WTM.L Regulatory News (WTM)

WATERMAN DELIVERS RESULTS ABOVE THREE YEAR TARGETS

Waterman Group plc, the engineering and environmental consultancy, today announces its Preliminary Results for the year ended 30 June 2016.

· Adjusted operating profit margin* 4.0% 3.3% +21%

· Return on Capital Employed ** 46.5% 30.3% +53%

*  Adjusted for exceptional items (2016: nil, 2015: £0.4m).

** Return on Capital Employed is calculated as adjusted operating profit divided by average capital employed where capital employed is equity less goodwill less net funds.

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

" Waterman is in excellent shape, having reported results which exceed its previously declared financial objectives over the three year period to 30 June 2016 of tripling adjusted annual profit before tax to £3.3m, delivering £3.6m and increasing Return on Capital Employed to over 20%, delivering 47%."

" Over the last three years, the Group has delivered a six times increase in the annual dividend paid to shareholders to 3.0p from 0.5p and during the same period, after paying shareholders dividends of £1.4m, net funds have increased to £5.5m from £1.1m."

" Our future aspiration remains to improve the Group's adjusted operating profit margin towards 6% over the next three years and to continue to increase our dividend payout consistent with the cash generative nature of the business."

-ends-

Date: 10 October 2016

For further information please contact:

Waterman Group plc Capital Access Group N+1 Singer

Nick Taylor, Chief Executive Simon Courtenay / Jessica Bradford Sandy Fraser

Alex Steele, Chief Financial Officer 020-3763-3400 020-7496-3176

020-7928-7888

web: www.watermangroup.com

CHAIRMAN'S STATEMENT 

Overview

I am very pleased to announce that Waterman has continued to perform ahead of its strategic plan.

The Group has delivered results which exceed its previously declared objectives over the three year period to 30 June 2016 of:-

· Objective: Tripling adjusted annual profit before tax to £3.3m. Delivered £3.6m.

· Objective: Increasing Return on Capital Employed to over 20%. Delivered 47%. 

During the year, revenue has grown by 9% to £91.3m (2015: £83.9m), with the adjusted operating profit margin increasing to 4.0% (2015: 3.3%). The Board's aspiration remains to improve this further towards 6% over the next three years.

Net funds have significantly improved by 45% to £5.5m (2015: £3.8m) after paying shareholder dividends of £0.7m during the year. The Board is recommending to shareholders an increase in the dividend. We have proposed a final dividend of 1.8p (2015: 1.2p) making a total dividend for the year of 3.0p (2015: 2.0p), an increase of 50% on last year.

Operational performance

Waterman generates almost 90% of its revenue from the UK with key markets being retail, commercial, residential and highways. Client demand in these markets has remained strong and this has contributed to our revenue and profit margin increase during the period. Our UK Group has increased revenue by 9% to £81.4m (2015: £74.5m).

Overseas, we have offices in Ireland, Australia and Poland. We have experienced varying levels of demand and overall our International Group has increased revenue by 5% to £9.9m (2015: £9.4m).

Dividend

In line with the Group's strategy to increase shareholder returns, the Board is recommending a further increase in the annual dividend paid to shareholders.

The Board is proposing to pay a final dividend of 1.8p per share (2015: 1.2p), subject to approval by the shareholders at the Annual General Meeting. The final dividend will be payable on 6 January 2017 to shareholders on the register on 9 December 2016. The final dividend together with the interim dividend of 1.2p paid on 15 April 2016 makes a total dividend for the year of 3.0p (2015: 2.0p).

The full year dividend is covered 2.5 times by adjusted earnings per share.

Over the last three years, the Group has delivered a six fold increase in the annual dividend paid to shareholders to the proposed 3.0p up from 0.5p in 2013. The Board's aspiration is to continue to increase dividends payable to shareholders in future years consistent with the cash generative nature of our business.

Board and staff

There have been no changes to the Board during the year.

At 30 June 2016 the Group employed 1,253 staff, essentially unchanged from 30 June 2015 at which point the number stood at 1,259. Our people actively contribute to the success of the Group through their technical skills and client relationships. I thank them all for their continued support and drive to provide appropriate and timely advice on our projects and commissions. A testament to their success is that over 80% of our revenue is generated from repeat business.

Offices

We operate from fourteen offices located in major cities throughout the UK. Our headquarters are in Borough Market adjacent to London Bridge where 354 people are based in a multi-discipline environment. We have recently moved our civil engineering team from Lingfield into a new enlarged office in Redhill to provide opportunities for further expansion to support the London and south east markets.

Overseas, we operate from established offices in Melbourne, Sydney, Dublin and Warsaw where we provide advice to local and national clients.

Order book, outlook and prospects

In the three months since the European Referendum, the Group has continued to experience good levels of enquiries and new commissions and we have not noticed any significant change in trading activity. We await clarity on the Government's future plans including for infrastructure investment which will have a bearing on our medium term prospects.

In the meantime, we continue to be appointed for new projects across a wide range of development activities and we have recently announced the following commissions:-

· Teddington Film Studios and Mortlake Stag Brewery sites in West London, two residential developments in prime riverside locations extending in total to over 26.5 acres.

· Capital Dock for Kennedy Wilson, a 60,000m2 (630,000ft2) office and residential development which includes the tallest tower in Dublin.

· Canary Wharf Group, to assist them with their plans for a further phase of the overall Canary Wharf development which is likely to involve over 200,000m2 (2,100,000ft2) of mixed use buildings.

Our outsourcing business which provides specialist highways and transportation engineers to Local Authorities and Highways departments on secondment, continues to experience high levels of opportunities. We have recently secured new public sector frameworks covering Swindon and West Yorkshire. We currently place engineers on secondment into over 50 Local Authorities and Highways departments throughout the UK.

Waterman's long-standing relationships with blue chip companies continue to generate repeat business year on year. Whilst the Board is necessarily watchful about the immediate future, it remains confident that Waterman's excellent client base will enable the Group to secure new commissions as they become available.

Overall, our order book has remained at a consistent level year on year of £130m and this we view as a lead indicator of the likely short term direction of travel in terms of operating performance. Beyond that, the Board looks to the future with measured optimism.

Michael Baker

Chairman

10 October 2016

CHIEF EXECUTIVE BUSINESS REVIEW

GROUP OVERVIEW

The Group has continued to experience a period of growth in revenue and profitability. Our focus on the UK has remained a high priority where almost 90% of our revenue is now consistently generated.

The range of engineering and environmental services we offer our clients has been strengthened through the recruitment of senior people with regional and specialism experience and our four key disciplines are:-

Structures Consulting

Building Services Consulting

Infrastructure & Environment Consulting

Highways & Transportation Outsourcing

Waterman provides these services across all markets in the private and public sectors. 84% of our UK revenue is generated from the highways, retail, commercial and residential markets. However, as the government and regulated industries invest in other markets in the future such as power, waste, water, healthcare and education, we have the skills to be able to access these opportunities.

Overseas, our Australian offices in Melbourne and Sydney are focused on generating revenue from building services design and engineering, both in the private and public sectors. Expertise includes healthcare, education, prisons, residential, commercial, technology and bank fit outs where the markets remain strong.

Waterman's office in Dublin, Ireland, provides a comprehensive multidiscipline consultancy design service to Irish clients on a range of developments. Current buoyant markets are residential and commercial development. However, the retail market is becoming more active and we have been recently advising clients on several large transactions which should result in future opportunities.

The profitability of each of our design groups can vary from year to year depending on the type of advice they are providing and the phasing of the commissions. We have focused on improving operating profit margins within each business as well as generating revenue growth from our clients. The advances we have made have increased the overall Group adjusted operating profit margin by 700 basis points (21%) to 4.0% (2015: 3.3%) on revenue up by 9% to £91.3m (2015: £83.9m).

PROPERTY SEGMENT OVERVIEW

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

The Property segment encompasses the UK Structures and UK Building Services consulting businesses which are involved in development projects both in the public and private sectors. In addition, this segment includes our overseas businesses in Australia, Ireland and Poland which are also involved in the design of buildings.

Revenue for this segment increased by 9% to £45.8m in the year, with the majority of this growth in the UK. The operating profit has grown in line with revenue with the operating margin essentially unchanged at around 8%.

All our markets remained strong and we continue to utilise our staff throughout the UK and overseas to service our workload. We also operate an outsourcing office in India which solely provides drafting services for our UK structures team.

UK BUSINESS REVIEW - STRUCTURES CONSULTING

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

Waterman's Structures business has expanded during the year with revenue increasing by 7% to £22.4m. Following an investment in the recruitment of staff in the previous year, operating profit has increased by 6% to £1.8m and the operating margin is essentially unchanged at 8%.

Waterman continues to be recognised for our design excellence and many of our developments have won awards during the year. New Ludgate near St. Paul's Cathedral, was recognised as the Best Commercial Building in London by the Royal Institute of Chartered Surveyors and NEO Bankside, next to the Tate Modern Gallery in London, was shortlisted for the prestigious Royal Institute of British Architects Stirling Prize.

UK BUSINESS REVIEW - BUILDING SERVICES CONSULTING

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

The Group's strategy is to target future significant growth in our Building Services group and we have delivered a 14% increase in revenue to £13.5m. Operating profit has increased to £0.7m and the operating margin has improved to 5.2% from 3.4%.

We are continuing to recruit senior staff into the business and have recently added to our teams in Birmingham and London. This investment in skilled resources will provide further diversity and increase our ability to service our clients' future projects.

Potential clients requiring Building Services consultancy advice are typically synonymous with our structural clients. We aim to leverage these established relationships to cross sell our services, either as a single commission or as part of a multidiscipline appointment.

UK MARKET REVIEW

Commercial

London office development has continued to provide opportunities for our planning and design team and we have many projects at different stages of the development cycle. The Land Securities 40,000m2 1 and 2 New Ludgate development in London was completed during the year, for which Waterman provided multidisciplinary services on both prestigious buildings. A second project designed by Waterman for Land Securities at 1 New Street Square providing 27,000m2 of offices has been pre-let to Deloitte and is currently under construction.

New commissions making further progress include Marble Arch Place, London, a development for Almacantar which comprises a seven storey commercial building providing over 9,000m2 of high quality offices and an 18 storey residential tower with 54 apartments. This mixed use development has received planning consent and demolition of the existing structure commenced on site in June 2016.

Adjacent to London Bridge at 33 King William Street, London, the 21,000m2 HB Reavis development is progressing well with the structural steel frame designed by Waterman currently being erected. Construction is scheduled for completion in late 2017 and the building has been successfully sold to Wells Fargo for their new European headquarters.

As part of our stated strategy, we have continued to work on providing multi-discipline services to our clients on their London projects with increasing success. Current commissions include Salisbury Square, a 15,000m2 development for Greycoat, One Bedford Avenue, a 7,000m2 development for Exemplar and Angel Court, a 27,000m2 development for Mitsui Fudosan UK and Stanhope.

In Birmingham, we have been progressing designs for Legal & General on their 11,000m2 Temple Court development which has recently been renamed The Lewis Building, in tribute to the historic use of the site in the 1920's by Lewis department stores.

Residential

The residential market has remained a buoyant source of revenue. London in particular has benefited from its position as a leading global city and the cultural and leisure facilities on offer to its residents. Waterman has considerable expertise across all types of residential development and is continuing to experience high levels of enquiries and appointments.

We have been appointed by Helical Bar to design their Barts Square development which provides 43,000m2 of residential and commercial space. This project involves several new buildings located in the area previously occupied by St. Bartholomew's Hospital, adjacent to the historic Smithfield area of London.

The Clarges development for British Land opposite the Ritz Hotel in Piccadilly, and the Two Fifty One development at Elephant and Castle are both nearing completion. New residential commissions include developments at the Oval in south London and Royal Arsenal Riverside at Woolwich for Berkeley Homes. In Bermondsey, Waterman has been appointed by London Square to assist them with the planning for a project involving 7,500m2 of apartments.

Along the River Thames from our London offices adjacent to Blackfriars Bridge, we have been providing advice to Native Land on their Ludgate and Sampson development. This is a major multi-building mixed use development. Waterman have also been appointed by Native Land to provide multi-discipline consultancy services on the Burlington Gate building in Mayfair which provides 9,000m2 of residential development on the upper floors and retail units at ground floor.

Further new commissions include developments outside central London for Meyer Homes in Lewisham where a fifty-four storey residential tower is being proposed and at Watford Health Campus where we are working with Kier Property on the delivery of a scheme involving 650 residential units.

Retail and urban regeneration

Waterman are the multidiscipline engineering designers for the acclaimed Victoria Gate retail development in Leeds for Hammerson. This new 40,000m2 shopping centre will open in October 2016 and it includes a new John Lewis store and multiple mall retail units. As is often the case for large retail projects, Waterman's involvement has been over many years supporting our clients' planning application, preparation of tender information and construction details.

Another project where we have been supporting our clients since 2000 is in Oxford. The 80,000m2 extension to the existing Westgate Centre is anchored by a 14,000m2 John Lewis store, with additional retail and leisure units and a mall leading to the existing shopping centre. Construction has commenced on site and completion is planned for autumn 2017. Our clients for this prestigious development in a historic setting are Land Securities and The Crown Estate.

In Ashford, Kent, Waterman has been appointed by Stanhope to deliver a new retail and leisure development at Elwick Place, adjacent to Ashford's railway station. At Covent Garden in central London, we have been working over many years on several projects for Capco. The latest of these developments is Kings Court and Carriage Hall which is a mixed-use development to open up more retail frontage and to develop fifty new homes in the district.

Brent Cross is a major retail destination in the north west of London. To enhance the centre's attraction and to offer greater retail diversity, we have been assisting Hammerson and Standard Life to review planning and prepare scheme proposals for an exciting extension to the centre involving up to 90,000m2 of additional lettable area. We continue to provide technical advice to Westfield and Hammerson on their plans to combine and redevelop the existing Whitgift Centre and Centrale in Croydon to provide a new mixed-use retail led scheme of around 200,000m2.

In the Knightsbridge area of London, we have been appointed by Chelsfield to provide engineering consultancy advice on their 33,000m2 K1 development which fronts onto Brompton Road and Sloane Street. This project within the Knightsbridge estate will retain the existing street facades whilst a new structure is constructed within the site footprint.

Other retail projects where we are advising clients include the 37,000m2 Unity Walk development in Stoke-on-Trent for Realis Estates, Guildhall Shopping Centre in Exeter for AVIVA and the 30,000m2 Cuerden Retail Park near Preston as part of an overall masterplan for Maple Grove Developments. Waterman also provided engineering and environmental due diligence studies in late 2015 for the £335m acquisition by Hammerson of the prestigious Grand Central Shopping Centre in Birmingham. The scheme was developed by Network Rail and Birmingham City Council as part of the £750m New Street station regeneration project.

Leisure

Waterman have been providing building services consultancy advice on several interesting leisure projects around the country.

In Harrogate, a new city centre cinema and restaurant complex is currently under construction for our client, 4 Urban Holdings Ltd.

In London, the new Four Seasons Hotel is approaching completion at Trinity Square which is located opposite the Tower of London. This development also includes 41 luxury serviced apartments within the upper levels of the building.

Education

Waterman's workload on education projects has remained at a consistent level throughout the year. We have been appointed on the Girls Day School Trust framework and new commissions include work at High Schools in Wimbledon, Norwich, Notting Hill and Ealing.

Construction is nearing completion on several Waterman designed projects as part of the Priority Schools Building Program London Batch 1 for the Education Funding Agency with three schools now open in Stratford and Greenwich.

Waterman is providing design services to Galliford Try on the Holywell Co-located School in Flintshire, North Wales. This development provides a new combined primary and secondary school for 800 pupils. The project has high sustainability targets and has been promoted by the Welsh Education Authority as an exemplar example of Building Information Modelling (BIM) level 2 delivery.

At Surrey University, we completed the design of two student residential complexes at the Manor Park campus and we have subsequently been commissioned to design a third building which will in total provide one thousand one hundred bedrooms for the students. At Coventry University, we have been commissioned by AXO Student Living to design a new accommodation building for occupation in 2018.

Healthcare

The healthcare market is opening up new opportunities for Waterman. We are providing strategic support services on the Primary Care framework for Hub South East and NHS Lothian in Scotland which has the potential of delivering over £50m of new health facilities over the next five years. We are also providing strategic support for two new hospitals in Aviemore and Skye.

In Northern Ireland we completed the engineering designs for the new health centre in Ballymena which was completed on site in February this year. In Cumbria, our building services team have been appointed by Integrated Healthcare Projects to provide full design services for a new £9m maternity unit at the existing Barrow-in-Furness General Hospital site. This project is being procured under the NHS ProCure 21+ form of contract.

Energy & Industrial

Siemens Real Estate are developing a new production facility and an associated office building for offshore wind turbine blades in Kingston upon Hull in the north east of England. Waterman has been involved in this project for many years supporting the planning application and more recently as Principal Designer Advisors and providing BREEAM services. Our structures team are currently lead designers for the steel framed buildings which incorporate heavy lift overhead travelling cranes and long reach job cranes which cantilever from the columns as part of the production facility.

Waterman have continued to provide ongoing support to Rolls Royce as part of their framework and in particular on their jet casing production facility in Hucknall, Nottinghamshire. Other industry frameworks include one with the Manufacturing Technical Centre (MTC) at Ansty Park, Coventry where we have designed a third building, the Advanced Manufacturing Technology Centre. This world class building will support the MTC with the necessary facilities to showcase the cutting edge of British technology and to provide teaching facilities for Research and Development (R&D) engineering.

AUSTRALIA BUSINESS REVIEW

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

We currently have a business in Melbourne where our ownership is 51% and a business in Sydney where our ownership is 100%.

The Australian operations primarily provide building services consultancy advice to the public and private sectors where demand has remained consistent. The majority of our revenue is generated from

healthcare, education, prisons, residential, technology and bank fit-out markets where demand remains good.

Whilst revenue in Australia has reduced slightly over the year, operating profit margins have remained consistently high at 15.0% (2015: 16.7%). The performance continues to reflect our niche position in several key markets. The operating margin is lower than the previous year due to our Sydney operation having a small loss during the period and the Board's priority is to return the Sydney business to profit in the next financial year.

Weighted average exchange rate during the year ended 30 June 2016: AUD 1.99 to £1 (2015: AUD 1.85 to £1)

AUSTRALIA MARKET REVIEW

Melbourne

Healthcare, education and residential have continued to provide a base workload for our Melbourne office.

During the year, Waterman has completed the documentation phase of the AUD 130m Royal Victorian Eye and Ear Hospital, the Monash Children's Hospital with a construction value of AUD 260m and a AUD 150m residential development in St. Kilda Road near our offices.

We have completed the contract tender documentation for the Joan Kirner Women's and Children's Hospital in Sunshine. This AUD 215m project, which extends over nine storeys, will be the third largest maternity hospital in the State of Victoria.

Other recent large commissions include advisory services on the AUD 600m three tower Jewel Apartments developments on the Gold Coast, the design of the AUD 110m Casey Hospital expansion in Melbourne, the AUD 75m Chisholm Institute Frankston Campus in Victoria and a AUD 60m office development in Collins Street in the financial centre of Melbourne.

The population of Australia continues to grow, in particular in Melbourne, where over the last twelve months it has been Australia's fastest growing city as its population approaches five million, and this should present increasing opportunities for our consulting services in the future.

Sydney

Commissions in the retail, residential, education, health, fit-out and telecommunications markets have made a positive contribution to the Sydney operation.

Waterman has continued with the 3D design of the building services on the AUD 100m Northpoint retail and hotel development in North Sydney. During the year, we completed the fire and hydraulic designs associated with the AUD 125m St. Vincent's Private Hospital redevelopment.

We continue to provide engineering services to the education sector, in particular new facilities at Sydney University, University of New South Wales, Wollongong University and Macquarie University. These projects have involved student accommodation, teaching laboratories, sports facilities and a grandstand.

Retail banks are progressively upgrading their high street facilities. We have been appointed by Westpac Bank and St. George Bank to sequentially develop and implement designs to meet their new requirements on several hundred sites across Australia.

We have been appointed by Qantas to complete the building services and structural engineering designs for their upgraded business lounge at Heathrow Airport, London. It was important to Qantas that the design was completed in Sydney.

EUROPE BUSINESS REVIEW

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

Waterman's European operations, which are based in Ireland and Poland, have experienced strong growth in the last year, with revenue up 39% to £3.9m.

The Irish economy has continued to perform strongly and demand for Waterman's services in Ireland continues to increase. Investment in commercial property remains strong and the residential sector is now becoming more active, with output expected to double over the next three years in order to meet demand.

The property sector in Poland is less buoyant although there has been significant activity in the investment market. As well as supporting our Polish clients, the Warsaw office has continued to provide technical assistance on London and Dublin projects.

Weighted average exchange rate during the year ended 30 June 2016: Euro 1.23 to £1 (2015: Euro 1.31 to £1).

EUROPE MARKET REVIEW

Ireland

Waterman provides civil, structural, building services consultancy, specialist transportation and construction related health and safety advice to our Irish clients from our office in Dublin.

The commercial markets have continued to provide an increasing workload. Waterman has been finalising designs for the 18,000m2 Baggot Court development and the 13,000m2 Block H development at Central Park. In addition, the 60,000m2 Capital Dock project has recently commenced on site.

In the residential market, a considerable number of schemes which have previously been in the planning pipeline are now moving forward to construction. The 165 unit Central park development for Kennedy Wilson is nearing completion, Phase 2 of their 170 unit Clancy Quay development is well advanced and planning work has commenced on Phase 3. A major public housing construction programme has recently been announced by the Irish government and this could provide a source of increased workload for Waterman over the next three to five years.

The retail market is starting to improve, we have been appointed for the redevelopment of the Clerys Building at O'Connell Street, Dublin which is a EUR 50m mixed use scheme for D2Private. Waterman advised Hammerson plc and Allianz Real Estate on their EUR 1.85bn (£1.34bn) acquisition of a portfolio of market-leading retail assets in Dublin from Ireland's National Asset Management Agency ("NAMA").

Poland

In Poland, Waterman has provided multi-discipline engineering services for the Building Permit application for a major leisure and residential development, Palace Park, located south of Warsaw. This project includes two hotels, apartments, retail facilities, a golf course, tennis academy and other sports facilities within a landscaped park complete with artificial lake and canals. Our Warsaw team has also completed a number of due diligence and feasibility studies for several retail projects in Poland.

INFRASTRUCTURE & ENVIRONMENT SEGMENT OVERVIEW

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

The Infrastructure & Environment segment comprises Waterman's Civil, Transportation and Environmental consulting business, which trades as Infrastructure & Environment consulting and Waterman's specialist Highways & Transportation outsourcing business, which trades as Waterman Aspen.

Overall performance has improved, resulting in an operating profit of £0.5m (2015: breakeven) being delivered this year. Revenue has increased by 9% to £45.5m, primarily from the growth of our Highways & Transportation outsourcing business which has experienced a continuing strong demand for our services.

Our Infrastructure & Environment consulting business has generated a loss, primarily due to a £0.3m one-off provision on a particular project together with the impacts of a slowdown in planning applications prior to the London Mayoral elections and uncertainty around the European Referendum result. However, since June the situation has improved and planning for development in London has returned to normal levels.

We have focused on winning Local Authority frameworks to boost our long term opportunities in both our consulting and outsourcing businesses.

INFRASTRUCTURE & ENVIRONMENT CONSULTING BUSINESS REVIEW

*Operating (loss) is before exceptional items and (charge)/release of liability insurance provisions.

Revenue decreased by 2% to £21.5m. Operating losses have halved to £0.4m and included in this loss is a one off provision of £0.3m on a particular project.

The re-focusing of the team within the business to meet client requirements for our services has continued through the year and positive progress has been achieved.

INFRASTRUCTURE & ENVIRONMENT CONSULTING MARKET REVIEW

Frameworks

One of the core priorities for the Infrastructure & Environment consulting business has been to proactively expand our services across the public sector, targeting local authority frameworks in addition to wider collaborative opportunities.

Over the last year the team has successfully built on its framework portfolio with a number of key commissions including:

· The West Midlands Combined Authority (WMCA) Framework (previously CENTRO);

· West Yorkshire Combined Authority Framework;

· South Derbyshire Design Consultancy Framework;

· Transport for London Professional Services Framework (Health, Safety & Environmental services);

· Gloucester County Council dynamic purchasing Framework; and

· Bexley District Council Framework - extension awarded to 2019 with additional scope including Traffic /Transportation services

The team has also been successful, with the wider Waterman Group, and in partnership with Turner & Townsend, in providing multidisciplinary pre-planning and engineering design services for the Education Funding Agency's Priority Schools Building Programme Phase 2 Technical Advisory Services Framework. 

We also continue to work with our partners BDP on the HCA Framework, which has recently seen a number of sites brought forward by the HCA for master planning and planning applications. 

Due Diligence & Environmental Management

Our Due Diligence team enjoyed yet another successful year, with an active real estate workload including advising on a number of prestigious properties such as One America Square, Grand Central, Oxford Castle Quarter and Kensington Olympia. By comparison with previous years, the team also delivered an increased volume of mainstream M&A support, in particular around the leisure and industrial sectors, which extended beyond the traditional environmental and health & safety (EHS) to comprise wider Environmental, Social and Governance issues. Similarly, the infrastructure sector has remained very strong, and we supported amongst others: high profile utilities, aviation and highways transactions, including the sale of Moto Hospitality and two separate bidders for the concessions of Lyon and Nice Airports.

Our team has continued to build on their reputation as a Responsible Investment advisor, having won two new mandates for ongoing support with Private Equity houses. Our directors were also sought as speakers for high profile conferences in the field, including those organised by the British Venture Capital Association (BVCA).

On the Environment Health & Safety Management Systems side, to capitalise on the introduction of ISO 14001:2015, a new Greenspace Environmental Aspect Register was launched which has led to an increase in appointments, including commissions from Bridon, Britvic and Karndean. The continued development of the Greenspace platform also led to an increase in the number of base subscribers to the service, with its implementation across Engie's UK portfolio and ten Hammerson shopping centres. In the near future, and responding to demand from water utilities and construction companies, the team plans to introduce a Compliance Manager and Action Tracker to Greenspace. Over the past year the team successfully delivered a significant number of Energy Savings Opportunity Scheme (ESOS) audits for a number of our key blue chip clients, and a significant ISO5001 management implementation system for the Ardagh Glass Group.

The construction Health & Safety team also remained very busy throughout the year, as the UK transitioned to the updated CDM 2015 Regulations, with new high profile appointments including the Siemens Blade Factory in Hull and East Midlands Gateway. Waterman's Principal Designer Training Course was incredibly popular and continues to be in high demand.

Environmental pre-planning services, Sustainability & Environmental Impact Assessment

Waterman maintained its position as a leading provider of Environmental Impact Assessment (EIA) services for urban regeneration projects, advising on a wide range of schemes over the year.

In London, the team continued to support Brent Cross Cricklewood for Hammerson and Standard Life Investments; Phases 1, 2, 3 and 4A of Battersea Power Station for the Battersea Power Station Development Company; British Land's masterplan for Canada Water; Ballymore's Leamouth South scheme and Old Oak Park for Car Giant and London & Regional. In addition, the team advised on Battersea Power Station's Cringle Dock development; Jupiter Friars 41-45 Blackfriars Road redevelopment; a residential tower development at 225 Marsh Wall, the Isle of Dogs; a commercial led development, modification and refurbishment of the heritage rich Royal Mint Court; and London Square's residential-led proposals for Bermondsey Square in Southwark.

The Birmingham team supported Spenhill Developments Ltd with their outline planning application for the redevelopment of the former 12.5 hectare Shredded Wheat factory site in Welwyn Garden City, in addition to advising on the development of up to 150 dwellings on a site to the west of Worcester, completing ecological, landscape, visual, air quality, flood risk, utilities and geo-environmental assessments. 

Further north, the team supported Muse Developments in the redevelopment of a strategic site within Preston City Centre, known as Preston Market Quarters. The site, which currently comprises an indoor market, a multi storey car park and former office building is to be redeveloped as part of a wider regeneration programme planned for the markets within the city.

With respect to our specialist technical pre-planning service teams, the ecology team delivered another year of sustained growth, with the team now established across the UK. Selected projects over the year include providing ecological advice on the southern expansion of Newark, Nottinghamshire to provide 3,500 homes over a multi phased development for Urban & Civic; continued advice on Graven Hill and supporting Taylor Wimpey on their major redevelopment at East Anton, Hampshire.

The landscape and arboriculture team advised on the former Sackville Hotel at Hove Seafront, undertaking a Townscape and Visual Impact Assessment of the proposed seventeen storey building, in addition to providing landscape evidence on behalf of Taylor Wimpey with respect to a development site which is located within the Green Belt at Oaklands College St. Albans.

The air quality team have successfully diversified their client base and range of services. In addition to completing traffic related air quality assessments, they have also been commissioned to provide air quality and odour assessments for a range of industrial schemes including: Chatterley Whitfield; Containerised Diesel Power Generators in Stoke-on-Trent; Menchine, Gibbet Moor and Edgeworthy Poultry Farms in Mid Devon; and Derby Hill Anaerobic Digestion Plant in South Derbyshire.

The Acoustics team maintained steady progress through the year, completing acoustic assessments for a wide range of schemes including: Ravensbury Terrace and Salisbury Square House in London; Bridge Street Pentecostal Church in Leeds; Furness Hospital Extension in Cumbria; Quintana Gate in Cardiff and Elwick Road in Ashford. The team also continues to advise on a number of high profile projects in London including the Clarges Estate, 10 Trinity Square and 55 Gresham Street.

Geo-environmental

Our geo-environmental team witnessed further growth over the year, especially in London where the team continue in their capacity as Project Manager and Supervisor in the remediation of the former Royal Mail site in Vauxhall, previously in use as a gas works. The team are also providing support for the infrastructure phase of the development. Recent commissions include being appointed by Berkeley Homes to advise on the remediation of the iconic Oval Gas Works, and Dragados, who are responsible for delivering the Bank Station Capacity Upgrade, has appointed Waterman to provide advice on issues relating to groundwater protection and discharge monitoring over the life of the five year project.

Outside of London, the team have been working with St James's on the proposed residential redevelopment of the Grade 2 Listed Beehive Mills in Bolton and have assisted Harrow Estates with their enabling works at Bullwood Hall in Essex. Work also continues with Realis Estates in supporting them with their proposed retail development in Hanley Town Centre, Stoke on Trent.

Transport Planning

The residential sector has remained buoyant throughout the year with Transport Planning services being provided to a number of house builders and Housing Associations for both land promotion through Local Plans as well as Strategic and immediate supply sites.

Projects have included junction design for Crest Nicholson's Holmer Road scheme in Hereford; providing transport planning advice on the redevelopment of the former Chubb fire extinguisher factory in Ferdale in the Rhondda Valley for Garrison Barclay Estates; in addition to supporting clients through the year such as Taylor Wimpey, Cala Homes, Network Housing, Hyde Group, Linden Homes, Martin Grant Homes and Rydon Homes.

Transport Infrastructure

The £18m construction of the Bedford Western Bypass on behalf of Bedford Borough Council was completed by J Breheny Contractors in the year, with Waterman's Infrastructure team having provided Highways design support throughout the eighteen month build programme.

Our team has continued to support Ark Continuity with respect to their data centres at Cody Park and Spring Park, and obtained technical approvals to enable Taylor Wimpey to commence construction of the primary infrastructure for Phase 1 of South Sebastopol, a 1,200 unit residential-led development in South Wales.

In the rail sector Waterman are currently providing the Network Rail role of Contractor's Engineering Manager and advice for a number of sizeable developments including Twickenham station, Atlas development, Ludgate House, Hampton Court, Farringdon Road, Westfield London, Earls Court and Plamston Court.

The team has continued to support Régie Autonome des Transports Parisiens (RATP) and M-Pact Thales (a Laing O'Rourke, Volker Rail and Thales consortium - MPT) with asset maintenance and condition surveys of the Metrolink tram system in order to provide hand-over condition records prior to

the new O&M commission for the network due to commence in autumn 2017. The team successfully secured several significant projects through the Merseytravel Framework, including a further extension to our Due Diligence Business Case audit work for the transportation authorities in the region.

Work at London City Airport has continued through the year, with Waterman providing civil, structural and building services support for the extension to the West Pier which is now nearing completion and civil engineering support on a number of maintenance projects. The team has also continued to support British Airways at Heathrow undertaking a range of maintenance projects, and Bristow Helicopters in design of a new Coastguard Search and Rescue centre at Lydd airport in Kent.

In the marine sector, the team has continued to provide consultancy support to the Bristol Ports Authority with respect to advice on maintenance and upgrade of various dock infrastructure projects, in addition to consultancy advice to assess and design the improvements to the sea wall defences in Hull. 

Power, Energy & Waste

Our Waste team has continued to work on Battersea Power Station Development Company's innovative Cringle Dock Waste Transfer Station Facility in London, and has supported Veolia with Independent Certifier services for their Hortonwood Integrated Waste Management Facility. Our team has continued with their on-going long term contracts for engineering works associated with asset maintenance and asset management across the Drax and Fiddler Ferry Power Stations. The team also successfully supported BHEG with their permit application for the £180m Energy from Waste facility in Walsall, which is the First Gasification project under the Contracts for Difference regime (CfD) in the UK.

Civils & Infrastructure

We have continued to provide support and advice to Graven Hill Village Development Company Limited on their Graven Hill scheme, the UK's largest self-build housing scheme. The site is currently occupied by the Ministry of Defence (MoD) who will be vacating the majority of the site over the next five years. The development will eventually comprise up to 1,900 new self-build homes, along with local amenities and, as part of the future Land Transfer Area 2, which provides 100,000m2 of commercial space for up to 2,000 new jobs and apprenticeships. 

Specialist services with respect to ground movement analysis, bridge assessments & design, and obtaining approvals for development over or adjacent to third party assets such as London Underground, Network Rail, Royal Mail Group, Thames Water and London Overground continued through the year, with key commissions including supporting Westfield at Westfield London and Capco at Earls Court. 

Through the WMCA framework, Waterman was appointed as designers, via Atkins, on the proposed Dudley Bus Station Redevelopment Project. The redevelopment of the station will provide a modern multi-model interchange facility to meet the needs of the travelling public and to provide a high quality customer experience. The appointment is to develop a full design for the new facility which will include up to nineteen bus stands, a retail kiosk, a travel shop, toilets, staff car parking and associated public realm improvements.

Waterman continue to work on several Hammerson projects and has been appointed to deliver civil engineering consultancy for a proposed retail park in Oldbury, West Midlands. Services being provided include flood risk, highways and drainage infrastructure and public highway agreements. Following on from the successful completion of Phase 1 of Hammerson's Elliott's Field retail park in Rugby, Waterman has been appointed as civil engineering lead consultant on the £20m Phase 2 development. 

Services being provided include flood risk, highways and drainage infrastructure and public highway agreements.

HIGHWAYS & TRANSPORTATION OUTSOURCING BUSINESS REVIEW

*Operating profit is before exceptional items and (charge)/release of liability insurance provisions.

This financial year has seen continued strong demand for Waterman's specialist secondment services in the highways and transportation markets. At year end, staff numbers have increased to 426 and revenue has increased by 21% from £19.8m to £24.0m.

The Government's renewed focus on infrastructure projects, particularly in the highways market, may create a skills shortage in the future. This will benefit Waterman and margins are likely to increase as we respond to market conditions.

HIGHWAYS & TRANSPORTATION OUTSOURCING MARKET REVIEW

This financial year has seen continued demand for Waterman's specialist secondment services in the highways and transportation markets. Growth in headcount at the start of the year was tempered by some uncertainty around the European Referendum vote, but Government investment in the highways programme and on major infrastructure projects has held up and the demand for Waterman's services to support public sector capital expenditure remains strong.

Specialist Staff Secondment

The Group's specialist secondment business trades as Waterman Aspen, which has built a strong track record by seconding engineers to a range of clients, primarily in the public sector highways and transportation market. Reductions in Local Authority headcount and their revenue expenditure has been more than offset by the requirement to deliver a large capital expenditure programme, and this capital rich / revenue poor status has increased the demand for our services.

There is no such thing as a typical secondment, our shortest was half a day to provide cover to a client to be represented at a meeting, our longest is the secondment of a senior bridge engineer which has just entered its 19th year and is still ongoing. The need for our staff arises from numerous reasons such as cover for maternity leave or sickness, to cover gaps while permanent recruitment takes place or more commonly now, as an alternative to permanent recruitment. This is especially beneficial in times of fluctuating or uncertain workload when clients cannot be guaranteed to maintain sufficient work for a large staff complement. Many of our local government clients have had to reduce their technical staff establishment in recent times due to budgetary pressures. Using staff from our specialist secondment service enables them to maintain a high degree of in-house expertise so that they have greater influence on the projects within their authority, often designed and delivered using teams of our staff.

Our clients include a large proportion of the County, City and Borough Councils throughout the UK as well as Highways England, Transport for Scotland and many highways and infrastructure consultants.

A majority of our seconded staff work in integrated teams, with the Client giving direction and control, but we also provide independent teams of secondees to deliver projects and functions. Reductions in Local Authority revenue spend have resulted in skills shortages and many now rely on our support to deliver functions including Development Control, responsibilities under the Flood and Water Management Act, traffic management and bridge maintenance programmes.

We also support the delivery of major capital schemes and provide project management and commercial assurance support to Highways England and their supply chain to build ten Smart Motorways. These schemes, including M1 junctions 16 to 19 in Northamptonshire and the M5 junctions 4a to 6 in Worcestershire, are part of the £15 billion government investment Highways England is delivering between now and 2021 which will add 292 extra lane miles to the UK motorway network.

Each of England's 39 Local Enterprise Partnership areas has a local plan for delivering the England Programme worth approximately £2.6 billion. Delivery of these schemes contributes to smart, sustainable and inclusive growth in England. With pressure to deliver schemes on programme and within budget, Waterman secondees provide design services and supervise construction of major highways schemes, public transport interchanges and public realm improvements.

Major frameworks including the West Midlands Highways Alliance, Midlands Highways Alliance, Hampshire County Council Strategic Partner Contract and London Borough of Bexley now provide 45% of our revenue and give us long term, exclusive access to secondment opportunities in 25 Local Authorities. On frameworks where we deliver this support with consultant partners, including Atkins and AECOM, we also generate additional opportunities in their other Local Authority commissions.

Through our frameworks we have won a number of awards this year, including:

· ICE East Midlands Merit Awards (EMMA's) for Team Achievement (Midlands Highways Alliance / AECOM / Waterman);

· CIHT West Midlands Award for Acocks Green Highway Scheme - Best Small Highways and Transportation Project (Birmingham City Council / Atkins / Waterman); and

· ICE West Midlands Award for Friargate Bridge, Coventry - Team Achievement Award (Coventry City Council /Atkins/ Waterman).

During the year, we have also secured positions on new framework contracts with Highways England and in Birmingham, West Yorkshire, Greater Manchester and the South West. These long term contracts will provide access to new clients, including newly formed Combined Authorities, and will secure a future pipeline of work.

Diversification into additional sectors, including water and environment, has also given us a broader offering and an expanded client base. This initiative is to establish the same track record and reputation that we have earned in our core highways and transportation market and achieve sustainable, organic growth in these new sectors over the medium term.

We continue to maintain our USP and differentiate ourselves from recruitment agencies by employing the majority of our secondees. The balance we achieve between salaried staff and the specialists and sub-contractors whom we engage provides flexibility and resilience. Our regional management teams are focussed on growing staff numbers and achieving headcount targets, but also on margin improvement and managing productivity.  

GROUP OUTLOOK

Waterman is a diversified group offering a comprehensive range of engineering and environmental services to our clients, both in the private and public sectors in a wide range of markets throughout the UK.

Overseas in Australia, we are more specialised and have focused primarily on providing Building Services consultancy in niche markets such as healthcare, education, justice, telecommunications and the financial markets.

In Ireland, we have expanded our range of services offered to clients over the last three years and are extremely well placed to benefit from any upturn in Dublin and the surrounding areas following the UK EU Referendum. We are the designers of the tallest and largest commercial and residential development being constructed in Dublin at present.

In the UK, we have been through a period of uncertainty during the London Mayoral election and more recently the EU Referendum. We remain conscious that the absence of decisive leadership from central government could in turn impact on future investment decisions made by our clients. However, we are continuing to experience good levels of enquiries and new commissions across a wide range of markets and this bodes well for the future.

Having achieved our previously declared three year financial objectives, we remain committed to our aspiration to increase the Group adjusted operating profit margin from the current level of 4% towards 6% by 2019.

Nick Taylor

Chief Executive

10 October 2016

(1) Refer to note 12, Property Plant and Equipment for details on the impairment of Land and Freehold Property

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL INFORMATION

The Group is a multidisciplinary consultancy providing sustainable solutions to meet the planning, engineering design and project delivery needs of the property, infrastructure, environment and energy markets.

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 Preliminary Announcement for the twelve months ended 30 June 2016, which does not constitute the Group's statutory accounts as defined in section 435 of the Companies Act 2006, was approved by the Board on 4 October 2016. The Preliminary Announcement is unaudited and the Report of the Auditors 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 2015 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 2015 have been delivered to Companies House.

2. BASIS OF PREPARATION

The unaudited Consolidated Financial Statements for the year ended 30 June 2016 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct 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 Board expects to be applicable as at 30 June 2016. IFRS is 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 International Financial Reporting Standards 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

The following standards, amendments to standards and interpretations are effective for the first time in the current financial year but have had no material impact on the Group's consolidated financial statements: 

Amendments to existing standards

Annual improvements to IFRSs 2012-2014 cycle (effective 1 January 2016)

New and amended standards not yet adopted

IFRS 9 Financial instruments replaces part of IAS 39 Financial instruments: Recognition (effective from 1 January 2018)

IFRS 15 Revenue from contracts with customers will replace IAS 18 and IAS 11 (effective from 1 January 2018)

IFRS 16 Leases will affect primarily the accounting by lessees and will result in the recognition of almost all leases on balance sheet (effective from 1 January 2019)

Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12 (effective from 1January 2017)

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 audited Financial Statements for the year ended 30 June 2015 as described in those Financial Statements.

SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historical

experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and assumptions that have the most significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are addressed in the paragraph below.

CRITICAL JUDGEMENTS

The Board considers that the estimates, judgements and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are:

· Contract Accounting: Revenue recognition, the valuation of trade receivables and amounts recoverable on contracts and the assessment of the percentage of completion achieved. 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. This policy requires forecasts to be made on the projected outcomes of projects. These forecasts require assessments and judgements to be made on matters including changes in work scope, changes in costs and costs to completion. While the assumptions made are based on professional judgements, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reporting results;

· Insurance Claims: Provisions in respect of potential liability insurance claims require assessments and judgements to be made of the likelihood of a claim succeeding and an estimate of the quantum. While the assumptions made are based on professional judgements, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reporting results;

· Goodwill is subject to impairment review both annually and when there are indications that the carrying value may not be recoverable. The carrying value is compared to the recoverable amount, which is the higher of value in use and fair value less costs to sell. Determining whether goodwill is impaired requires an estimation of the value in use of Cash Generating Units (CGU's) to which the goodwill has been allocated. The value in use calculation requires an estimate to be made of the timing and amount of future cash flows expected to arise from the CGU and the application of a suitable discount rate to calculate the present value. The discount rates used are based on the Group's weighted average cost of capital adjusted to reflect the specific economic environment of the relevant CGU (refer to note 11); and

· Deferred Tax: Deferred tax is accounted for on temporary differences using the liability method. Deferred tax assets are only recognised as recoverable if it is judged probable that a future taxable profit will arise against which the temporary differences can be utilised. Deferred tax liabilities will be provided for in full.

4 SEGMENTAL REPORTING

The Board reviews the Group's internal management accounts in order to analyse performance and allocate resources. Performance was assessed on the basis of operating profit before exceptional items and the charge or release of liability insurance provisions. Revenue was reported and assessed on a consistent basis with revenue reported in the Consolidated Income Statement. The Board assesses the business from both a business discipline and geographic perspective.

The Group monitors and reports on the performance of its Property and Infrastructure & Environment ("IE") business segments. The components of each business segment have been reported in the segmental reporting note (note 4) for informational purposes.

A segmental analysis of net finance costs has not been disclosed as the Directors are of the opinion that its components cannot be meaningfully analysed across regions and classes of business.

Internal revenue is work done on behalf of fellow group undertakings on an arm's length basis. External revenue reported to the Board is measured in a manner consistent with that in the Consolidated Income Statement.

Since July 2015, trading undertaken by the Environment business unit has been consolidated with the Civil and Transportation consulting business unit to form the Infrastructure & Environment consulting business unit. For the previous year, the segmental performance of these two business units has been consolidated and restated above.

Operating results by business unit is assessed prior to exceptional items and the (charge)/release of liability insurance claims. The prior year results by business unit have been restated to ensure consistency with the current year,

Unallocated, discontinued and consolidation adjustments consist primarily of intercompany balances which are eliminated on consolidation and balances related to the Group overdraft facility. The Group has the right to offset the cash and overdraft balances between Group companies and hence includes the new balance, if any, within Cash and cash equivalents.

 5 EMPLOYEE BENEFITS EXPENSE

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) Restructuring costs: Costs in 2015 related principally to settlement and redundancy costs to former directors and staff arising from the restructuring of our Infrastructure & Environment Consulting business.

b) Taxation: The taxation credit of £79,000 in 2015 was due to the tax deductibility of the exceptional items.

7 TAXATION

a) ANALYSIS OF CHARGE IN THE YEAR

b) FACTORS AFFECTING TAXATION FOR THE YEAR

The following table shows a reconciliation from the expected corporation tax charge, using the UK corporation tax rate for 2016 of 20.0% (2015: 20.75%) to the reported tax charge. The reconciling items represent, other than the impact of tax rate differentials and changes, non-taxable income or non-deductible expenses arising from the difference between the local tax base and the reported financial statements.

The total tax charge in future years will be affected by any changes in the corporation tax rates in force in the countries in which the Group operates as shown in note 14 to the Consolidated Financial Statements.

The UK corporation tax rate will be 19% from 1 April 2017 and 18% from 1 April 2020 and this has been reflected in the Consolidated Financial Statements.

Further changes to the UK corporation tax rates were announced in the Chancellor's budget on 16 March 2016. These include reductions to the main rate to 17% from 1 April 2020 instead of the 18% rate previously announced. As this change had not been substantially enacted at the balance sheet date, its effect is not included in these Financial Statements.

8 DISCONTINUED OPERATIONS

In July 2013, the Board decided to discontinue trading in the United Arab Emirates (UAE). In January 2014, the Board decided to discontinue trading in Russia. By 30 June 2014 for Russia and by 31 December 2013 for UAE, all revenue generating operations in Russia and the UAE had ceased and these operations were classified as discontinued.

All expenses relating to discontinued operations were charged in the year ended 30 June 2014. No expenses for discontinued operations have been charged during the current period or prior year period.

A net cash outflow from operating activities of £80,000 (2015: outflow of £114,000) resulted from the discontinued operations during the year, principally relating to progressing the liquidation of the legal entities.

9 EARNINGS PER SHARE

The basic and diluted earnings per share has been calculated on the earnings attributable to the owners of the parent and based on a weighted average of 30,758,824 (2015: 30,721,657) shares in issue and ranking for dividend during the year. The diluted earnings per share is the same as there were no dilutive share options in issue as at 30 June 2016.

The adjusted earnings per share before exceptional items is 7.6p (2015: 5.4p) as set out below.

10 DIVIDENDS

A dividend of £281,000 (2015: £383,000) was paid to the non-controlling interest during the year.

An interim dividend of 1.2p per share was paid on 15 April 2016. Reflecting its confidence in the future performance and prospects for the Group, the Board is recommending to shareholders an increase of the final dividend to 1.8p per share (2015: 1.2p). If approved by shareholders at the Annual General Meeting to be held on 9 December 2016, the final dividend will be paid on 6 January 2017 to shareholders on the register at close of business on 9 December 2016.

The Employee Benefit Trust has waived its entitlement to dividends which has reduced the 2016 interim dividend paid by £1,568 (2015: £1,045) and the 2015 final dividend paid by £1,568 (2014: £765).

11 GOODWILL

12 PROPERTY PLANT AND EQUIPMENT

The Group's freehold property was revalued on transition to IFRS as at 1 July 2004 by independent qualified valuers, GVA Grimley and BH2, who are both firms of independent chartered surveyors. The valuation was based on active market prices and reflected the existing value of the property concerned. The valuation was incorporated into the Consolidated Financial Statements and the resulting revaluation adjustments were credited to the revaluation reserve net of deferred tax.

As a result of a change in the future use of the Group's freehold property in Leeds, an impairment review has been performed. An impairment charge of £781,000 has been taken and set against the revaluation reserve. £183,000 of deferred tax held within the revaluation reserve has been reversed. The net impact on the revaluation reserve is a reduction of £598,000 to £nil at 30 June 2016.