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WATERMAN GROUP PLC

Preliminary Results Announcement for the Year Ended 30 June 2011

Waterman Group plc, the international engineering and environmental consultancy, today announces its preliminary results for the year ended 30 June 2011.

Notes

1. The pre tax profits include a provision for exceptional items which in 2011 is £123k and in 2010 was £5,638k.

Commenting on the results, Nick Taylor, Chief Executive said:-

" We are pleased to have achieved these robust results in a market which is still constrained by lack of significant investment."

" The implementation of our three point strategy will allow the business to sustain the current market environment. We have made significant progress towards repositioning the business in core markets and countries, which going forward will provide revenue growth."

" Our performance in the second half of the year improved relative to the first half with increased profitability and reduction in net debt as benefits materialised from the earlier re-structuring of the business with a greater focus on our core consultancy skills and geographical strengths." 

-ends-

Date: 04 October 2011

For further information please contact:

Waterman Group plc City Profile

Nick Taylor, Chief Executive Jonathan Gillen

Alex Steele, Finance Director Simon Courtenay

020-7928-7888 020-7448-3244

web: www.watermangroup.com

CHAIRMAN'S STATEMENT

The last year has seen improving trading conditions for Waterman Group (the "Group") with profitability returning. During the second half of the year we experienced an improvement in the level of private sector workload. This helped compensate for the impact of reduced investment in the public sector following the UK government's Comprehensive Spending Review announced in October 2010.

Much has been achieved over the last twelve months. We have created a stable platform to enable future investment in resources and new markets to occur to stimulate increased profitability and the creation of shareholder value.

We have made good progress with the collection of overdue debt from the major UK clients mentioned in the last Interim Management Report. Our net debt at the year end was £8.6m which was marginally lower than the half year net debt of £8.9m. We continue to make annual capital repayments and interest payments of £1.8m on our property and business mortgages and loans.

Results

In the year to 30 June 2011, revenue was £74.1m (2010: £83.2m) and adjusted pre tax profit was £1.1m (2010: loss of £4.5m). The adjusted pre tax profit excludes £0.5m (2010: £0.5m) for amortisation of acquired intangible assets. The net asset value per share was 112p (2010: 110p). The proposed final dividend is 0.1p per share (2010: 0.9p) which is the same as the interim dividend to allow for the continued investment in the business, resources and future workload.

Strategy

The Board introduced the Group's three part strategy in 2010 to:-

·; Focus on removing costs which do not produce long term value;

·; Return each of our business units to profitability; and

·; Deliver revenue growth.

During the last twelve months we have made good progress on the reduction of our costs. There has been particular emphasis on the release of unused office space back to landlords and the simplification of our management and reporting structure.

We have made significant steps to re-position the business in core markets and countries which will provide growth in the future. Each of our primary business units is now generating profit, apart from the Civil and Transportation group which has been affected by recent cuts in public spending. Action has been taken to streamline this business and we are pleased to have recently been re-appointed for a four year term contract with the London Borough of Bexley for engineering services consultancy support.

The UK business has been re-focused to maximise opportunities in new growth markets. This has enabled us to make optimum use of the relationships of our senior management team, who through their technical excellence are the main generators of new opportunities.

Overseas, our resources at the beginning of the year were re-aligned into four main international hubs which are Australia, Middle East, CIS and Europe. Outside the main hubs, our India office is currently providing outsourcing resource for our UK operations and our China office generates masterplanning commissions for Group services.

Over the next twelve months our teams throughout the Group are focused on improving margins and revenue growth. Sensible opportunities will be pursued either in geographical areas in which we currently have a presence, or where we can operate with a local partner.

People

We have reduced our employee numbers from 1216 to 1052 over the last twelve months. A one off charge of £0.4m is absorbed within our declared profit for the financial year. The Board believes that the Group is now the appropriate size to operate successfully both in the public and private sectors.

On 5 April 2011, we announced that Graham Hiscocks, Arthur Austin and Barry Gore had agreed to step down as directors of the Board with immediate effect and that Graham Hiscocks retains the position of company secretary. In conjunction with these changes to the Board, the former operational Group Management Board was replaced by a UK Management Board and an International Management Board. The changes have simplified the reporting and responsibilities within the business. The new structure gives greater leadership to these two distinct parts of the Group and more opportunity to focus on existing and new markets.

I would like to thank all three directors for their contribution to the Group over many years.

We continue to invest in the training and development of our employees, and in particular the use of Building Information Modelling (BIM) techniques which we have been at the forefront of developing for the last ten years. The UK Government has recently announced that designers on all public sector projects must be 3D BIM compliant by 2016.

In September this year, the next intake of engineering graduates who we have sponsored through university joined the Group. This programme continues our commitment to young engineers during a time of change in university funding.

Property

By the end of 2011, we will have implemented our strategy for the rationalisation of our regional offices into a more compact number of multidisciplinary offices with Waterman represented in each major city centre in the UK. This process has been completed as leases expire or break clauses arise on currently occupied premises. In the first half of the next financial year, we expect to have completed the final part of the strategy, which is the release of 2,500m2 of under-utilised office space back to our landlords. The reduction of leased floor area will have a beneficial effect on the Group's overheads and will enable the Group to be more competitive in the future.

As part of the review of our future office space requirements, we have reconsidered the benefits of the ownership of our head office at Pickfords Wharf, Clink Street, London. Accordingly, the Group is currently in negotiations for the sale and leaseback of this property. The sale and leaseback, if concluded, would be subject to shareholder approval and would realise an exceptional profit for the Group. Waterman will update shareholders as and when it is appropriate.

Dividend

The adjusted earnings per share, before amortisation of acquired intangible assets and exceptional items, are 1.8p (2010: loss 2.4p).

In view of the need to continue to invest in new areas of business and markets both in the UK and overseas, the board is proposing to pay a final dividend of 0.1p per share (2010: 0.9p). This will be payable on 10 January 2012 to shareholders on the register on 9 December 2011. This final dividend with the interim dividend of 0.1p which was paid on 21 April 2011, makes a total dividend for the year of 0.2p (2010: 1.8p).

The Board will review normalising its dividend policy in future years in light of market conditions and trading performance.

Outlook

The Group has returned to profitability over the financial year during a period when our markets have remained constrained by lack of significant investment by our clients.

Historically, three quarters of the Group's revenue was generated from the property sector. This reliance on the property sector has created difficult trading conditions over the last three years as the sector suffered a severe and abrupt downturn. However, over the financial year we have seen a significant improvement in enquiries and secured projects in the commercial and residential markets and more recently we have witnessed renewed interest from clients involved in retail developments throughout the UK.

We are continuing to diversify and have recruited a new Director of Technology Services in Australia following new commissions in the telecommunications sector. In addition, in June this year we appointed a new Managing Director of our Building Services business from within our existing team. He will be particularly focused on promoting our carbon and energy management credentials to clients.

While there remains financial uncertainty both in the global economy and in the rate of recovery in many markets, I believe we are well positioned and have a highly regarded brand and employees which will enable us to succeed and take advantage of appropriate opportunities. 

On behalf of the Board, I would like to express our appreciation to all our clients and staff for their continued support.

Roger Fidgen

Chairman

04 October 2011

OPERATIONAL REVIEWS

Waterman operates within the UK in four segmental profit centres based on the following engineering disciplines which provide 73% of the Group revenue:-

Structures (16% of Group revenue)

Civil and Transportation (37% of Group revenue)

Building Services (11% of Group revenue)

Energy, Environment & Design ( 9% of Group revenue)

Each engineering discipline works in a range of sectors in both the private and public markets. Professional advice and designs provided by the Group range from planning consultancy such as environmental impact assessments and transportation studies through to detailed design and facilities management.

Overseas, we operate in each country as a multi-discipline business, providing a range of services to a multitude of sectors. Work is generally in the private markets although in Australia and Ireland we are also involved in the public markets. In 2010, we organised the overseas business into four main hubs as noted below to focus resources and business development into regions:-

Australia (11% of Group revenue)

Middle East ( 9% of Group revenue)

Europe ( 4% of Group revenue)

Commonwealth of Independent States (CIS) ( 2% of Group revenue)

Overall, 65% of the Group revenue is generated from the private property sector with the remainder being generated from the public sector and the regulated industries.

Structures

Success across a variety of market sectors has enabled Waterman's structural business to continue to consistently deliver good profit margins. The Company has faced greater fee competition due to market conditions but the effect of timely efficiency measures have allowed profitability to be maintained.

The advancement of computer aided design and Waterman's commitment to the increased use of Building Information Modelling (BIM) systems continues to keep the company at the forefront of emerging design technology, achieving greater efficiency through the design and construction process.

Commercial

Activity in the London commercial sector has improved throughout the last twelve months. Work has continued on the 40,000m2 project to develop two office buildings at Ludgate for Land Securities. It is anticipated that the development will progress to site shortly. At One Angel Court, planning consent has been achieved for the redevelopment of the 25 storey building for TIAA CREF. The project involves retaining elements of the existing structure and introducing new more efficient floor plates to create a highly sustainable redevelopment solution. The scheme includes a new 5 storey structure to provide additional commercial floor space at the lower levels.

Detailed design work has been completed on 8-10 Hanover Street, London; a new development of high quality offices and residential units for HSBC Bank Pension Trust / CORE. Enabling and investigation works commenced on site in 2011 with a start on site anticipated in January 2012. Design work is also complete on a 14 storey 22,000m2 office building at 6 Bevis Marks in London for CORE. The design incorporates reuse of the piled foundations, an important sustainability initiative implemented by Waterman on this scheme. At Cavendish House, refurbishment and extension of the existing building is underway to provide an improved area of 3,500m2.

Also in the City of London, Waterman is at the early design stage for two corporate headquarters buildings. At Finsbury Circus, designs are being developed for a 20,000m2 major refurbishment including façade replacement, additional storeys and internal modifications. Demolition commenced in accordance with the development programme and construction work began in August 2011. Due diligence, structural and fire engineering design services are being provided on a new 70,000m2 building for UBS at 5 Broadgate.

Waterman has been retained under framework agreements to provide structural advice on major London estates for both landlord and tenant modifications and maintenance strategies. The estates include The County Hall Riverside Building on the South Bank for Metropolitan Estate Management Services Ltd and the Tower 42 Estate for the Tower Partnership.

Waterman has been appointed by The States of Jersey Development Company Ltd to provide multidisciplinary engineering and environmental consultancy services for Phase 1A of the Esplanade Quarter, St Helier. The sensational waterfront redevelopment will provide a new town quarter, aiming to seamlessly integrate the old town with the waterfront. A new financial centre within the development will provide around 33,000m2 of high quality new office space for Jersey's thriving business community. It has the potential to provide up to 62,000m2 of office accommodation in the overall scheme. The first phase of works consists of four buildings over an integrated podium, providing parking for around 500 cars (with spaces for up to 1,402 cars in the overall scheme). The individual buildings are being designed by leading architects with Eric Parry Associates and MJP confirmed to design the first two buildings.

The design of the new National Centre for Network Rail at Milton Keynes is continuing and is scheduled to complete in 2012. The new Ordnance Survey headquarters in Southampton for Kier Property was completed this year.

Retail

The exciting Trinity Leeds development by Land Securities plc, programmed to open in spring 2013, will bring a conclusion to fifteen years of Waterman involvement with this site. Detailed design has been completed and construction work is currently in progress. The city centre plot is close to Leeds main line station and the complex local topography required an imaginative solution to deliver access to the three trading levels from the surrounding streets. The scheme will be integrated with the remodelled Plaza Centre to provide a combined retail area of approximately 100,000m2, with over 100 stores.

Waterman provided input into a planning application on behalf of Sainsbury's to provide a new 8,000m2 store and a 737 apartment residential development at Nine Elms, London. Design work on a similar scheme at Fulham Wharf has also progressed, having secured planning consent in early 2011.

Structural teams are advising clients on large scale retail developments throughout the UK including Stoke on Trent, Milton Keynes, Selly Oak, Telford and Lakeside in Essex. Work continues with Tesco on the Express roll-out programme and further new Tesco stores across the country.

Residential

The company has been working on a number of residential schemes in London.

NEO Bankside, a joint venture development between Native Land and Grosvenor, is under construction adjacent to Tate Modern. The four major buildings in this impressive riverside development will be completed in May 2012. Waterman provided input on an 18,000m2 residential project at Campden Hill for the same clients which secured planning consent in the year.

Demolition work in preparation for the construction of Henry Moore Court, a high quality residential development in Chelsea, was finalised earlier in the year. The new development is due for completion in 2012.

Design work has commenced on the Wandsworth Town project for Mount Anvil, comprising nine residential plots of between 6 and 15 storeys, alongside commercial office and retail space. As part of Waterman's involvement with the Crown Estate framework, design work is being undertaken on Albany House, 80-82 Mortimer Street and MacDonald Buchanan House which will provide residential accommodation in connection with the Regent Street and St James's area redevelopment plan.

Johnson House in Ebury Square, Belgravia is a challenging project involving Waterman's structural and civil engineering teams. The scheme involves the development of two 5 and 6 storey blocks with a 3 level basement located over and adjacent to a section of the London Underground District line. The Waterman teams are also working on a challenging project to deliver two residential developments which are integrated into the new Woolwich Crossrail station.

Student accommodation is continuing to provide opportunities for Waterman. The development of 325 student apartments on Holloway Road in London was completed this year. At Winchester University, 500 apartments commenced construction in June 2011. A number of other schemes are at preliminary design stage.

Urban Regeneration

Considerable progress has been made on The Crown Estate's major developments in the Regent Street and St James's area of London. Quadrant 3 is the redevelopment of the former Regent Palace Hotel into 40,000m2 of retail, commercial and residential space. This is the largest and most prestigious development of The Crown Estate and it is expected to complete in October 2011. Quadrant 2 is the refurbishment of an existing building adjacent to the Café Royal and construction work commenced in March 2011. Block W4 (155-167 Regent Street) comprises 20,000m2 of retail and commercial accommodation. During the year, the design has been progressed with site work commencing in September 2011 and completion due in 2013. Gateway is a 30,000m2 retail / commercial / residential block at Piccadilly Circus, with retained façade and new structural framing. Reconstruction on this project has commenced and completion is due in 2013. Finland House and Dorland House in St James's Market, Lower Regent Street is the redevelopment of two separate buildings for retail / commercial / residential use. Waterman is working with the architect, Make, on feasibility study and master planning.

Waterman has contributed to the planning process for a number of major city centre regeneration schemes. The 200,000m2 Eastgate development by Hammerson in Leeds secured planning approval in the year. Following the re-evaluation of the 100,000m2 Westgate development at Oxford, the team has been instructed by clients The Crown Estate and Land Securities to prepare and submit a new planning application. This work is anticipated to be completed in early 2012. In Exeter, a feasibility study involving the development of 100,000m2 retail led urban regeneration has been completed for Land Securities and The Crown Estate on land adjacent to the Princess Hay Centre. Worthing Gateway, a 95,000m2 mixed use development adjacent to Worthing Station has achieved planning consent. Waterman is now developing the structural, building services and civil engineering design with construction work scheduled to commence in late 2012. Waterman is continuing to provide advice on the Station Hill development in Reading.

Waterman has secured a major, mixed use development of approximately 110,000m2 at Vauxhall for CLS Holdings. The scheme will include a hotel, offices, student accommodation, leisure / cinemas, retail space and two 50 storey residential towers.

Energy / Industrial

Work on the major new electricity substation in Edinburgh at Dewar Place has made considerable progress this year. In late 2012 the main construction work will be completed allowing the installation of the main transformers. The relationship with Scottish Power has provided opportunities for additional work on energy projects. It is anticipated that this will provide a further increase in revenue from this sector.

Waterman is working closely with construction companies and process engineers on energy from waste PFI projects. The North Allerton and Hertfordshire projects have reached preferred bidder status and the company anticipates that design work will start in early 2012.

Waterman has been working for Princes Foods on a number of projects. These include a new production building and syrup room together with an 18,000m2 warehouse. A feasibility study has been carried out reviewing its Cardiff and Manchester facilities as part of its national juice strategy. Design work has been instructed to submit a planning application.

Work completed in the year also includes new process lines for Coca Cola Enterprises at Abbeywell, Sidcup and Edmonton.

Hotels

Galliford Try has completed construction work on the 4 star Crown Plaza Hotel at Heythrop Park, Chipping Norton, near Oxford. The project designed by Waterman also involved the partial refurbishment of the existing country house in addition to the new bedroom and conference facility and was officially opened by The Right Honourable David Cameron.

Designs are currently being progressed for a Queenhithe Hotel in Upper Thames Street, London, providing approximately 200 keys and a planning application was submitted in July 2011.

In Greenwich, a new 100 room hotel project is underway with design work commencing in July with a target to complete the development on site by June 2012.

Healthcare

Healthcare projects in London include the £15m paediatric extension to the Chelsea and Westminster Hospital, which has progressed to site and the framework agreement with Homerton Hospital. Construction is underway on the Community Hospital at Selby which combines with a new civic centre. In Derbyshire, an extension to the Bramble Lodge residential home near Ilkeston is due for completion late 2011.

Education

Progress in the education sector was interrupted in 2010 due to Government cut backs in education sector spending. Despite this, the majority of Waterman's school projects were able to continue in the year. As part of the Middlesbrough BSF programme, a pupil referral unit, a special educational needs secondary school and a Catholic college were handed over. Good progress has been made on the Heartlands Academy in Birmingham which is due to complete in 2012. A new appointment has been received for Stanley School in Richmond, Surrey. Work commenced in June 2011 and it is due for completion during the year ahead.

Civil and Transportation

Waterman's civil and transportation business has experienced a challenging period due to the effects of the Government's Spending Review on its public sector markets, coupled with a slow recovery in private sector work. However, Waterman has won an increasing number of power, energy, waste and rail projects since the start of 2011, which are providing a significant proportion of turnover and should allow for modest growth to be achieved over the next twelve months.

Public Sector

Waterman has continued to pursue public sector framework agreements and has secured a number throughout the year. These provide a significant workload for the transportation, engineering and hydrology teams. Work arising from the highways sector has reduced in the last twelve months due to the Government spending review.

In June 2011, Waterman completed the transport planning, environmental and economic analysis and engineering feasibility work for the £120m Managed Motorway Scheme for M62 Junctions 18 to 22. This has allowed the scheme to proceed as part of the Government's SR10-14 national highways construction programme.

The Company is currently working on Phase 2 of the Bedford Western Bypass Scheme for Bedford Borough Council. Funding for the £5m scheme was obtained in March 2011 and design work is ongoing. Construction is due to start in 2012 with completion in 2015.

Burnt Tree Island was a major at-grade gyratory on the dual two-lane A4123 between Birmingham and Wolverhampton which is being replaced by a complex signal-controlled junction. Dudley and Sandwell Metropolitan Councils appointed Waterman with Carillion in 2007 to progress the design and statutory procedures for the project, including Full Business Case Approval. The scheme received DfT funding for £12m in 2009 and is now nearing completion.

Waterman continues to act as Technical Advisor to the funding banks for the £400m M40 Design, Build, Finance and Operate (DBFO) scheme, which is now in the twelfth year of the 25 year shadow toll concession period. Waterman is responsible for periodic technical reviews of the contract. It covers all aspects of engineering asset management and maintenance for the DBFO contract, as well as monitoring the traffic volumes and types against the forecasts which underpin the shadow toll element of the bank's financial models.

Rail

Waterman has seen growth in rail and rail related work during the year. Design of the Royal Arsenal and Woolwich Station structure has been progressed and piling starts on site in September 2011. The client, Berkeley Homes, is delivering the £75m station as part of the London Crossrail scheme.

The Company has designed upgrades for ten stations as part of the National Station Improvement Programme. The work has been undertaken for a number of train operating companies (TOCs) as well as direct for Network Rail. It is anticipated that work will continue at a similar level in the coming financial year.

The rail team in London has a growing reputation with London Underground and Network Rail for providing loading and associated ground movement calculations to satisfy the asset protection requirements for tunnels and other rail assets. These have allowed planning approvals to be obtained for a number of challenging projects both in London and throughout the UK.

The Transport for London (TfL) framework has resulted in a number of new commissions and workload is continuing primarily on asset maintenance projects.

Waterman's AutorailTM asset database continues to be the primary source of information for the UK rail network. The Company is appointed by Network Rail to keep the information updated and issues quarterly updates to subscribers which include Network Rail, TOCs, consultants and contractors.

Secondment Services

Waterman Aspen, the Group's secondment and outsourcing business, had a significant drop in demand for its services during the year. This was due to the effect of the Government's Spending Review in October 2010, which resulted in a major reduction in staff within local and highway authorities. In response, the business has been restructured to offer services to a wider range of markets. Demand for staff in the rail and power and energy markets has grown and further secondments are being targeted in these sectors.

Despite the effects of the spending review, Local Authority framework agreements remain an important source of secondments. In April 2011, Waterman Aspen was part of the team appointed for the Midlands Highway Alliance Professional Services Partnership framework. The three year framework provides staff on a wide range of disciplines including asset management, Local Transport Plans and highway infrastructure design. The framework covers fourteen local authorities in the Midlands and has resulted in a significant number of secondments.

In addition to direct frameworks, Waterman Aspen is working with other Group businesses to assist in securing consultancy frameworks which utilise a mix of office based consultancy and seconded staff. A number of tenders for frameworks have been submitted on this basis and are under consideration.

Power, Waste and Energy

Progress has been made in the power, waste and energy markets during the last twelve months.

The framework in Scotland for Scottish and Southern Energy has resulted in over forty commissions and the team now has projects throughout the Highlands of Scotland, the Western Isles and Orkney. A number of projects are on site and Waterman is carrying out site supervision in addition to the design work and contract preparation.

Alternative energy schemes are also providing a significant workload especially for the engineering and transport planning teams. Waterman has on-going work advising over 100 wind turbine proposals throughout the UK. It is also acting as engineering advisor to a company providing solar panel systems. This is a growing market due to the current feed in tariffs for renewable energy.

During the year, Waterman has worked on projects at fifteen power stations throughout the UK and these have covered all three fuel sources: nuclear, coal and gas. Clients include EDF, Scottish and Southern, Scottish Power, RWE Npower and E.ON. The projects range from assisting with the management of maintenance work to the design of upgrades. The upgrades include a number of Selective Catalytic Reduction (SCR) systems which are used to reduce NOx and SOx emissions from power stations, required under clean air legislation.

Waterman continues to provide engineering support for a number of Waste PFIs including Nottingham, Sheffield and West Berkshire and is currently working on the bid for the Greenwich waste PFI. Waterman provided engineering input for a new waste to energy plant in Surrey for Sita as part of a planning application. This was given permission in July 2011. The team in Scotland is providing masterplanning and transport planning advice in support of a planning application for a £640m waste and recycling facility in East Renfrewshire.

In April 2011, Waterman signed a three year framework agreement with National Grid to provide engineering advice and support. There are a number of projects under consideration and it is anticipated that this framework will provide an increasing flow of work over the next three years.

The team has also been providing engineering advice for a number of other energy projects including the design of a gas supply pipeline in Scotland and a proposed cable tunnel under a large estuary in the UK.

In July 2011, Waterman was appointed as the lead consultant responsible for civil, structural, mechanical, electrical and process integration for a new £12m lightweight aggregate (Lytag) processing facility at Drax Power Station, North Yorkshire. The facility will process ash from the power station to produce a range of lightweight building products. It will be a flagship project for Lytag Ltd and the first facility of this type to be constructed in the UK in over thirty years.

Health & Safety

Waterman Health & Safety provides consultancy services to clients in the public and private sectors, and also acts as Waterman Group's health and safety advisor.

CDM co-ordinator services form the most significant proportion of Waterman Health & Safety's revenue. As this service is an integral part of the construction industry, the market for these services has hardened. However, the division has performed well with appointments in various sectors. These include a 750 unit residential project in East London, a major redevelopment of the Broadmoor secure hospital and various new waste recycling facilities throughout the UK. It also has a number of framework agreements which provide on-going repeat work.

Anticipated improvements in the building market should result in an increase in workload for the coming year.

Transport and Development Infrastructure

Workload in this sector has increased gradually over the year and the team has been working in support of a large number of planning applications, in addition to the design of projects.

Waterman provided significant input into the planning application for the £500m Eastgate retail development in Leeds, which received approval in July 2011. It has also provided information for the proposed £150m Teville Gate mixed use development in Worthing. This has been submitted for planning and final approval is expected in September 2011.

The transportation team in Manchester is currently working on The Greenbank Embankment regeneration project in Salford. The thirteen acre, mixed use site is a joint development between Ask Developments, Network Rail and Salford City Council.

Work has restarted on the The Junction Retail Park at Oldbury in the West Midlands. An amended planning application is being submitted for this £40m development which is expected to start on site in 2012. Waterman has a multidisciplinary appointment for the development covering all the engineering and environmental planning and design work.

A large number of flood risk assessments have been completed throughout the UK. One of the larger studies was for New Lubbesthorpe near Leicester, a proposal for 4,250 homes on a 394 hectare Greenfield site. This involved extensive modelling of the hydrology and preparation of a sustainable drainage strategy in support of the planning process.

The team has been commissioned to prepare the Surface Water Management Plan for a 5km corridor centred on the Bradford to Shipley canal. The study will provide the basis for a long term action plan to manage the food risk within the study area.

The residential sector has shown an increase in activity from major house builders in the first half of 2011. This has resulted in a significant level of work for the transportation, flood risk and engineering teams. In July 2011, a three year framework agreement was signed with Taylor Wimpey for the provision of engineering services.

In Scotland, Waterman is working on the Laurieston Transformation and Regeneration project. This is a major residential regeneration project south of Glasgow City Centre, adjacent to the River Clyde. Work on the £22m first phase has commenced and includes 200 one, two and three bedroom affordable rent homes.

In other sectors, the £40m Manufacturing Technology Centre at Ansty Park near Coventry was completed in July 2011. The facility will be used to undertake research and development for the aviation industry. Waterman has recently been appointed for the design of a 75,000m2 food distribution facility at Castlewood near Mansfield. The joint clients for the project are Clowes Developments and First Industrial. The facility is being constructed for the Co-operative Retail Group. The development has received planning permission and is due to start on site in September 2011.

Building Services

Against the background of challenging market conditions, Waterman's building services business has delivered a robust performance. There has been an increase in projects in the London commercial market and the Company has continued to perform well in the education, defence and technology markets.

Commercial

Waterman has undertaken scheme design for three major developments in London to allow them to be submitted for planning. The 30,000m2 redevelopment of 82-84 Piccadilly and the 45,000m2 One Angel Court project have both received planning consent. The building services for 30 Old Bailey / 60 Ludgate Hill were designed by Waterman to take full advantage of the active façade on the Old Bailey building to comply with Part L of the Building Regulations and incorporated both active and passive design.

Detailed design work for the 6 Bevis Marks and 12-15 Finsbury Circus commercial office buildings in London has been completed and construction is due to commence shortly on both projects.

Construction work is well underway on the new 36,790m² American Express headquarters in Brighton. Waterman's scope has increased to include the design of specialist architectural lighting and street lighting.

Macquarie Bank's 20,000m2 fit out at Ropemaker Place in London was successfully completed in the year, with the offices and trading floors now fully operational.

Waterman has been appointed by Lend Lease for the HM Treasury Workspace Project at 1 Horse Guards Parade in London. The purpose of the project is to significantly increase the occupancy of the existing Grade 2 Treasury Building by reconfiguring its internal space. Key aspects of the project include upgrading the IT infrastructure, redesigning the UPS and generator back up for the building, upgrading the electrical supplies and detailed thermal modelling to establish how naturally ventilated sections of the building are to be treated. Waterman's scope also includes acoustics and fire engineering.

As part of a multidisciplinary appointment from the States of Jersey Development Company, Waterman will provide building services design on Jersey's new Esplanade Quarter in St Helier.

Industrial

The £40m Manufacturing Technology Centre in Coventry, designed by Waterman, was completed in July 2011. The 12,000m2 manufacturing research facility will concentrate on assembly, fabrication and joining technologies and act as a bridge between university development and testing work and full production business. The initial research partners were University of Birmingham, University of

Nottingham, Loughborough University, TWI Limited and founding industry members were Rolls Royce, Airbus UK and Aero Engine Controls.

Defence

Building services design work continues with Aspire Defence on Project Allenby/Connaught, the largest infrastructure PFI ever led by the MoD. The £8bn project includes a £1.5bn construction programme and is providing new and refurbished living accommodation as well as technical, administrative and leisure facilities for some 21,000 military and civilian staff. The Waterman team will remain on site at a reduced capacity throughout 2011-2012.

Healthcare

Following the successful completion of a new radiotherapy unit at the Royal Oldham Hospital, construction work is progressing well on a new Women and Children's Unit. The project is a negotiated contract under the ProCure 21 (P21) National Framework led by IES Healthcare and is due for completion in 2012. Waterman is undertaking building services design of the operating theatres, intensive care facilities, wards and outpatient departments.

Education

Waterman has developed strong relationships within the education sector. This has resulted in new commissions despite the reduction in government funding.

Schools in Bradford and surrounding towns have been transformed as part of the Bradford BSF programme. Waterman has worked closely with Educo (joint venture between Costain and Ferrovial Agroman) on the delivery of Beckfoot and Hanson Schools and the Grange Technology College, which were completed in the year. As part of the Middlesbrough BSF on behalf of Willmott Dixon, Trinity, Beverley and Tollesby Schools were also completed.

Following the withdrawal of Learning and Schools Council (LSC) funding, a number of 6th form colleges have started to progress schemes on a reduced scale using local funding. Workload is strong in this area and commissions have been secured for Cheadle and Marple, Blackpool, Wirral and Altrincham Sixth Form Colleges, with a combined construction value of £25m.

In addition, contracts have been secured as part of the Office of Government Commerce (OGC) at Manchester and Chester Universities.

Data Centres

Waterman is working on a number of data centre projects. Specialist expertise in this area includes the design of uninterruptible power supplies, generators and resilient cooling systems. Detailed design on a major data centre for Amex is complete and the project is now under construction. Further projects are underway with Talk Talk, Visa and Hewlett Packard. This market is continuing to grow strongly and the company is well positioned to take advantage of the opportunities this presents.

Energy, Environment & Design

Waterman's environmental business benefited from improved market conditions and returned to sustained profitable trading. Following the strategic review undertaken in 2010, the new management team has continued to invest in the Company's core services, allowing the business to take advantage of opportunities resulting from the market recovery. The strategic focus is to increase market share by developing unique products and services, which add value for clients and reduce their environmental risks.

Due Diligence and Environmental Management

Waterman's due diligence team retained its position as one of the UK's leading providers and experienced a significant increase in due diligence assignments during the year, providing a mix of property, institutional investor and private equity house clients with commercially focused advice. 

Key commissions in the UK included advising LGV Capital on the Management Buy Out (MBO) of Snow + Rock, the specialist outdoor sports retailer; supporting Macquarie Bank on the refinancing of the MOTO service station portfolio; and the provision of vendor due diligence on behalf of Bank of America for its sale of Integrated Dental Holdings to Carlyle Group.

Waterman has a strong track record in providing international due diligence and has experienced growth in this sector. The team advised on the acquisition of Bormioli Rocco, ALB Technick, Sparex and Metallwarenfabrik Gemmingen. The team is currently advising on a new energy facility in Belgium.

In the property market, Waterman advised on the acquisition of Chiswick Park, a large office and retail development in west London; the sale and leaseback of a 13 site portfolio of chilled warehouses across the UK; a number of caravan and retail parks; and the development of a new student campus in Tekeli, Kazakhstan.

The team has continued to support the British Venture Capital Association (BVCA) in promoting responsible investment within the private equity and venture capital world. Waterman is now co-authoring the first supplement to the Guidance issued in June 2010, with a launch planned during the BVCA Summit in October 2011.

During the year, the team launched the new and improved EnviroRisk Wizard, an online environmental risk screening platform for banks, enabling environmental risks to be captured during the valuation process. Waterman's Greenspace online integrated management platform continued to attract blue chip clients wishing to utilise the system's bespoke management tools. Clients include Jeyes, Shell, Petroplus, Goodyear, Scottish Water, GE, GKN Aerospace, Accenture and GVA. A number of Greenspace clients are also benefiting from Carbon Manager, Waterman's latest application.

Brownfield Regeneration

Despite continuing challenging market conditions, Waterman has retained its position as one of the UK's leading specialists in brownfield regeneration.

Work continued on the redevelopment of the former Steetley Colliery site in Nottinghamshire for Laing O'Rourke and enabling works have now commenced on site. The twelve month programme includes the relocation of existing sensitive ecological habitats to two specially formed wildlife areas, bio-remediation of contaminated soil, re-engineering and capping of the former uncontrolled landfill sites, and moving 250,000m3 of material to create six level platforms for future development as an industrial park.

Remediation works are on-going at the Edgewater Park residential development, Warrington for Morris Homes. The area is a former landfill site and innovative remediation and ground improvement techniques are being used to allow the houses to have standard foundations.

Following due diligence work at the former US Air Force Base in Upper Heyford, Oxfordshire, Waterman is undertaking extensive site investigation works and analysing the 13km petrol, oil and lubrication pipeline system that was formerly used at the site.

Environmental Impact Assessment (EIA) & Sustainability

Waterman's EIA team experienced a steady increase in enquiries over the year and secured a number of key commissions. The team has been appointed by Lend Lease to support the regeneration of Elephant and Castle in London, and is retained by the US Department of State to assist with the detailed design and reserved matters applications for the US Embassy in Wandsworth.

In London, Waterman has successfully delivered EIAs for a number of high profile projects, including Principal Place, a 54,940m2 office development on behalf of Hammerson and the Embassy Gardens masterplan for Ballymore. The latter is a six hectare site near Vauxhall providing 2,000 homes, over 45,000m2 of office space, a 100 bedroom hotel and 12,000m2 of retail and restaurants.

In Scotland, Waterman has completed an EIA for MOTO Hospitality Ltd for the redevelopment of the motorway service area at Kinross on the M90 and has helped Scottish Resources Group Estates Ltd secure planning consent for a mixed-use and employment-focused development at Poniel in south Lanarkshire. The team also has an increasing workload in wind farm site selection and feasibility studies.

The national noise and vibration team has continued to expand and develop skills in environmental, building and architectural acoustics. Waterman is now a sponsor member of the Institute of Acoustics. Notable commissions include services to UK Coal in support of an open cast mine extension and the construction of the M90 Fife Intelligent Transport Scheme. The team has recently completed design projects for the University of Chester Halls of Residence and Atholl Estates Hydro-Electricity Plants and continues to provide design advice for large scale residential and commercial developments at the Royal Arsenal, Woolwich.

Waterman's team of licensed BRE assessors have seen an upturn in workload with some notable commissions in London, including BREEAM services for 120 Fenchurch Street and 12-15 Finsbury Circus for CORE, 60 Old Bailey for Land Securities and the World Conservation and Exhibition Centre at the British Museum.

Ecology, Archaeology, Landscape Planning and Design

Waterman's ecology team has provided detailed advice to clients on habitat and protected species issues across the UK. Bat survey and mitigation has been required at a number of sites where bat roosts have been identified in trees and buildings on or near to an application area. This includes a residential site in Kent where 37 buildings were demolished, and 80 bats were released under licence. Reptile surveys have led to extensive species translocation exercises, including a site at North Whiteley in Hampshire where over 1,000 reptiles were moved to an appropriate receptor site. The ecology team carried out an assessment for Selby District Council of its development plan and supplementary planning documents in relation to Natura 2000 Sites under the Conservation of Habitats and Species Regulations 2010.

In November 2010, the landscape team won the Best Landscape or External Space award at the Building Better Healthcare Awards in London for its work on Redcar Primary Care Hospital. In May 2011 the team won a Northern Region RIBA Design Award for Knop Law School in Newcastle. The landscape team has completed numerous townscape and visual assessments for mixed use developments, including a 14 storey tower at Pembury Circus in London, a major settlement expansion at Sebastopol in South Wales and the redevelopment of the former Courtaulds factory in Coventry. The team also worked on the redevelopment of the former Gloucester College of Arts and Technology.

The heritage team has worked on a diverse range of projects including the BT tower which is a Grade II listed building. The team has also overseen archaeological investigation at Cranbrook, a new settlement east of Exeter, where significant new information relating to Devon's prehistory has been recorded. At Berryfields, north of Aylesbury, a section of Roman Akeman Street is being sampled.

International

Waterman's international business has experienced another challenging twelve months. However, good progress has been made in reducing overheads and reorganising the business to meet the demands of the market conditions. Focused efforts have been made to build sustainable workload in four main regional hubs: Australia, Middle East, Europe and CIS.

Australia

Waterman's business in Australia has been a significant contributor to the company's international operation during the economic downturn. Work has focused on local projects in the public and private sectors across Australia and work in South East Asia for global clients.

In New South Wales, the Sydney office has performed well in a competitive local market. Main areas of activity have included education, public housing, court houses, police stations, telecommunications and high density residential work. A strong end to the financial year and projected economic growth will offer expansion opportunities in the coming period.

Design work is on-going for a number of police stations across New South Wales, together with a new court house. The Federal Government's stimulus funding package has resulted in a number of commissions for social housing. Waterman is progressing design for the new $180m University of Technology Sydney's Broadway Building which will house the Engineering and IT Faculty and has designed a number of facility upgrades for Broadcast Australia. The team continues to provide engineering services for a new rail interchange in the south west of Sydney.

New projects include national telecommunications infrastructure upgrades for sites across Australia and upgrades to numerous bank data centres across South East Asia. Two projects have been commissioned for the University of Sydney: the upgrade and refurbishment of the heritage substation and the initial stages of a $250 million precinct redevelopment. Also in Sydney, the team is appointed on the redevelopment of a heritage building to provide a boutique hotel, as well as a tri-generation study for the University of Technology. In the aviation sector, Waterman is appointed on a major redevelopment of Pier C at Sydney Airport. In the waste sector, it has various commissions for Sita Waste across Australia.

Waterman's relationship with Sydney Airport FM Group has remained strong with on-going building services and structural commissions. Waterman is pre-qualified with the capital projects group which will lead to opportunities for further major commissions.

Project completions include the redevelopment of Birkenhead Point shopping centre, Camden Police Station and the University of Western Sydney Climate Research Facility.

The Melbourne office has performed well again with efforts focused on the healthcare, education, local government and residential sectors, which have continued to receive investment. In addition, the retail sector is showing signs of improvement and should provide work in the future. Design documentation commenced in May 2011 for a prestigious residential development in Chapel Street, Prahan and for the Essendon Football Club, the fourth football club that the office has documented.

Construction work is underway on a number of projects. The Royal Children's Hospital is nearing completion and it is expected that the contract for the Victorian Comprehensive Cancer Centre will be announced shortly. Swinburne University ATC Building has also been completed and the fitout of the Nanoplasmonics Laboratories is under construction.

In Brisbane, work has been undertaken for major clients in the commercial office and retail sectors, with several significant projects in the pipeline. The team is appointed for the extension of two major shopping developments in Queensland.

Middle East

The start of the year was difficult with projects moving slowly, but the office has won some significant commissions in a challenging market which allows the coming year to be viewed more optimistically.

Construction of the Al Muneera project at Al Raha Beach in Abu Dhabi is progressing with completion due by the end of 2011. Waterman's site inspection team continues to be heavily involved on this major project. Facilities management framework agreements at Injazat and Yas Marina F1 circuit have continued successfully throughout the year.

In the wider Middle East and North Africa (MENA) region, several projects have progressed. The concept and scheme design of the Khams Shamat retail project in Syria for Dubai based MAF Group were completed with detailed design continuing through to the autumn. In Sudan, detailed design has been completed for the infrastructure for the Musheireb, a mixed use development in Khartoum with construction drawings in progress.

In late 2010, Waterman was appointed as lead consultant for a hotel refurbishment for MAF Group in Dubai and for two new projects in Qatar. Waterman has commenced as Information and Communications Technology (ICT) executive consultant for the Dohaland project in central Qatar. The project will extend for five years and the appointment covers the delivery of the ICT strategy and principles for the development together with monitoring its delivery during design and construction. In Qatar, Waterman was appointed for the MEP design of the fit out for the new headquarters for Barwa and the ICT design for the Doha Convention Centre and Tower project.

Europe

Waterman's European operations continued to experience challenging trading conditions in the last year, and have yet to return to growth. However, the actions taken over the last two years have brought costs in line with income and the business is well placed to take advantage when buoyancy returns to the property market.

In Ireland, Waterman has had a difficult period but has managed to maintain its workload and grow its market share. The team has been busy on a number of education sector projects, with detail design being completed for the 8,000m2 Monaghan Multi-user Education Campus and on three other major school extension projects. These projects are due to commence construction in late 2011. Pre-planning work has been completed on a further twelve school sites, with detail design expected to commence on a number of these in the next financial year.

The team has completed designs on Phase 1 of the Honeypark mixed development, with work on a major upgrade of the public roads around the development completed and the first block of residential accommodation on this prestigious south Dublin site ready for occupation. Planning for the second phase, a neighbourhood commercial centre, has commenced.

The Dublin civil engineering team has worked on projects ranging from the planning, design and public consultation for flood defence measures along the historic Liffey Quay Walls in central Dublin to studies to assess the feasibility of a new terminal for the latest generation of cruise ships at Dun Laoghaire Harbour.

Whilst most development work in Ireland has ceased, Waterman has been engaged by funders, UK investors and receivers to assist them to maximise the potential of partly developed sites and so called ghost estates. There is considerable potential for growth in this area over the next few years.

Looking ahead, conditions are likely to remain challenging in Ireland for several years to come, but Waterman has a reasonable order book and is well placed to provide the project due diligence and assessment skills that will be required by the property market.

In Central Europe, it has been a similar year of consolidation in the private development market. In Poland, Waterman has been appointed to carry out due diligence work, BREEAM assessments and pre-planning studies for various sites. It is expected that this will lead to full commissions on a number of these projects, as the level of investment increases. The London team has completed masterplanning work for a major commercial and mixed use scheme in Bucharest, and is currently working on detail design for a significant retail development in Tiblisi, Georgia. The team has recently been appointed to provide multidisciplinary engineering services for a large five star hotel conversion project in historic St Petersburg.

Commonwealth of Independent States (CIS)

Trading conditions in the region have continued to be difficult as new appointments have been delayed and staffing levels have remained low.

Work on the Khamovniki project, a mixed use residential complex of 444,600m2 in Moscow for Metalloinvest-Development continues and design on a new Marriott Hotel in Krasnodar, Russia, is nearing completion. In April 2011, Waterman was appointed on a 60,000m2 mixed use development at SmolenskyBasage in Moscow and construction work commenced in July 2011. Further appointments include two projects in St Petersburg, where historical buildings are to be converted for hotel and residential use. The 100,000m2 French Centre, a mixed use development in Almaty, Kazakhstan for MAG is progressing well on site with the construction of foundations nearing completion.

China

In China, the economy has continued to grow although government action has slowed demand in the property sector. During the year, the scheme design for a 5 star hotel in Beitang district, Tianjin was completed for TEDA and construction is due to start on site shortly. A major transportation study was undertaken for the Fashion Square District in Tianjin, which includes retail and leisure areas and the Tianjin Football Stadium. The skills of the Waterman UK transport planning team were utilised to deliver a full micro simulation model which was used to identify the constraints and potential solutions to the traffic generated by the development.

Nick Taylor

Chief Executive

04 October 2011

Included within amortisation of other intangible assets is a charge of £488,000 (2010: £515,000) in respect of acquired intangible assets, a non-cash item. The write back of this expense and the exceptional charge of £123,000 (2010: £5,638,000) would, after taxation, increase the basic earnings per share by 1.4p to 1.8p (2010: reduce the basic loss per share by 14.5p to 2.4p) and diluted earnings per share by 1.4p to1.8p (2010: reduce the diluted loss per share by 14.5p to 2.4p).

Notes to Financial Information

for the year ended 30 June 2011

1. General information

The company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is Pickfords Wharf, Clink Street, London SE1 9DG.The company has its listing on the London Stock Exchange.

The preliminary announcement is based on extracts of the unaudited financial statements prepared in accordance with European Union (EU) endorsed International Financial Reporting Standards ("IFRS") and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The principal accounting policies are consistent with prior year.

The preliminary announcement for the twelve months ended 30 June 2011 which does not constitute the Group's statutory accounts as defined in section 435 of the Companies Act 2006 was approved by the directors on 27 September 2011. The Preliminary Announcement is unaudited and the auditors' report on the Group's financial statements has not yet been signed. The disclosures made meet the requirements of the Listing Rules.

The Report of the Auditors on the financial statements for the year ended 30 June 2010 which were prepared in accordance with IFRS was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006. The financial statements for the financial year ended 30 June 2010 have been delivered to Companies House.

2. Basis of preparation

The unaudited consolidated financial information for the year ended 30 June 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority, in accordance with IFRS as adopted by the EU, and in accordance with those parts of the Companies Act 2006 related to reporting under IFRS that the directors expect to be applicable as at 30 June 2011. IFRS are subject to amendment or interpretation by the International Accounting Standards Board and there is an ongoing process of review and endorsement by the EU. For these reasons, it is possible that the information presented in this report may be subject to change.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reported period. Although these estimates are based on management's best knowledge of the amount, events or actions, actual results ultimately may differ from those estimates. 

3. Accounting policies

There has been no impact due to the implementation of new accounting standards during the year. All of the accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2010, as described in those annual financial statements.

4. Restatement

During 2011 management discovered a misstatement in the calculation of non-controlling interests in the year ended 30 June 2010.This has been corrected in the comparative results and resulted in an increase in the non-controlling interests in the balance sheet of £525,000 with a corresponding decrease in profit and loss reserves attributable to the owners of the parent. In addition profit attributable to non-controlling interests increased by £525,000 in the year ended 30 June 2010 with a corresponding increase in loss attributable to the owners of the parent. Loss per share for the year ended 30 June 2010 increased by 1.8p to 16.9p.

5. Segmental information

* The international multi-disciplinary business segment consists primarily of the building services and structures disciplines.

6. Exceptional items

The following is an analysis of the exceptional items arising within the Group during the year, all of which have been included in the Consolidated Income Statement.

a) Property provisions and accruals: At 30 June 2010, a provision of £1.4m was made as an exceptional cost in respect of vacant leasehold charges primarily made up of rent, rates and service charges payable by the Group over the remaining lease terms on vacated properties. Favourable settlements with landlords over future rental costs have resulted in a reduction in the provision required as at 30 June 2011.

b) Work in progress and trade receivables provisions: At 30 June 2010, a provision of £3.5m was made against work in progress and trade receivable balances in Ireland and Poland. Since 30 June 2010 £0.2m of the trade receivable balances have been recovered.

c) Impairment of goodwill and PPE: At 30 June 2010, following a review of the value of the assets of the Belgium business, an impairment charge of £617,000 was made against the goodwill and PPE as the carrying value was considered to be unsupportable by the directors.

d) Depreciation of PPE: An additional depreciation charge of £80,000 relates to the accelerated depreciation on PPE within vacated office space.

e) Other restructuring costs: Relates mainly to redundancy costs within the civil and transportation businesses.

7. Taxation

Taxation charge for the year ended 30 June 2011 of £173,000 mainly results from the recognition of tax on overseas profits.

8. Earnings / (loss) per share

The basic earnings per share has been calculated on the profit attributable to the owners of the parent and based on the weighted average of 30,501,241 shares in issue during the year and ranking for dividend (30 June 2010: 30,483,157).

The fully diluted earnings per share also takes account of unexercised options potentially convertible into new ordinary shares and shares conditionally awarded in accordance with the Long Term Incentive Plan. The calculation is based on a weighted average of 30,508,767 shares during the year (30 June 2010: 30,483,157).

9. Dividends

An interim dividend of 0.1p per share was paid on 21 April 2011. The directors propose a final dividend of 0.1p per share (June 2010: 0.9p per share). The shares will become ex-dividend on 7 December 2011 and the dividend will be paid on 10 January 2012 to those shareholders on the register at the close of business on 9 December 2011.

10. Trade and other receivables

Trade receivables net of provisions at 30 June 2011 were £20.0m (2010: £22.2m) of which £9.1m

(30 June 2010: £12.8m) were more than 30 days old but not impaired. These relate to a number of independent UK and overseas customers for whom there is no recent history of default.

Amounts due from customers on long term contracts at 30 June 2011 were £10.5m (2010: £10.8m).

11. Trade and other payables

Trade and other payables at 30 June 2011 were £19.5m (2010: £22.8m) of which £3.8m

(2010: £4.8m) relate to trade payables.

Amounts due to customers on long term contracts at 30 June 2011 were £7.4m (2010: £8.9m).

12. Financial liabilities-borrowings

The Group had term loans totalling £6.2m (2010:£7.3m) from HSBC Bank plc disclosed above within Bank loans. The term loans are subject to three financial covenants which are tested half yearly.

As reported within the 30 June 2010 Annual Report and Financial Statement on 18 August 2010 the bank agreed to waive the requirement for a covenant test at 30 June 2010 and 31 December 2010. As the waiver was agreed post 2010 year end, the term loans were classified as current at 30 June 2010. The loans have been reclassified as long term loans at 30 June 2011.

13. Provisions

Liability insurance claim provisions reflect management's estimate of the likely cost of claims including professional indemnity insurance excesses and has been provided for in accordance with the group's accounting policy. These provisions will be carried forward until the claims to which they relate are agreed and amounts utilised or released as appropriate.

The property provisions relate to rent, rates, service charge and other associated costs relating to properties that are vacant.

14. Share capital

The share capital of the Company comprises ordinary shares of 10p each. No shares were issued during the year. Shares were issued in 2010 at an issue price and weighted average share price of 40.0p.

15. Notes to the Consolidated Cash Flow Statement

16. Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and notes.

The directors have prepared a cashflow forecast and a forecast for covenant compliance to 30 June 2013. The financial covenants allow for a sensible tolerance in trading performance in relation to the forecasts. The directors are confident that the underlying forecasts are reasonable. In the current economic climate the Group is reliant on the ability of customers to pay debts and on the timing of projects coming on line. In adverse circumstances the board has a number of mitigating actions it could take to ensure covenant compliance.

The group has considerable financial resources together with long term contracts with a number of customers and suppliers across different geographic areas and industries. An analysis of the Group's borrowing facilities are disclosed in note 12 'Financial liabilities-borrowings'. As a consequence, the directors believe that the group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statement.

17. Principal risks and uncertainties

The principal risks and uncertainties requiring critical judgment are in the determination of revenue recognition and the assessment of the percentage of completion achieved on contracts. The group assesses contract progress and determines the proportion of contract work completed at the balance sheet date in relation to the total contract works. Judgments are also made when assessing the adequacy of provisions for potential liability insurance claims and trade and other receivables.

18. Further information

Electronic copies of the Annual Report and Financial Statement will be made available on the Group's website www.watermangroup.com from 9 November 2011. Additional copies will be available on request from the Company's registered office at Pickfords Wharf, Clink Street, London SE1 9DG.

The directors are responsible for the maintenance and integrity of the Group's website on the internet. However, information is accessible in many different countries where legislation governing the preparation and dissemination of financial information may differ to that applicable to the United Kingdom.