WTM.L Regulatory News (WTM)

WATERMAN DOUBLES DIVIDEND REFLECTING STRONG UK GROWTH

Waterman Group plc, the engineering and environmental consultancy, today announces its Preliminary Results for the year ended 30 June 2015.

· Solid order book of £130m (FY2014: £120m) driven by strong UK demand.

· Staff numbers increased by 14% to 1,259 during the last twelve months to service the growth in the UK market.

· Return on Capital Employed**(ROCE) increased to 30.3% (FY 2014: 11.4%), exceeding our published strategic target to achieve 20% by June 2016.

*  Adjusted for amortisation of acquired intangible assets and exceptional items.

** 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.

***Previously reported results exclude the effects of discontinued operations.

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

" Waterman is in excellent shape. We are delighted with these results."

" The Group operates in the property and infrastructure markets. Our niche position is helping us to develop further our reputation as the "Go to Consultant" for both our clients and staff."

" The past year has seen Waterman continue to deliver against our three year strategic plan to enhance shareholder value. Our profitability has improved significantly and we are proposing to double the dividend we are paying to our shareholders."

" The strategy announced in 2013 to re-focus the Group primarily on the UK has been a significant success. As a result, during the last two years UK revenue has increased by 48%. Waterman now generates 89% of its revenue from the UK."

" Overseas, our operations in Australia and Europe are performing well."

" The Board is looking to the future with confidence. We expect to deliver further growth in the current year. Our future aspiration is to improve the Group adjusted operating margin towards 6% over the next four years from the current level of 3.3%."

-ends-

Date: 5 October 2015

For further information please contact:

Waterman Group plc Broker Profile N+1 Singer

Nick Taylor, Chief Executive Simon Courtenay Sandy Fraser

Alex Steele, Chief Finance Officer Harry Rippon 020-7496-3000

020-7928-7888 020-3763-3400

web: www.watermangroup.com

CHAIRMAN'S STATEMENT 

This is my first annual statement to Waterman shareholders since my appointment as Chairman.

Overview

I am very pleased to announce that Waterman is performing ahead of its three year strategic plan which runs to 30 June 2016. The Group is delivering a significant improvement in its financial performance and increased returns to our shareholders.

The success of this strategy is demonstrated by the continuing progression in the Group's adjusted profit before tax, which has increased substantially to £2.7m (2014: £1.4m, 2013: £1.1m).

The Group's continued focus on stable economic markets in the UK, Australia and Ireland has established firm foundations for the future. Waterman generated 89% (2014: 87%) of its revenue from the UK with revenue growing by a total of 48% over the last two years, including 25% in 2015 (2014: 19%).

Waterman's premium brand and its long established client relationships have contributed to the delivery of strong results, with an improved cash flow and a further increase in our Return on Capital Employed. Positively, net funds have improved by £2.2m to £3.8m (2014: £1.6m). This was after investing £0.8m in April 2015 to increase the Group's ownership of its Australian businesses. Most encouragingly, the Group's Return on Capital Employed hit 30.3% (2014: 11.4%, 2013: 7.6%) which is ahead of our previously stated target of achieving a 20% Return on Capital Employed by June 2016.

As a result of the improved performance noted above and the outlook for the Group, the Board is pleased to recommend to shareholders a significant increase in the dividend. We have proposed a final dividend of 1.2p (2014: 0.6p) making a total dividend for the year of 2.0p (2014: 1.0p), an increase of 100% on last year.

Operational Performance

Waterman is now experiencing the benefits from the strategic decisions taken in earlier years to return focus to the UK and to simplify its management structure. The result is a more focused business that is operating in buoyant markets. Over the last three years, Waterman has withdrawn from China, UAE and Russia as these were markets which the Board decided could not provide adequate sustainable returns. The one-time financial impact of these decisions has been fully recognised in previous years.

Revenue grew by 22% to £83.9m (2014: £68.8m). The Group now generates 89% of its revenue from the UK and 11% from its overseas operations, with 8% from Australia and 3% from Ireland and Poland.

We have continued to recruit engineers and environmental consultants in order to provide the necessary resource to service our clients' increasing workload. Staff numbers grew by 151 (14%) during the year to 1,259 employees (2014: 1,108). Our staff is the key resource for the Group's future success and we need to continue to nurture our talent and improve and expand their career prospects, especially given the Board's plans for future growth. I am delighted with the strong culture that the Group has developed that enables us to attract and retain high quality staff.

Investment in many of our offices has been made to improve the working environment and to provide greater capacity for future expansion. City centre locations for our design teams give greater connectivity with our clients and other professional colleagues; over the last twelve months we have relocated into city centre offices in Birmingham, Leeds and Sydney.

Management actions to improve the performance of our UK Civil and Transportation Consulting business have shown good results. Although revenue in the period fell from £13.3m to £11.8m, operating losses were reduced by £1.7m to £1.2m this year from £2.9m in 2014. This year's performance continued to be adversely impacted by low staff utilisation and legacy issues on historic projects, which were substantially resolved by the period end.

Looking ahead, our UK Civil and Transportation's business should benefit from both improved market conditions and our stronger position in Public sector frameworks. The Board fully recognises the importance of this business returning to profitability in the future.

Order book and Market Prospects

New commissions have resulted in an increased order book which has grown by 8% to £130m (2014: £120m). This growth has been generated through our leading position in the UK Property and Highways sectors where demand for our quality services is increasing. Over the last year we have won several important long term frameworks in the Public sector.

Following the outcome of the recent General Election our Property clients have focused on their future direction and investment strategies for the UK. This should provide enhanced opportunities for Waterman, further improved by its Highways and Transportation Outsourcing business where revenue grew by 36% to £19.8m (2014: £14.6m).

Strategic initiatives in Australia

Our Australian businesses are based in Melbourne and Sydney, where our teams primarily provide building services consultancy advice to the healthcare, education, residential, technology and financial markets. The original stakes in Sydney and Melbourne were acquired in 2002 and 2006 respectively.

Over the last two years these businesses have been through a period of planned transition which has seen the appointment of the next generation of Directors in both Melbourne and Sydney. This process has enabled us to build on the established positions of each operation and develop a strategy to create a stronger Waterman Australia. 

As previously announced, on 1 April 2015, the Group invested AUD 1.6 million (equivalent to approximately £0.82 million at 1.94 AUD: GBP) before transaction costs to increase its ownership of the Sydney business to 100% (previously: 80%) and of the Melbourne business to 51% (previously: 41%). The purchase was funded by a four year AUD 1.6 million term loan from HSBC Bank plc. Interest on the loan will be charged at 2.5% per annum over AUD LIBOR. Further information is included in note 12 of this preliminary report.

New Long Term Incentive plan

A new incentive scheme for senior management was approved by shareholders at the Annual General Meeting in December 2014. This Long Term Incentive Plan (LTIP) provides senior management with an award of shares which vest in part when the share price, which was 52 pence at the time of shareholder approval, achieves certain trigger values above 100 pence for a period of 25 consecutive dealing days during the five year period from 9 December 2014. The LTIP share awards will vest in full if the share price achieves the trigger value of 150 pence for a period of 25 consecutive dealing days.

Full details of the LTIP scheme were included in the Chairman's letter to shareholders issued prior to the Annual General Meeting held on 5 December 2014. Further information is included in note 19 of this preliminary report.

Dividend

In line with the Group's strategy to increase shareholder returns, the Board is recommending a significant increase in the dividend. This year we are proposing a doubling of the dividend we are paying to our shareholders.

The Board is proposing to pay a final dividend of 1.2p per share (2014: 0.6p). Subject to approval by the shareholders at the Annual General Meeting, the final dividend will be payable on 8 January 2016 to shareholders on the register on 11 December 2015. The final dividend together with the interim dividend of 0.8p paid on 17 April 2015 makes a total dividend for the year of 2.0p (2014: 1.0p), an increase of 100%. The full year dividend is covered 2.7 times by adjusted earnings per share.

Over the last two years, the Board has delivered a doubling of dividends year on year (2013: 0.5p, 2014 1.0p, 2015: 2.0p), reflecting its confidence in the strategy, financial performance and future prospects of the Group. 

Board and Staff

Roger Fidgen retired at the end of the Annual General Meeting on 5 December 2014 after ten years on the Board, including nine years as Chairman.

The Board thanks Roger for his guidance and leadership to the Group throughout his tenure, especially during the difficult times of the recent recession, and wishes him a long and happy retirement.

Following Roger's retirement I was appointed to the Board as non-executive Director and Chairman.

As reported at the time of my appointment, I am a Chartered Surveyor with over 40 years' experience in the London property market across several economic cycles. I was previously Chief Executive of Baker Harris Saunders Plc, which was the first surveying firm to float on the London Stock Exchange. I have been Chairman of several committees of the Royal Institution of Chartered Surveyors and also the Master of the Chartered Surveyors Livery Company.

Since my appointment I have spent time in getting to know many of our directors and staff and understanding how the various elements of the business work together to maintain and improve our position as a niche consultant. I am greatly encouraged by what I have seen and I congratulate our staff and colleagues for delivering a successful year.

Outlook

The Board has recently completed a review of the Group's progress against the previously published three year strategic target to triple adjusted annual profits before tax to £3.3m over the three year period to 30 June 2016, with a Return on Capital Employed (ROCE) of 20%. Given the recent strong performance, the Board now expects the Group to exceed the profit target during this financial year and we have already exceeded our ROCE target, a year early.

Waterman will continue to focus on the core markets in the UK, Australia and Ireland where clients and revenue are more secure and we see plentiful opportunity. Two important initiatives have begun that will ensure our clients are fully aware of the full range of services we offer throughout the Group and to increase our share of Public sector opportunities.

The availability of skilled resources is a constraining factor. Accordingly, our strategy is not to drive the maximum revenue growth, but rather it is to improve Group profitability through our long term relationships in the markets in which we operate and to become the "Go to Consultant" for our clients and employees.

It is in this context that the Board has created an aspiration for the four years to June 2019, to increase the Group's adjusted operating profit margin towards 6% from the current level of 3.3%. We anticipate that this aspiration will drive a continued improvement in our financial performance and will enable us to continue to create significant value for our shareholders.

In conclusion, the Group is in excellent shape and accordingly, the Board looks forward to the current year with excitement and confidence.

Michael Baker

Chairman

5 October 2015

CHIEF EXECUTIVE BUSINESS REVIEW

GROUP OVERVIEW

The Group has made excellent progress with our strategy to have a greater focus on the UK where 89% of our revenue is now generated.

We have experienced outstanding growth in our UK Structures and Building Services property businesses and also in our Highways and Transportation Outsourcing business. Overall, our UK operations grew by 25%, significantly ahead of the published 7% growth in output of the UK construction industry in 2014. This success has been generated through our niche position in several markets and our ability to cross sell our services. Our clients remain very loyal and we have increased our share of their workload and opportunities.

In Australia we continue to deliver a consistent financial performance, even though the slowdown of China's growth has impacted on the local economy. Our office in Dublin has reported improving trading conditions as the requirement for new office space and residential properties increases.

Whilst fee levels currently remain competitive, there are some signs of improvement particularly in the Highways and in the private development sectors. During the year we have recruited an additional 151 staff, an increase of 14%. This recruitment has impacted on our operational costs and margins in several of our businesses as it has proved necessary to recruit through agencies involving one off recruitment fees. However, we are not anticipating that revenue and demand for our services in future years will continue to grow at over 20% per annum which has been the average over the last two years. Our investment in resources should benefit future profitability following the initial recruitment cost outlay.

The majority of our revenue is generated from London based clients, comprising major development companies, banks, pension and property investment funds. As previously anticipated, we are experiencing an increase in retail sector activity, with 160,000 m2 of development designed by Waterman currently under construction on sites in Leeds, Newport and Oxford.

Following actions taken, the performance of our Civil and Transportation Consultancy business has improved, with the underlying performance moving towards a profit in the future.

Overall, the Group is expecting to exceed the previously published financial target to triple the adjusted profits before tax of £1.1m for FY 2013 during the three years to 30 June 2016.

PROPERTY SEGMENT OVERVIEW

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

The Property segment encompasses the UK Structures and Building Services businesses which are involved in development projects both in the public and private sectors. In addition, this segment includes our overseas business in Australia (which is partly owned by the Group), Ireland and Poland which are solely involved in the engineering design of buildings.

Revenue for this segment has increased by 29% to £42.1m, with the majority of this growth in the UK. The operating profit and margin has reduced during the year as we have needed to invest in the recruitment of additional technical resources to service our greater workload and salary costs have been increased in line with market conditions.

All our markets remain strong and we are currently utilising our staff in Ireland, Poland and Australia to service some work in the UK. We also operate an outsourcing office in India which solely provides draughting services for our UK structures team.

UK BUSINESS REVIEW - STRUCTURES

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

Waterman's Structures business has expanded during the year with revenue increasing by 36% to £20.9m. It has been necessary to increase our headcount during the period to meet our clients' requirements and this has resulted in additional costs being incurred for one off agency recruitment fees which has reduced the operating profit and margins. The enhanced capacity within the structures team will be available to service our increasing workload and therefore the investment in staff will lead to higher margins in the future years.

Waterman continues to win awards for the structural design of buildings in all markets such as offices, retail and residential. One of our residential projects, NEO Bankside situated next to the Tate Modern Gallery in London, has recently been shortlisted for the prestigious Royal Institute of British Architects 2015 Stirling prize.

UK BUSINESS REVIEW - BUILDING SERVICES

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

The Group strategy is to target significant growth in our Building Services group over the next four years. Potential clients requiring building services consultancy advice are synonymous with our structural clients and we will aim to leverage these established relationships to cross sell our services, either as a single commission or part of a multidiscipline appointment.

This engineering segment is an area of investment and opportunity for Waterman and we are currently focusing on building a team capable of delivering design excellence for our clients.

In October 2014, the Everyman Theatre in Liverpool won the Royal Institute of British Architects Stirling prize for the ingenious use of natural ventilation to provide cooling to the theatre. This innovative design by Waterman involved the development of sophisticated computerised thermal modelling to predict the future temperatures within the auditorium, thereby enabling the building services design to be finalised.

UK MARKET REVIEW

Commercial

Tenant demand continues to drive forward commercial development, particularly in the City of London where projects have provided a high proportion of our revenue this year. We are also experiencing increased demand for our services in regional cities such as Birmingham and Manchester, where developments are moving forward to tender and construction.

Waterman provided multidisciplinary services on the Land Securities development at 1 and 2 New Ludgate in London, which comprises 35,000m2 of grade A office space located above retail units at ground floor level. Following the successful completion of this project, Waterman has been retained by Land Securities on 1 New Street Square, London which is a 27,000m2 development pre-let to Deloitte.

An unusual commission which is progressing on site, is Angel Court in London developed by Mitsui Fudosan UK and Stanhope. This 27,000 m2 project has involved the retention of significant parts of the existing core structure which is enclosed with a new steel superstructure incorporating an efficient building services system.

Our Building Services team have been appointed by Generali to provide consultancy services on 10 Fenchurch Avenue which is a 46,000m2 mixed use office development located in the centre of London's insurance district. The 17 storey building has been designed by Waterman to have an energy efficient façade to reduce solar gain while maximising useful daylight.

In Birmingham, Waterman has recently been appointed by Legal and General on their 15,000m2 Temple Court development.

Residential

Demand for prime and super prime residential in London shows little signs of slowing and our teams of structural and building services engineers are busy delivering a variety of projects.

The Clarges development by British Land opposite the Ritz Hotel in London where Waterman is providing a multidiscipline service, includes a new headquarters for the Kennel Club of Great Britain. This 18,000m2 residential project provides 34 apartments arranged over ten floors, ranging in size from one to five bedrooms.

Two Fifty One, formally known as Eileen House, is located at Elephant & Castle in London. This whole district is undergoing an extensive redevelopment and Waterman originally provided environmental planning advice on the regeneration of the area. Two Fifty One is a 41 storey residential tower designed by Waterman in conjunction with Laing O'Rourke using their DfMA prefabricated system for the structure and building services systems.

Another project under construction is Tribeca Square at Elephant & Castle, London which comprises 40,000 m2 of high quality residential homes for developers Delancey and Oakmayne.

Waterman is appointed to provide structural engineering design services to Barratt London on the redevelopment of the Sainsbury Nine Elms site. On completion, this site will deliver over 700 new residential units in the Vauxhall area of London.

Recent completions include Buildings P1 and T1 for Argent at Kings Cross which provide over 300 luxury apartments. 

Retail and Urban Regeneration

Several of our clients' town centre retail led developments designed by Waterman have progressed onto the construction phase. Waterman is currently providing advice on over 600,000m2 of future retail development, of which over 160,000m2 is currently on site.

Large retail developments can often take many years to proceed through planning to completion and these projects provide great opportunities for Waterman to provide consultancy services at all stages. We are currently moving into a period where retail commissions will be providing an increasing proportion of the Group's revenue. Waterman has an extensive track record over many years of successfully delivering large schemes such as Bluewater, Bullring, Liverpool One and Westfield London and this has enabled us to secure commissions on the next series of large retail centres moving through the planning system such as Brent Cross in London and Whitgift Centre in Croydon.

Projects designed by Waterman include Friars Walk, Newport, a 38,000m2 retail led town centre development for Queensbury Real Estate which is opening in the autumn of 2015. The 42,000 m2 first phase of Victoria Gate in Leeds commenced on site in 2014 and involves the construction of a John Lewis store and retail units. Waterman has been involved with this project for over ten years providing planning and pre-construction services to the developer, Hammerson, for the comprehensive 100,000m2 development. We are currently providing detailed design services for structures and building services to Sir Robert McAlpine who are appointed for the construction of the first phase of the project with completion in 2016.

The third development designed by Waterman, which has recently commenced on site, is the 80,000m2 extension to the Westgate Centre in Oxford for Land Securities and The Crown Estate. This project is due for completion in autumn 2017 and is anchored by a 14,000m2 John Lewis store with retail and leisure units along a mall leading onto the existing shopping centre, which is also being refurbished.

In London, the West End continues to reinvent itself and Waterman has provided consultancy services to The Crown Estate on their many historic projects in Regent Street. The latest development is St. James Market which provides 31,000m2 of mixed use retail and commercial space in two significant buildings between Haymarket and Lower Regent Street.

Leisure

Waterman are providing building services designs to Reignwood Group on the redevelopment of Ten Trinity Square in London. The original building constructed in 1922 was previously the Headquarters of the Port of London Authority, is Grade II* listed and overlooks the Tower of London World Heritage site. The building is being retained and sympathetically transformed into a luxury Four Seasons hotel with 100 guest rooms and suites. At the upper levels, 41 fully serviced luxury apartments are being incorporated into the development. The complex routing and access requirements of the building's services has been carefully considered by Waterman to limit damage to any of the heritage areas and particularly the ceilings.

Waterman has been appointed by the British Museum to carry out a full energy review of their prestigious Bloomsbury site which extends over 75,000m2 and is visited by over 6 million people a year. This review will evaluate and propose means of significantly reducing the carbon emissions from the buildings.

Education

Education has remained a major sector for our regional offices with commissions for primary and secondary schools plus further and higher education schools.

As part of the Education Funding Agency Priority School Building Programme, Waterman has been appointed as designers for the Harris Academy for 1,150 students and the Stratford Academy for 1,500 students in London.

Waterman is currently designing the Holywell primary and secondary school as part of the North Wales Schools Framework. Construction is progressing and the schools are programmed for delivery in the summer of 2016.

In the North West we have been appointed to provide detailed design of six schools within the Priority Schools Building Programme North West Batch. These schools are of significant importance as they represent the first series of schools designed to the new Education Funding Agency design guidelines. 

There is a greater emphasis on computer simulation based design techniques and strict energy targets for all aspects of the building energy use.

Energy & Industrial

Waterman's regional involvement in industrial projects is increasing. We are currently providing design advice to Rolls Royce on their jet engine casing production facility in Hucknall, Nottinghamshire and Siemens have appointed Waterman to design their new wind turbine factory in Hull.

In the Midlands at Nuneaton, we continue to provide multidisciplinary consultancy services on the Motor Industry Research Association (MIRA) complex. The redevelopment of this site will provide the perfect location for the European research and development of motor vehicles and associated components. It is expected that development will be phased over the next ten years.

As part of the ongoing framework with the Manufacturing Technology Centre (MTC), Waterman have designed a third technology building for our client at Ansty Park, Coventry. This advanced Manufacturing Technology Centre will showcase the cutting edge of British technology and will provide teaching facilities for research and development engineering.

Waterman has been appointed by Vinci UK to provide multidisciplinary design services for the construction of Allerton Waste Recovery Park. This project is a 13,500m2 multi-treatment development on 5.1 hectares of land in North Yorkshire comprising an energy from waste facility, a mechanical treatment facility and an aerobic digestion unit. The park will produce 220,000 MWh of renewable electricity per annum and is due for completion and operation in 2018.

AUSTRALIA BUSINESS REVIEW

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

In Australia, we have businesses in Melbourne and Sydney. In April 2015, we increased our ownership of the Melbourne business to 51% (previously 41%) and the Sydney business to 100% (previously 80%).

Our Australian operation primarily provides building services consultancy advice to the public and private sectors where demand has remained constant and resilient, notwithstanding the slowdown of China and their reduced requirement for mineral resources from Australia. The majority of our revenue is generated from healthcare, education, prisons, residential, technology and bank fit out markets where demand remains high.

Whilst revenue in Australia has slightly reduced over the year, operating profit has increased with margins at a healthy 15.2% (2014: 13.0%). This performance reflects the business's niche position in several key markets.

AUSTRALIA MARKET REVIEW

Melbourne

Justice, healthcare, residential, sports and recreational markets have continued to provide a base workload for the Melbourne office.

During the year Waterman has designed and documented the AUD 130m Royal Victorian Eye and Ear Hospital and the Monash Children's Hospital with a construction value of AUD 260m. We have recently been appointed designers for the AUD 200m Sunshine Hospital Women's and Children's Centre and this will generate fee income over the next two years. Another appointment is the Technical Advisory role on the AUD 100m expansion of Casey Hospital in Victoria.

In the sports and recreation market, we have completed the design of the Eltham Leisure Centre and Aquanation Aquatic Centre in Ringwood. We are currently designers for Franksten Stadium and Bendigo Stadium.

We have completed building services designs for the new AUD 40m Robert Bosch Headquarters on the Clayton Campus in Melbourne.

New appointments include a Technical Advisory role at St. James Cook University in Cairns and building services designs for a AUD 150m residential development in St. Kilda Road which is near our offices in Melbourne.

Sydney

Waterman's Sydney operation is mainly focused on the residential, education, bank fit out and telecommunications markets where demand remains strong.

We have been appointed to provide building services design on the AUD 100m Northpoint retail and hotel development in North Sydney where our client wishes to utilise our 3D design and draughting capability on this exciting project.

In the residential market, Airlie Beach resort development providing 101 apartments in Queensland has recommenced and Waterman is appointed for both the building services and structural design.

Universities have continued to generate revenue as they expand their campuses to attract and accommodate overseas students. Waterman is currently working on projects at UTS, Sydney University, University of New South Wales, Wollongong University and Macquarie University.

The financial services sector is experiencing a roll out of upgrades in the retail outlets of many high street banks. Waterman has been appointed to provide building services designs for the upgrades for Commonwealth Bank, Westpac Bank and St. George Bank across Australia. These are ongoing commissions and we have completed one hundred branches to date with an additional three hundred branch refurbishments expected to continue to generate revenue over the next three years.

We relocated our offices from the outskirts of Sydney into a more central City location in February 2015. The new office provides better connections with our clients, thereby reducing travel time. In addition, we are aiming to recruit additional staff to service the increasing workload and the City centre location provides a greater access to the available resource pool in Sydney.

EUROPE BUSINESS REVIEW

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

Waterman's European operations, which are based in Ireland and Poland, have experienced strong growth in the last year, with revenue up 33% to £2.8m. The business has now returned to profitability after a number of very challenging years.

The Irish economy recorded the strongest growth figures in the Eurozone in 2014. Investment in commercial property in Dublin has increased significantly, as the effect of the stagnation of the last six years has resulted in a shortage of high quality office space. The residential sector is also growing with a drive towards properties for lease rather than traditional housing for sale. Retail, hotel, industrial and logistics sectors are expected to become more active in the future.

The property sector in Poland remains more subdued, though with some signs of increasing investment. Our Warsaw team has continued to provide technical support on London and Dublin projects.

EUROPE MARKET REVIEW

Ireland

Our Dublin office has seen considerable growth in its residential workload in the year as projects start to move from planning stage to construction. New commissions secured include the 200 unit Marrsfield apartment scheme and projects at Waterside Swords, Station Road Portmarnock, Oldcourt in Firhouse and at Kilternan. Planning for Phase 3 of the Clancy Quay development has also commenced. Construction is now underway at Royal Canal Park for Ballymore, Oldtown and Clongriffin for Gannon and at Clancy Quay (Phase 2) and Central Park for Kennedy Wilson.

Waterman has been appointed by Green REIT to provide structural design services for an eight storey 13,000m2 office scheme at Central Park, and by state agency IDA Ireland, for an office development at Tralee Technology Park, County Kerry. Construction of a major refurbishment and extension to Baggot Court in Dublin has commenced and will provide 18,000m2 of Grade A office space on completion. Planning stage services have also been completed for 35,000m2 of new development as part of the Capital Dock scheme.

The retail sector remains more subdued, although there are signs of activity levels starting to pick up. Planning stage services have been provided for a major upgrade to Stillorgan Shopping Centre, where Waterman are appointed to provide structural and building services engineering. Construction of Aldi's Terenure store in Dublin, which incorporated elements of a historic tram terminus building, has recently been completed and is due to open for business in autumn 2015. We have subsequently been appointed for the design of several new Aldi stores.

Waterman continues to be one of the leading consultancies in the education sector in Ireland. Several significant new commissions have been secured, including the thirty two classroom Harcourt Urban primary school, which is to be developed as an exemplar project for the Irish Department of Education, a six hundred pupil secondary school at Clifden, County Galway, and the Rapid Build Schools Framework for 2015. For this latter appointment, Waterman has already provided all civil and structural work required to obtain planning and to procure design and build contractors for new schools at thirteen sites. Detailed design has commenced for the one thousand pupil Kingswood exemplar secondary school, South Dublin, while construction of several primary school projects has been completed in the year.

We have successfully strengthened our teams through recruitment of additional senior and support staff. Our building services team, only established in 2014, has made better than expected progress and an increasing number of projects are now being awarded on a multi-discipline basis. As a result Waterman is well positioned to benefit from the continued recovery in the Irish economy.

Poland

In Warsaw, the Waterman team has completed a number of fit-out commissions for tenants of the Pramerica Tower in Krakow, following completion of refurbishment work at the building in early 2015. Structural design work for a 34,000m2 office in Domaniewska, Warsaw, has also been completed, with construction due to commence in the coming months.

Waterman has been appointed to provide multi-discipline engineering services for Palace Park, a new leisure and residential community development south of Warsaw and feasibility work for a retail refurbishment and extension scheme at Zielona Gora.

INFRASTRUCTURE & ENVIRONMENT SEGMENT OVERVIEW

*Operating profit/(loss) is stated before exceptional items and amortisation of acquired intangibles.

The Infrastructure & Environment segment comprises Waterman's Civil and Transportation Consulting, Highways and Transportation Outsourcing and Environmental Consulting businesses.

Overall performance has resulted in an operating profit of £0.2m being delivered this year compared to 2014's operating loss of £1.6m. Revenue has increased by 15% to £41.8m, primarily from the growth of our Highways and Transportation Outsourcing business which has experienced a continuing strong demand for our services.

The actions taken in 2014 to restructure the management of our Civil and Transportation Consulting business and to reduce costs and increase utilisation has very significantly reduced the losses in this business to £1.2m from £2.9m in the previous year. The current year loss in this business is in part due to one off provisions on legacy projects, with the underlying performance moving towards a profit in the future.

Several senior recruits have been made to focus on public sector frameworks and transportation planning and therefore we anticipate that these sectors will generate additional revenue in the near future.

CIVIL AND TRANSPORTATION CONSULTING BUSINESS REVIEW

*Operating (loss) is stated before exceptional items and amortisation of acquired intangibles.

Revenue reduced by 11% to £11.8m and operating losses have reduced by £1.7m to £1.2m. Included in this loss are legacy issues from historic projects which have been protracted and a one off provision of £0.5m on two projects where final account settlements have been reached with our clients.

Following the restructuring of the Civil and Transportation Consulting business in 2014, significant improvements in the underlying performance have been achieved. The business has now been streamlined and the forward order book continues to improve giving confidence that it remains on course to deliver the Board's strategic objective in its return to profitability.

CIVIL AND TRANSPORTATION MARKET REVIEW

Transport Planning

In the South, the residential sector has provided a good revenue stream through the delivery of immediate supply sites as well as promotion of strategic land through Local Plans for clients including Linden Homes, Barratts, Crest Nicolson, Coca Cola Enterprises, Countryside, Cala Homes, Network Housing and Hyde Group. Key commissions included providing the transport planning advice for a major mixed use and residential development at Sampson House, Blackfriars, in addition to on-going work advising the redevelopment of Cringle Dock adjacent to Battersea Power Station to provide a new waste transfer station, with 450 residential units above.

We continue to provide transportation and highways advice to the States of Jersey Development Corporation for the six building finance centre on the St Helier sea front. Following planning consent we are also working with the new owner of the site adjacent to Hampton Court Station to further optimise the site layout and junction works for this residential led mixed use scheme. In Milton Keynes we have provided transportation advice to Hermes, the owners of the main retail centre, on their emerging development plans and have recently helped secure planning consent for a major new multi storey car park.

The Manchester transportation team has continued to grow and provide technical support to our teams across the north of England and Scotland. Notable commissions included assisting Peel Energy with the expansion of their Scout Moor on-shore wind farm, and delivering numerous transport assessments for Scottish school projects commissioned through the HubWest Framework.

Transport Infrastructure

Highways

In London and the South East, having successfully completed the design of Bedford Western Bypass on behalf of Bedford Borough Council, our team is now retained for the £18million construction phase by J Breheny Contractors. The team have also been providing transportation advice and associated support to a number of proposed allocations in Local Development Plans that are being formulated throughout the UK.

In the South West, the team was appointed on a number of significant sized infrastructure schemes including a new link road and enabling works in Abbeymeads; Swindon, Crosshands and South Sebastopol near Cwmbran.

Rail

In the rail sector, the team has been engaged on the National Station Improvement Program designing upgrades at Clapham Junction, Farnborough, Crystal Palace, Faversham, Rainham, Portsmouth and Southsea, Putney, Virginia Water, Walton-on-Thames and Hatfield Stations. Waterman are also currently providing the Network Rail role of Contractor's Engineering Manager for a number of sizeable developments. One involves the redevelopment around Twickenham Station and another the 32 storey 'Atlas' development adjacent to the railway viaduct at Vauxhall.

Aviation

In the aviation sector Waterman have provided support to British Airways at Heathrow with maintenance projects and recent new commissions relating to aprons, carparks, fire mains and hydrants. Work at London City Airport has also been growing with Waterman providing civil, structural and building services support for the extension to the West Pier and civil engineering support on a number of maintenance projects.

Marine

In the marine sector, the team provided engineering input and ground contamination advice to support the planning application for a new cruise liner berth at Dun Laoghaire harbour in Ireland, supporting the wider services being provided by our Dublin office.

Power, Energy & Waste

In Scotland, the team has continued to be very active in the Energy Sector, providing design services to a number of Distribution Network Operation Companies (DNOs) in the upgrading of the national grid infrastructure, on projects of National significance, such as the Moray to Caithness High-voltage, Direct Current (HVDC) project and the Foyers to Knochnagale upgrade. Waterman have undertaken the design role for a number of major substations in the Highlands including a twin 275KV substation at Farigaig, which involves the blasting of rock and conventional mechanical extraction of over 200,000 m3 of material in some of the remotest country in the UK. Waterman were fortunate enough to be shortlisted for their innovative approach on one such project at Noss Head HVDC landing site, culminating in being a finalist at a national award. More significantly, Waterman, in conjunction with SSE and Shell, have had the privilege of providing geotechnical assistance for the Horizontal Directional Drilling FEED study on the world's first full-scale gas carbon capture and storage (CCS) project at Peterhead power station.

Our Energy team has continued to support Vinci UK in constructing the Energy from Waste plant in Allerton and in design of the Cringle Dock Project in London.

Civil Structures and Infrastructure

The London infrastructure teams continue to provide urban regeneration services to many blue chip clients including Hammerson, Land Securities and Hermes. In Brent Cross and Canada Water, we are providing strategic infrastructure advice on drainage and services within the site perimeter. Other retail and residential projects include schemes in Didcot Orchard Centre, Exeter Bus Station and Nine Elms, Battersea. Within Greater London the drainage team are working on the refurbishment and extension of several office, retail and residential blocks including the redevelopment of St Bart's Hospital and several sites around Covent Garden and Southampton Street.

The Civils teams in the south have been engaged on a number of Waterman Property Group projects including Marble Arch, Westgate, Sloane Street, Canada Water, Clarges, Farringdon Road, Alderman House, Clearings, Star & Garter and Ludgate/Sampson House as well as supporting Berkeley Homes on their Riverside development in Woolwich, St James Street on Peter's Village project and Ringway Island Roads. The services provided include ground movement analysis, bridge assessments & design, independent design checks of sub-structural work as well as obtaining approvals for development over or adjacent to third party assets namely LUL, Network Rail, RMG, Thames Water and London Overground. We also continue to provide temporary works design and checking for major contractors including Laing O'Rourke, O'Keefe, Volker Fitzpatrick, ISG and Vinci.

In Bristol, the team were appointed to provide civil and sub-structure design advice on Cody Park, a data centre for Ark Continuity, which follows similar on-going work at Spring Park, Corsham for the same client. Pre-planning flood risk assessments and water resources assessments have been completed for St James Group for the redevelopment of Southall Gasworks, which has led to the provision of design advice.

Our Civils and infrastructure team in Manchester continues to work on projects commissioned through the Merseytravel framework, which is the integrated transport authority for Merseyside. Work also continues for Metrolink RATP, and M-Pact Thales (MPT) in relation to the Manchester tram system. Schemes in Leeds and Oxford city centres are nearing design completion and are on site encompassing drainage, S278 and streetscape improvements for major shopping centres

Public Sector

We have been working in long term partnerships with many public sector clients for nearly 20 years and have recently secured significant extensions to some of our major frameworks.

In the London Borough of Bexley, Waterman has held frameworks with the Council since 1996 providing a range of engineering consultancy services. Earlier this year our contract was extended for up to 4 years and includes provision of traffic and transportation engineering services over and above the current scope of civil, highway, bridgeworks, drainage, CDM-C and staff secondment. The framework is an important part of the long-term regeneration framework of the Borough's growth strategy for its economic, environmental and social regeneration. The programme aims to strengthen Bexley's reputation as a desirable location to live in and do business, with plans to expand its transport infrastructure and education programmes while encouraging high aspirations and entrepreneurship.

In Crawley, West Sussex, Waterman has secured a two year extension of three partnering contracts with Crawley Borough Council, providing civil engineering, flood alleviation, drainage and structural engineering services. The extended contracts are a continued co-operation with the Council to achieve the aims and objectives of their Sustainable Community Strategy in delivering a range of environmental improvements as part of their Capital and Revenue Programmes.

More recently the business was appointment to the North Lincolnshire Council Framework. The framework is for an initial two years, with the option of further extensions. Services include highway design/engineering, bridge engineering, traffic and transportation, drainage design and surface water management.

Following on from previous successful frameworks, Waterman has been appointed to a new four year framework with Merseytravel, the Executive body that provides professional, strategic and operational transport advice to the Liverpool City Region Combined Authority, to provide multidisciplinary engineering consultancy services covering expertise across rail, civil & structural, transport, highways infrastructure and business case development. The framework can also be used by the constituent councils of the Liverpool City Region Combined Authority and the Liverpool City Region Local Enterprise Partnership (LEP).

HIGHWAYS AND TRANSPORTATION OUTSOURCING BUSINESS REVIEW

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

This financial year has seen continued strong demand for Waterman's specialist secondment services in the highways and transportation markets. In response to this, staff numbers have increased from 311 to 414, up 33%. This has necessitated an enhanced overhead support structure to co-ordinate and manage the larger number of engineers on secondment and support plans for further growth in staff numbers.

Government investment in the highways programme and on major infrastructure projects has created a skills shortage. The requirement for Waterman's services has increased and margins are likely to trend upwards in future years as skilled resources become sought after by local authorities, consultants and contractors.

HIGHWAYS AND TRANSPORTATION OUTSOURCING MARKET REVIEW

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 in the highways and transportation sector. In the last year the significant increase in employee numbers has been achieved by incremental growth in all parts of the UK, underpinned by strong performance in servicing three major local authority frameworks:-

• The Midlands Highway Alliance Professional Services Partnership 2 contract was re-awarded to an AECOM/Waterman partnership in April 2015. This framework is now in its 7th year and has expanded to serve 20 local authorities, representing 15% of all UK highways authorities. This framework extends to 2018 with the additional potential for a one year extension. Demand has remained strong and at 30 June 2015 we had 76 staff working within these authorities under this framework. Waterman is also supporting AECOM with a further 18 staff on its other local authority commissions.

• The West Midlands Highways Alliance is the corresponding framework in the West Midlands area. This contract was awarded in May 2013 to an Atkins/Waterman partnership. Over the course of the year, the number of seconded staff working within the three main participants, Warwickshire County Council, Coventry City Council and Solihull Metropolitan Borough Council, has increased to 82. This framework extends to 2017.

· The Hampshire County Council Strategic Partner Contract , also in association with Atkins, was awarded in April 2014 and we have 30 seconded staff in place. With satisfactory performance this initial 4 year contract which ends in 2018 has the potential to be extended to 2022. Waterman is also supporting Atkins with a further 30 staff working throughout the UK.

These major framework wins have been captured by collaborating with partner consultants and we continue to secure further opportunities on future bids and frameworks.

The client facing management team has been strengthened in all parts of the UK, especially in London and the South East where we have the greatest potential to attract staff and generate opportunities to support new Clients. Diversification into new sectors including water, utilities and rail is being targeted.

Our business model remains robust and we continue to maintain our USP and differentiate ourselves from recruitment agencies by employing a majority of our secondees. Employees receive varied experience and effective training and development, all important factors in staff retention.

ENVIRONMENTAL BUSINESS REVIEW

*Operating profit is stated before exceptional items and amortisation of acquired intangibles.

Waterman's Environmental business continued to build on the success in prior years, delivering 23% growth in revenue to £10.2m and improving its market position, especially in its pre-planning services.

The focus of the business has been maintained with respect to delivering value added strategic advice to clients, and minimising their environmental related commercial risks either through acquisition, or the planning process. Positive progress was also made with respect to the strategic objective of diversifying the business into the infrastructure market to create a more adaptive business. Prospects for the forthcoming financial year remain positive with good levels of forward orders.

The business continues to focus on maintaining long term relationships with clients, and developing services and products which provide pragmatic, commercial advice and added value.

ENVIRONMENTAL MARKET REVIEW

Due Diligence and Environment Management

It has been a further excellent period for Waterman's due diligence service. The team cemented its position as a leading advisor to the real estate sector, supporting numerous clients across the UK and internationally, and was awarded Property Due Diligence Firm of the Year 2015 for the second year in a row by Acquisitions International. In the UK, the team advised Blackstone on the refinancing of the large and recently acquired Max Property Group, whilst in Europe we supported BMO Real Estate Partners (formerly F&C Reit) on their first European acquisition involving properties in Germany, Belgium and Netherlands.

In the infrastructure sector, the team supported the acquisition of Glasgow, Aberdeen and Southampton Airports by Macquarie and Ferrovial, Toulouse Airport, Green Highlands Renewables Ltd (a hydroelectric business) and Wightlink Ferries. Transactional work in the Mergers and Acquisitions field also experienced growth, with particular emphasis on the leisure sector. Waterman also advised on a number of corporate deals, including the acquisition of Away Resorts and Bridge Leisure.

As the business continues to diversify its service offering, Waterman has established itself as a leading adviser in Responsible Investment, developing a series of tools and services and was awarded Best ESG Strategy Advisor of the Year 2015 by Acquisitions International.

Waterman's environmental management advisory system, Greenspace, was expanded further to cover corporate environmental, health, safety and carbon management services in addition to data security. This year, the team developed a new Hazard Register function, initially for Tata Steel, but with a view to expanding the function to further clients. This tool allows clients to document, assess and control their occupational health and safety hazards. There has also been growth internationally and Greenspace is now operational in Sweden, Holland, Australia, China, Russia, Malaysia and USA.

The Health & Safety team has positioned itself at the forefront of the transition to CDM 2015, offering high quality and commercial Principal Designer and client advisor services, having been appointed as advisor on a large number of high profile projects.

Pre-Planning Services, Sustainability & Environmental Impact Assessment (EIA)

Waterman continued to strengthen its position as a leading provider of pre-planning EIA services for urban regeneration projects. Notable large scale commissions in London included continuing to support proposals at Brent Cross Cricklewood for Hammerson and Standard Life Investments, Phase 4A of Battersea Power Station for the Battersea Power Station Development Company, British Land's masterplan for Canada Water encompassing Harmsworth Quays, Surrey Quays Shopping Centre Site and the Surrey Quays Leisure Park Site; Ballymore's 2.43 hectare residential scheme in the docklands, located directly to the south of their 1,000 home City Island development and advising on the Car Giant and London & Regional Properties' masterplan for their 46 acre site at Old Oak Park, part of the Old Oak Park & Park Royal development area adjacent to the Old Oak Common proposed HS2 interchange.

In the South West the team provided pre-planning services to a host of schemes across the residential, commercial, industrial, leisure and retail sectors. In the residential sector, the team supported Taylor Wimpey on three schemes in Wales at Rhoose (350 homes), Penllergaer (250 homes) and South Sebastopol (1200 homes), in addition to advising on a major residential development on the outskirts of Hereford. For the past two years the team has also been advising on environmental issues and designing the infrastructure and highway improvements for the Graven Hill New Urban Village, Bicester, Oxfordshire, a 207 hectare operational MOD site that has been purchased by Cherwell District Council /Graven Hill Village Development Company. 

In the North and Midlands, the team began the year advising on major residential-led developments proposed in Lincolnshire and Cambridgeshire. As the year progressed, an outline planning application was submitted for a 90 hectare strategic greenfield site in the Midlands for a residential led scheme providing up to 1,700 units along with a retirement village, commercial units, community facilities, a primary school and an energy centre. During the year a new masterplan was also developed for the Hungate site, the residential led scheme for Lend Lease/Evans Property joint venture in York.

In Scotland, the team have provided detailed support to TH Real Estate on the detailed design and application process for the £850m Edinburgh St James project, involving key inputs to support two successful planning committee hearings, including the high profile central hotel design. The team are also finalising the EIA, together with specialist marine consultancy Fugro EMU, for the £350m Aberdeen Harbour Expansion Project; one of Scotland's key national infrastructure projects. Elsewhere, specialist technical support has been provided on a wide range and scale of residential, retail, education and healthcare projects; the latter of which as part of a multi-disciplinary Waterman offering to the HUB framework. 

Ecological services continued to build on the growth witnessed in previous years, with the team being expanded nationally, and advising on numerous projects including Land South of Newark for Catesby

Property Group, Land South of Clovelly Road, Bideford for Linden Homes, Leybourne Grange for Taylor Wimpey and a portfolio of sites for Aldi across Scotland. Of particular note is the addition of specialist aquatic ecology services to the national skill set, via the Glasgow office. Complimenting this service line, the Landscape and Heritage teams also grew nationally, providing a holistic approach and an integrated design solution.

Sustainability support services continue to thrive with support being provided to Weston College, Data Centres in Corsham and Farnham, Esplanade Quarter Jersey, 21 Glass House Street and the US Embassy in London, in addition to the Manufacturing Technology Centre in Coventry where we are providing wider Group engineering services.

Waterman's Acoustics team has continued to enjoy a period of growth in both the property and non-property sectors. The team has recently completed acoustics assessments for Hampden Park Stadium in Glasgow together with providing acoustic support from pre-planning to completion for major developments throughout the UK. Key commissions include St James Quarter, Edinburgh and One Angel Court in London, whilst work continues on a number of high profile projects including Two Fifty One, a residential development located in Elephant and Castle, Clarges Estate a high end residential development in Mayfair, and 10 Trinity Square, the conversion of an existing Grade II listed building to provide residential and a hotel development.

Geo-environmental

Waterman's land quality and brownfield regeneration team experienced significant growth in workload during the year, advising on a number of complex projects.

In London, works progressed at the Old Gasworks in Sutton, with the demolition of two gas holders and an 11 storey tower block and the on-site remediation works are nearing completion. The team has also been supporting Royal Mail in the flagship redevelopment of the South London Mail Centre at Vauxhall, itself a former gas works. This site is one of the largest remediation projects in London at the moment.

Our understanding of the development process and our ability to offer pragmatic commercial environmental solutions continues to ensure we are involved in numerous large multidisciplinary schemes. Detailed geotechnical and environmental investigations have been completed on a number of projects where the interaction of London Underground infrastructure has been carefully modelled and where foundation solutions for high rise towers have been designed without impacting the neighbouring buildings.

Outside of London, our Bristol team has had a very busy year delivering a wide range of assessments on a number of different mixed use and commercial schemes for Keir Property and residential led developments for Taylor Wimpey. They have also completed a large ground investigation for the Esplanade Quarter, Jersey and continue to support the Client on delivering the first phase of development, as part of the overall Group engineering services.

The Leeds and Manchester teams are continuing to assist with the John Lewis anchored Victoria Gate scheme in Leeds, supporting Sir Robert McAlpine with site enabling works. The team is also continuing to provide support to Vinci UK with the geotechnical design of an Energy from Waste plant in Allerton, North Yorkshire. The team's remediation specialists are also assisting with the ground remediation of a former RAF base in Cambridgeshire.

GROUP OUTLOOK

The foundations of Waterman's current success were established two years ago when we withdrew from several overseas countries to focus on the mature markets in the UK, Australia and Ireland, where we have strong positions in our chosen sectors. A restructure and streamlining of the management and reporting structure has more fully integrated our international business with the UK which has created opportunities for sharing of clients, resources and technical support.

Significant progress has been made to focus the Group on strong and growing markets where Waterman has established client relationships. Waterman's order book has grown by 8% to £130m (2014: £120m) and the range of future work is more diverse than in previous years.

In the immediate short term, Waterman is focused on improving the performance of our Civil and Transportation Consulting business. The Board is confident of meeting our stated targets for 2016. Looking further ahead, we have set a new aspiration to increase the Group operating profit margins from the current level of 3.3% towards 6% by 2019.

Nick Taylor

Chief Executive

5 October 2015

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 2015, 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 2 October 2015. 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 2014 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 2014 have been delivered to Companies House.

2. BASIS OF PREPARATION

The unaudited Consolidated Financial Statements for the year ended 30 June 2015 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 2015. 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.

RESTATEMENT

The amounts due from customers on long term contracts and the amounts due to customers on long term contracts for the prior year have been restated from work order level to contract level to ensure a consistent method of calculation to the current year. The effect of the restatement is shown below:

3. ACCOUNTING POLICIES

There has been no impact due to the implementation of new accounting standards during the year. All of the accounting policies adopted are consistent with those of the audited Financial Statements for the year ended 30 June 2014 as described in those Financial Statements with the addition of the following updated policies:

TRANSACTIONS AND NON-CONTROLLING INTERESTS

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. Translation costs incurred in relation to a transaction with a non-controlling interest that does not result in a change in control are deducted from equity.

EMPLOYEE BENEFITS

a) SHARE INCENTIVE PLAN (SIP)

The Group launched a new Share Incentive Plan (SIP) in December 2014. The SIP enables free shares to be awarded and employees to purchase Company shares, or partnership shares, out of pre-tax salary. The expense in relation to the 'free' shares is recorded as employee remuneration and measured at fair value of the shares.

The Group holds Waterman shares that were purchased to meet the requirements of an earlier SIP which has now expired. These shares held by the Employee Benefit Trust at the balance sheet date are disclosed as a deduction from total shareholders' equity.

b) SHARE BASED PAYMENTS

A new LTIP was introduced in December 2014 following shareholder approval at the Annual General Meeting (AGM). When performance targets are achieved, awards will be settled by the issue of new ordinary shares.

In accordance with IFRS2, Share-based payments, the cost of share based payments is charged to the income statement over the vesting periods. The cost is based on the fair value of the awards made at the date of grant, adjusted for the number of awards expected to vest. The credit associated with the amounts charged to the income statement is in retained earnings/accumulated losses until the awards are exercised. Where awards are settled by the new issue of shares, any proceeds received in respect of share awards are credited to share capital and share premium.

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 JUDGMENTS

The Board considers that the estimates, judgments 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 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 judgments 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 judgments, 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 judgments to be made of the likelihood of a claim succeeding and an estimate of the quantum. While the assumptions made are based on professional judgments, 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 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 10); 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 as disclosed in the Consolidated Income Statement. 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 losses incurred by the Discontinued operations (note 7) in the prior year were reported separately in the Consolidated Income Statement below Profit after taxation from Continuing operations. 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).

In the prior year, EBITDA (Earnings before interest, taxation, depreciation and amortisation) and profit for Other International include £117,000 from settlement of a debt previously provided for. 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.

Unallocated 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.

In the 2014 segment balance sheet, the liability for Discontinued operations has been restated to exclude £3.52m of liabilities owed to Group companies which are now included within Unallocated and consolidated adjustments. The segment balance sheet for 2015 has been prepared on the same basis.

5 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 relate principally to settlement and redundancy costs to former directors and staff arising from the restructuring of our civil and transportation consulting business (2014: settlement and redundancy costs to former directors and staff following business restructuring).

b) Work in progress and trade receivable provisions: In 2014 payment was received for two debts which had previously been written off as exceptional.

c) Taxation: The taxation credit of £79,000 (2014: £122,000 credit) is due to the tax deductibility of the exceptional items.

6 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 2015 of 20.75% (2014: 22.5%) 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 UK corporation tax rate will be 20% from 1 April 2015 and this has been reflected in the financial statements. Further changes to the UK corporation tax rates were announced in the Chancellor's budget on 8 July 2015. These include reductions to the main rate to 19% from 1 April 2017 and 18% from 1 April 2020. As these changes had not been substantially enacted at the balance sheet date, their effect are not included in these financial statements.

7 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, all revenue generating operations in the UAE and Russia had ceased and the operations have been classified as discontinued.

The Consolidated Income Statement and Consolidated Cash Flow Statement report Continuing operations and Discontinued operations separately. The results for the Discontinued operations, which have been included in the Consolidated Statement of Comprehensive Income, were as follows:

A net cash outflow (including from Investing activities) of £114,000 (2014: outflow of £1,418,000) resulted from the Discontinued operations during the year.

8 EARNINGS / (LOSS) PER SHARE

The basic and diluted earnings / (loss) per share has been calculated on the earnings / (loss) attributable to the owners of the parent and based on a weighted average of 30,721,657 (2014: 30,647,574) shares in issue and ranking for dividend during the year. The diluted earnings / (loss) per share from continuing and discontinued operations is the same as there are no dilutive share options in issue as at 30 June 2015.

The adjusted earnings / (loss) per share from continuing operations before amortisation of acquired intangible assets and exceptional items is 5.4p (2014: 2.0p) as set out below.

The adjusted earnings / (loss) per share from continuing and discontinued operations before amortisation of acquired intangible assets and exceptional items is 5.4p (2014: 10.4p loss) as set out below.

9 DIVIDENDS

A dividend of £383,000 (2014: £299,000) was paid to the non-controlling interest during the year.

An interim dividend of 0.8p per share was paid on 17 April 2015. 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 1.2p per share (2014: 0.6p). If approved by shareholders at the Annual General Meeting to be held on 11 December 2015, the shares will become ex-dividend on 17 December 2015 and the final dividend will be paid on 8 January 2016 to shareholders on the register at close of business on 18 December 2015.

The Employee Benefit Trust has waived its entitlement to dividends which has reduced the 2015 interim dividend paid by £1,045 (2014: £880) and the 2014 final dividend paid by £765 (2013: £656).

10 GOODWILL

11 PROPERTY PLANT AND EQUIPMENT