our divisions during the last year. Since January 2009, we have reduced employee numbers across the Group by 17%.

Strategic acquisitions

We seek to complement our organic development with strategic acquisitions, both to expand our technology base and to strengthen our market positions. During the year we completed two acquisitions. On 29 September 2009 we acquired the business and assets of Krystallon Limited. Krystallon Limited has developed a leading technology for systems to address the emerging market for marine sulphur emissions reduction. On 30 September 2009 we also completed the acquisition of the Technology & Products division of Aibel AS. This business provides leading technologies for the upstream oil & gas industry and expands the Group’s presence in this target market.

We continue to be active in the search for strategic bolt-on acquisitions and, supported by our strong balance sheet, expect that these will continue to form an important part of the development of the Group in the years ahead.