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WATERMAN GROUP PLC

Interim Results Announcement for the Six Months to 31 December 2010

Waterman Group plc, the international engineering and environmental consultancy, today announces its interim results for the six months to 31 December 2010.

Note

1. The pre tax profits include a provision for exceptional items which in H1:FY11 is £8k and in H2:FY10 was £5,638k.

2. The results for the second half of the previous financial year have been included above to enable comparisons to be made with the interim results for the current year.

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

" We are pleased to have achieved these results in a market which continues to be unfavourably affected by Government policies."

" Good progress is being made on our strategy for future profitable growth and the planned reduction of our surplus office space as leases expire."

-ends-

Date: 28th February 2011

For further information 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

INTERIM MANAGEMENT REPORT

Trading conditions for Waterman Group in the first half of the financial year have generally been in line with our expectations and, as anticipated, have remained challenging during the period. The UK Government's Comprehensive Spending Review and reduced investment in the public sector has impacted on the business, however we have experienced an improvement in the private sector workload. We have made good progress with our strategy for further consolidation of our offices having reduced them from thirty-one to twenty-seven in the period as leases have ended. Over the next twelve months further consolidation is planned as leases on an additional seven properties end. The benefits will materialise in future financial years. We have experienced problems with collection of overdue debt from some of our major UK clients during the winter period and we anticipate that the situation will be rectified during the next six months as each major client is a market leader in their sector. Our net debt has increased to £8.9m from £6.4m at 30 June 2010.

We have won a number of important contracts and extensions to existing commissions in recent months including the French Centre, a 110,000m2 retail development in Kazakhstan; the final phase of Khamovniki, a 444,000m2 mixed use residential development in Moscow; Hillgate and Ludgate, a 40,000m2 commercial development in central London; Vauxhall Square, a 110,000m2 mixed use development in Vauxhall, London and the Mall of Syria, a 125,000m2 retail development in Syria. We are particularly pleased that the Transport Secretary announced last week that an agreement has been reached on the funding of the construction of the Woolwich Crossrail station box which is a scheme previously designed by Waterman. We have secured over 89% of our forecast revenue for this financial year.

Results

In the six months to December 2010, Waterman Group achieved a revenue of £36.5m (2009: £42.9m). Adjusted pre tax profit stands at £0.5m (2009: £0.7m). The adjusted pre tax profit includes £0.25m (2009: £0.25m) for amortisation of acquired intangible assets. The net asset value per share is 111p (2009: 130p). The interim dividend will be 0.1p per share (2009: 0.9p).

Strategy

We have made good progress on our strategy for future profitable growth.

The first objective is to continue to focus on removing costs which do not produce long term value. We have made excellent progress towards our target of reducing by 5,400m2 our future office lease liabilities by 31 December 2011.

The second objective is to return each of our business units to profitability and to capitalise on the investment we have made in our senior management team. It is these individuals who maintain our client relationships, provide technical excellence and generate opportunities. As part of our focus on improving the corporate structure, we have initiated a programme to streamline our corporate reporting to enable a greater focus on our markets and sectors.

The third objective is to return Waterman to delivering revenue growth. In our markets activity in the private sector is improving both in the UK and overseas. We are increasingly becoming involved in due diligence work on property acquisitions and planning for future developments. Our overseas hub strategy will see us targeting only those countries where we have an established advantage. This is already creating new opportunities and commissions.

Business Review - UK

The UK business provides 74% of the Group's revenue and 41% of this is in the public sector. The Government reduction in spending has affected our forward workload by 7% and we have therefore reduced our resourcing levels accordingly. The majority of our workload in the UK is advising property clients on development opportunities from planning through to construction. Our environmental impact assessment and due diligence teams have experienced an increase in revenue supporting planning applications and acquisitions of property portfolios respectively. In the property group our structures and building services teams have been busy working on a variety of developments throughout the country. The London teams have been particularly active on the design of commercial buildings and several of these are anticipated to proceed through to construction during 2011. Waterman is at the forefront of successfully implementing Building Information Modelling (BIM) on projects designed by the company. Quadrant 3, a 40,000m2 development adjacent to Regent Street in central London, will be completed on site during this year, significantly ahead of programme as a result of the use of this innovative technology. The regional offices outside London have not yet witnessed any increase in workload from the private sector and currently utilisation rates are lower than optimum. In Scotland, we have extended our commissions with Scottish and Southern Energy on the upgrade of the transmission network throughout the region.

Business Review - Overseas

Overseas, we have now effectively restructured into four resource hubs which cover CIS, Europe, the Middle East and Australia. Trading conditions have been testing, however the recent increase in oil price has provided new opportunities in Russia, Kazakhstan and the Middle East. Towards the end of the interim period and in early 2011 we have been instructed to commence design of several significant developments in Syria, Qatar, Russia and Kazakhstan. Our Australian business has experienced delays to several large commissions in the medical and education sectors which has reduced its normal levels of profitability. Now that Government elections in Victoria and New South Wales have been completed, we anticipate that these projects will move ahead this year.

People

The UK Government Comprehensive Spending Review has reduced the requirement for our services in the public sector. Where possible we have transferred resources into other areas of our business and market sectors, however we have reduced our employee numbers from 1216 to 1104 over the last six months with an associated one off charge of £0.28m being absorbed within our declared profit for the financial year.

Property

We have continued with our strategy for rationalisation of our office accommodation in the UK and Ireland where, as a result of acquisitions, we have had more than one office in the same city. Generally, the consolidation has occurred as leases expire or break clauses arise on currently occupied premises. During the period we have vacated from 1,040m2 of leased space and this is in line with our planned strategy to reduce our leased space by 5,400m2 over the 18 month period from 30 June 2010. The reduction of surplus office space will have a beneficial effect on the Group's overheads and this alone in the future will begin to return the Group to a more normal level of profitability.

Dividend

The adjusted earnings per share are 0.35p (2009: 1.23p).

In view of the unexpected problems with the collection of overdue debt over the winter months, the Board has decided to declare an interim dividend of 0.1p per share payable on 21 April 2011 to shareholders on the register on 25 March 2011. As previously noted, we anticipate that the short term payment issues with some of our major UK clients will be rectified during the next six months. When recommending the final dividend, the Board will take account of any improvement in collection of overdue debt over the forthcoming period up to 30 June 2011.

Outlook

Despite the current market conditions, which are likely to remain challenging for the foreseeable future, we have secured over 89% of our forecast revenue for this financial year giving the Board confidence in the performance for the full year and the future prospects of the Group.

While 85% of our revenue is from the UK and Australian markets, both of which remain competitive, our future growth will be primarily aligned with the technical excellence and professional relationships built up over many years by our teams in these countries and Waterman is winning its fair share of opportunities.

Waterman is a well respected firm and as markets recover further we expect to continue to secure future workload from clients who have retained us over many years.

Finally, I would like to express the Board's appreciation to all our clients and staff for their continued support.

Roger Fidgen

Chairman

28 February 2011

Independent Review Report to Waterman Group plc

for the six months ended 31 December 2010

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010, which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Shareholders' Equity and Notes to Financial Information. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved, by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

1 Embankment Place

London

WC2N 6RH

28 February 2011

Notes to Financial Information

for the six months ended 31 December 2010

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.

This condensed consolidated half-yearly financial information was approved for issue on 28 February 2011.

These interim financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2010 were approved by the Board of Directors on 26 October 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

2. Basis of preparation

This condensed unaudited consolidated financial information for the half year ended 31 December 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union (EU).The half year condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 30 June 2010, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU with the exception of the following standards which have been adopted in this half year report:

·; Annual improvements 2009 (Amendments, effective 01 July 2010)

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

·; IFRS 1 First time adoption of IFRS additional exemptions (Amendment, effective 01 July 2010)

·; IFRS 2 Share based payments group cash settled transactions (Amendment, effective 01 July 2010)

·; IAS 32 Financial instruments: Presentation on classification of rights issues (Amendment, effective 01 

July 2010)

·; IFRIC 14 Prepayments of a minimum funding requirement (Amendment, effective 01 July 2010)

·; IFRIC 15 Arrangements for construction of real estates (effective 01 July 2010)

·; IFRIC 18 Transfer of assets from customers (effective 01 July 2010)

·; IFRIC 19 Extinguishing financial liabilities with equity instruments (effective 01 July 2010)

At the date of authorisation of these financial statements, the following amendment to a standard was in issue but not yet effective and has not been adopted early by the Group:

·; IAS 24 Related party disclosures (Amendment, effective 01 July 2011)

The condensed unaudited consolidated half yearly financial statements have been prepared in accordance with IFRS as adopted by the EU, and 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

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. Segmental information

* Adjusted operating profit is reported after adding back the amortisation charge on acquired intangible assets of £253,000 (30 June 2010 : £260,000 and 31 December 2009 : £255,000) and exceptional items of £8,000 (30 June 2010 : £5,638,000 and 31 December 2009: £nil) .

5. Taxation

Taxation for the six months ended 31 December 2010 has been calculated at 32% (31 December 2009: 28% and 30 June 2010: 28%) of the profit before taxation being the estimated effective rate for the year. The effective rate for the period has increased due to the change in the mix of the profits between the different Group companies and jurisdictions in which they operate.

6. Exceptional Items

Property provisions: 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 31 December 2010.

a) Property provisions: 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 31 December 2010.

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 Belgian business, an impairment charge of £462,000 was made against the goodwill and PPE as the carrying values were considered to be unsupportable by the directors. Additional impairment charges of £155,000 at 30 June 2010 and £80,000 at 31 December 2010 relate to PPE within vacated office space.

d) Other restructuring costs: Relates mainly to redundancy within the Polish business at 30 June 2010 and the civil and transportation businesses at 31 December 2010.

7. Earnings per share

The basic earnings per share has been calculated on the profit attributable to shareholders and based on the weighted average of 30,499,157 shares in issue during the period and ranking for dividend (30 June 2010: 30,483,157 and 31 December 2009: 30,482,324 ).

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 30,516,401 shares during the period (30 June 2010: 30,483,157 and 31 December 2009: 30,482,324).

8. Dividends

The directors propose an interim dividend of 0.1p per share (31 December 2009: 0.9p per share and 30 June 2010: 0.9p). The shares become ex-dividend on 23 March 2011 and the dividend will be paid on 21 April 2011 to those shareholders on the register at the close of business on 25 March 2011.

The final dividend for the year ended 30 June 2010 was paid on 11 January 2011 to all members on the shareholders register at 17 December 2010.

9. Capital expenditure

10. Trade and other receivables

As of 31 December 2010, trade receivables, net of provisions were £20.0m (30 June 2010: £22.2m and 31 December 2009: £27.3m) of which £13.2m (30 June 2010: £12.8m and 31 December 2009: £20.1m) 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.

11. Financial liabilities-borrowings

The Group had term loans of £6.7m (30 June 2010: £7.3m and 31 December 2009: £7.8m) disclosed above within Bank loans at 31 December 2010, which 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

Movements in financial liabilities-borrowings are analysed as follows:

12. Provisions

13. Share capital

The share capital of the company comprises ordinary shares of 10p each. No new shares were issued during the current or comparative period.

14. Merger reserve

The merger reserve represents the value received in excess of nominal value for shares issued pursuant to business combinations where company law prohibits the recording of a premium. Included within the profit and loss reserve balance brought forward is an amount of £1,133,000 (2009: £1,133,000) relating to the write off of purchased goodwill prior to the introduction of FRS 10.

15. Notes to the Consolidated Cash Flow Statement

16. Related party transactions

There have been no significant changes apart from the disclosures below in the related party transactions described in the Waterman Group plc financial statements for the year ended 30 June 2010 that could have a material effect on the financial position or performance of Waterman Group plc in the six month period ended 31 December 2010.

17. 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 Interim Management Report. 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 cash flow forecast and a forecast for covenant compliance to June 2012. 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.

In addition the group has considerable financial resources together with long term contracts with a number of customers and suppliers across different geographic areas and industries. 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 Interim Report and financial statements.

18. Principal risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain broadly the same as at 30 June 2010. These risks and uncertainties are expected to be unchanged for the next six months and are disclosed within the Financial Review of the Waterman Group plc Annual Report and Financial Statement 2010.

19. Further information

Copies of the Interim Report have been sent to shareholders. Additional copies are available from the company's registered office at Pickfords Wharf, Clink Street, London SE1 9DG. In addition, electronic copies of the Interim Report and the 30 June 2010 financial statements can be viewed on the Group's website www.watermangroup.com.

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.

Statement of Directors' Responsibilities

The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the Interim Management Report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.

The directors of Waterman Group plc are listed in the Waterman Group plc Annual Report and Financial Statement 2010. There have been no changes of directors since the Annual Report. A list of current directors is maintained on the Waterman Group website www.watermangroup.com.

By order of the Board

Graham R Hiscocks

Company Secretary

28 February 2011