Weir Group Inc. — Annual Report 2011

Jun 30, 2011

2011

Annual Report & Financial Statement Waterman Group Plc

| Annual Report Contents |

01	Financial Highlights
02	Chairman's Statement
04	Operational Review
06	Structures
10	Civil & Transportation
14	Building Services
18	Energy, Environment & Design
22	International
26	Board of Directors
29	Financial Review

| Financial Highlights |

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

| Chairman's | Statement |

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

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

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

Results

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

People

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

On 5 April 2011, we announced that Graham Hiscocks, Arthur Austin and Barry Gore had agreed to step down as directors of the Board with immediate effect and that Graham Hiscocks retains the position of company secretary. In conjunction with these changes to the

Board, the former operational Group Management Board was replaced by a UK Management Board and an International Management Board. The changes have simplified the reporting and responsibilities within the business. The new structure gives greater leadership to these two distinct parts of the Group and more opportunity to focus on existing and new markets.

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

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

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

Property

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

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

Dividend

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

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

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

Outlook

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

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

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

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

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

| Operational | Review |

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

• Focus on removing costs which do not produce long term value;
• Return each of our business units to profitability; and
• Deliver revenue growth.

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

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

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

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

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

In the UK, Waterman operates in four segmental profit centres based on the engineering disciplines as shown on the next page, and together they generate 73% of the Group revenue.

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

In overseas markets, we operate in each country as a multi-discipline business, providing a range of services to a multitude of sectors. Work is generally in the private markets although in Australia and Ireland we are also involved in the public markets. The percentage of our overseas revenue from each of the four main hubs is as noted below and in addition a further 1% of the Group's revenue is generated from our office in China.

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

| Structures |

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

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

Commercial

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

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

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

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

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

The Quadrant:MK in Milton Keynes is scheduled to complete in 2012. The new Ordnance Survey headquarters in Southampton for Kier Property was completed this year.

Retail

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

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

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

Residential

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

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

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

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

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

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

Urban Regeneration

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

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

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

Energy/Industrial

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

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

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

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

Hotels

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

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

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

Healthcare

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

Education

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

| Civil and | Transportation |

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

80%

target for reuse/recycling (hoped to be exceeded)

Public Setcor

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

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

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

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

Waterman continues to act as Technical Advisor to the funding banks for the £400m M40 Design, Build, Finance and Operate (DBFO) scheme, which is now in the twelfth year of the 25 year shadow toll concession period. Waterman is responsible for periodic technical reviews of the contract. It covers all aspects of

engineering asset management and maintenance for the DBFO contract, as well as monitoring the traffic volumes and types against the forecasts which underpin the shadow toll element of the bank's financial models.

Rail

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

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

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

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

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

Secondment Services

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

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

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

Power, Waste & Energy

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

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

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

During the year, Waterman has worked on projects at fifteen power stations throughout the UK and these have covered all three fuel sources: nuclear, coal and gas.

Clients include EDF, Scottish and Southern, Scottish Power, RWE Npower and E.ON. The projects range from assisting with the management of maintenance work to the design of upgrades. The upgrades include a number of Selective Catalytic Reduction (SCR) systems which are used to reduce NOx and SOx emissions from power stations, required under clean air legislation.

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

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

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

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

Health & Safety

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

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

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

Transport & Development Infrastructure

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

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

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

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

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

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

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

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

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

| Building Services |

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

Project Infographics: Macquarie Bank

Commercial

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

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

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

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

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

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

Industrial

The £40m Manufacturing Technology Centre in Coventry, designed by Waterman, was completed in July 2011. The 12,000m2 manufacturing research facility will concentrate on assembly, fabrication and joining technologies and act as a bridge between university development and testing work and full production business. The initial research partners were University of Birmingham, University of Nottingham, Loughborough University, TWI Limited and founding industry members were Rolls Royce, Airbus UK and Aero Engine Controls.

Defence

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

Education

Waterman has developed strong relationships within the education sector. This has resulted in new commissions despite the reduction in government funding. Schools in Bradford and surrounding towns have been transformed as part of the Bradford BSF programme. Waterman has worked closely with Educo (joint venture between Costain and Ferrovial Agroman) on the delivery of Beckfoot and Hanson Schools and the Grange Technology College, which were completed in the year. As part of the Middlesbrough BSF on behalf of Willmott Dixon, Trinity, Beverley and Tollesby Schools were also completed.

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

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

Healthcare

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

Data Centres

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

| Energy, Environment & Design |

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

Project Infographics: Embassy Gardens

Sustainable Homes (CSH) Level 4 for all residential units on Detailed Component of the Development.

Due Diligence and Environmental Management

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

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

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

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

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

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

Brownfield Regeneration

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

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

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

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

Environmental Impact Assessment (EIA) & Sustainability

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

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

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

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

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

Ecology, Archaeology, Landscape Planning and Design

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

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

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

| International |

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

Project Infographics: University of Technology Sydney

Australia

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

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

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

New projects include national telecommunications infrastructure upgrades for sites across Australia and upgrades to numerous bank data centres across South East Asia. Two projects have been commissioned for the University of Sydney: the upgrade and refurbishment of the heritage substation and the initial stages of a \$250 million precinct redevelopment. Also in Sydney, the team is appointed on the redevelopment of a heritage building to provide a boutique hotel, as well as a trigeneration study for the University of Technology. In the aviation sector,

Waterman is appointed on a major redevelopment of Pier C at Sydney Airport. In the waste sector, it has various commissions for Sita Waste across Australia.

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

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

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

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

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

Waterman is progressing design for the new \$180m University of Technology Sydney's Broadway Building which will house the Engineering and IT Faculty

Middle East

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

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

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

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

Europe

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

In Ireland, Waterman has had a difficult period but has managed to maintain its workload and grow its market share. The team has been busy on a number of education sector projects, with detail design being completed for the 8,000m2 Monaghan Multi-user Education Campus and on three other major school

extension projects. These projects are due to commence construction in late 2011. Pre-planning work has been completed on a further twelve school sites, with detail design expected to commence on a number of these in the next financial year.

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

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

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

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

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

Commonwealth of Independent States (CIS)

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

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

China

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

| Board of Directors |

John Archibald Senior Independent Non-Executive Director

Roger Fidgen Non-Executive Chairman

Geoffrey Wright Independent Non-Executive Director

Nicholas Taylor Chief Executive

Alex Steele Finance Director

John Waiting Executive Director

Simon Harden Executive Director

| Financial Statement Contents |

29	Financial Review	48	Consolidated Cash Flow Statement
31	Corporate Responsibility	49	Consolidated Statement of Changes in Equity
34	Statement of Directors' Responsibilities	50	Notes to the Consolidated Financial Statements
35	Directors' Remuneration Report	74	Independent Auditors' Report to the Company
40	Corporate Governance Report	75	Parent Company Financial Statements
43	Directors' Report	76	Notes to the Parent Company Financial Statements
45	Independent Auditors' Report to the Group	81	Five Year Results Summary
46	Consolidated Income Statement	81	Advisers
46	Consolidated Statement of Comprehensive Income	81	Financial Calendar
47	Consolidated Balance Sheet	82	Waterman Presence

Financial Review

The financial review should be read in conjunction with the business review on pages 4 to 25 of the annual review.

Trading Performance

The year saw improving trading conditions with our private sector workload increasing in the second half of the year. This helped to partially compensate for the impact of the government spending cuts on our public sector work. We have made good progress in removing overhead by consolidating office space and simplifying the management and reporting structure. With the exception of the Civil and Transportation business which was affected by reduced public spending, all of our primary business units have generated operating profits.

Group revenue was £74.1m (2010: £83.2m). Profit before taxation, before the impact of £0.1m (2010: £5.6m) of net exceptional items and £0.5m (2010: £0.5m) of amortisation of acquired intangibles, increased to £1.2m (2010: £1.1m). Net assets increased to £34.3m (2010: £33.8m), representing 112p of net assets per share (2010: 110p) of which 53p (2010: 51p) per share relates to net assets excluding goodwill and intangible assets.

Exceptional Items

Net exceptional items of £0.1m (2010: £5.6m) were incurred during the year. A £0.4m charge relating to restructuring costs within the Civil and Transportation business was offset by a £0.4m write back of prior year exceptional provisions mainly due to recovery of trade receivable balances and favourable rental settlements agreed with landlords. Further details are included within note 5 to the financial statements.

Underlying Profit Margins

The operating profit margin was 1.4% (2010: loss of 5.5%). The operating profit margin before exceptional expenses and the amortisation of acquired intangibles was 2.2% (2010: 1.8%).

Tax

The tax charge for the year was £0.2m (2010: taxation credit of £0.7m), representing an effective tax rate of 28.2% primarily resulting from taxation on overseas profits.

Earnings Per Share

Basic and diluted earnings per share increased to 0.4p (2010: loss of 16.9p). Basic and diluted earnings per share prior to exceptional items and the amortisation of acquired intangibles increased to 1.8p (2010: loss of 2.4p).

Dividends

In view of the need to invest in new areas of business and markets, the board are recommending a final dividend per share of 0.1p (2010: 0.9p), giving a total dividend for the year of 0.2p (2010: 1.8p). If approved by the shareholders at the AGM, the dividend will be paid on 10 January 2012 to shareholders on the register on 9 December 2011.

Banking Facilities

The Group funds its activities through cash generated from operations and supplemented, where necessary and appropriate, with bank borrowings and facilities. The Group's principal banking facilities are provided by HSBC Bank PLC and include overdraft facilities of £4.5m and term loans of £6.2m. The term loans are on quarterly repayment terms through to 2017. The Group has £3.7m of mortgage facilities owing to Nationwide Building Society. These are secured against our head office building and are repayable by 2021. In addition, the Group has access to a £3m invoice discounting facility. At 30 June 2011, the amount undrawn under the Group's credit lines was £5.6m.

Cash Flow

	6 months to 31 December 2010 £'000	6 months to 30 June 2011 £'000	Year to 30 June 2011 £'000	Year to 30 June 2010 £'000
Cash generated from operations	(1,777)	1,368	(409)	3,357
Capital expenditure and proceeds from sale of PPE	(89)	(348)	(437)	1,442
Net interest paid	(200)	(232)	(432)	(520)
Tax paid	(261)	(44)	(305)	(1,002)
Repayment of borrowings	(691)	(554)	(1,245)	(1,196)
Dividends	(383)	(303)	(686)	(1,073)
Currency and other movements	150	(133)	17	(60)
Net cash (outflow)/inflow	(3,251)	(246)	(3,497)	948
Net debt at 31 December/30 June	(8,945)	(8,618)	(8,618)	(6,375)

Cash outflow for the six months ending 31 December 2010 was affected by delayed payments from some of our major UK clients. We made good progress on cash collection in the second half of the year with cash generated from operations of £1.4m. As a result net debt decreased from £8.9m at 31 December 2010 to £8.6m at year end and debtor days reduced from 96 days at 31 December 2010 to 90 days at 30 June 2011. Effective cash management has remained a key financial priority during the year. We continue to invest in information technology and the fit out of office space, with £0.4m of capital expenditure(2010: £0.1m) being invested during the year. We continue to make annual capital repayments of £1.2m (2010: £1.2m) on our property mortgages and term loans.

Key Performance Indicators

A number of metrics are used to monitor financial performance. These include turnover, revenue per head, operating profit, fee earner utilisation, cash collection and aged debt and work in progress management. These are monitored against budget and prior year performance. With the exception of the Civil and Transportation business, the Key Performance Indicators have improved for each of our businesses over the second half of the year. The financial performance by sector is reported in note 2, Segmental Reporting.

Treasury

The Group's financial instruments include borrowings, cash and liquid resources and trade debtors. The main risks comprise interest rate risk, liquidity risk, credit risk and foreign currency risk. The Group's policies for managing these risks are summarised in note 1 to the consolidated financial statements. The Group does not trade in financial instruments.

Risk and Uncertainties

The Group's primary objective is to deliver strong long term shareholder returns through the delivery of a profitable and effective engineering and environmental consultancy service. To achieve this, the board sets a strategy for future operations based upon its expectation of future opportunities and market conditions. Inevitably, such investment decisions require reasonable judgement of the risks to be taken in order to drive future growth.

The main risks and uncertainties set out below are based upon management's best estimates and reasonable judgements set out in note 1 to the consolidated financial statements. A wide range of factors may cause the actual outcomes to differ from our estimates and none of these statements should be construed as a profit forecast.

Business environment – economic, political and market factors may affect the Group's business strategy. External market conditions are considered at monthly board meetings and an annual strategy review takes place when these external factors are addressed.

Market conditions – the Group provides design consultancy services on building, environmental, infrastructure and transportation projects to private and public sector clients in the UK and overseas. Demand from clients will usually reflect the economic conditions prevailing within each market and may suffer during periods of slowdown or recession. The risk of lower demand or client failure is mitigated by providing a wide range of consultancy services to a diverse range of clients in many countries.

Profit margins – we operate within a mature market where a range of consultants are able to meet client demand. We aim to optimise profit by maximising revenue whilst maintaining effective control over costs. When demand for our services reduces or project revenues decline, our profit and margins will be affected. We mitigate against this risk by minimising the value of fixed cost commitments and maximising the variable costs which can be reduced quickly and at minimum cost.

Finance – appropriate funding facilities need to be in place to meet the Group's working capital requirements and fund growth through enhanced capital expenditure or acquisitions. Insufficient facilities may impact upon our ability to conduct current trading or exploit future opportunities. We manage this risk by ensuring that adequate funding facilities are available to meet our short and medium term requirements, both in the UK and overseas. The Group's cash position is carefully monitored with regular forecasts of expected cash flows and monitoring of compliance against lenders' covenants.

Foreign exchange – the Group performs work in many overseas markets and contracts in various currencies. This presents an exposure to currency risk on business transactions where revenues and costs are in different currencies, and translation of assets and liabilities from local currency into sterling. We manage these risks by matching revenues and costs in the same currency wherever possible, establishing natural hedges where available or purchasing foreign currency hedges where this is considered to be appropriate.

People – as a consultancy providing services to our clients, our staff are our greatest asset. To maintain staff loyalty and support, we aim to provide a range of interesting and challenging work performed in comfortable working conditions and with financial rewards which meet or exceed the market average.

Service quality – it is essential that we deliver a high quality cost effective service to all of our clients. Failure to meet quality standards will result in liability insurance claims and disappointed clients. To mitigate the risk of service quality failure, we maintain high levels of staff training supported by effective quality systems and internal checking procedures. We also maintain high levels of insurance cover as a precaution against failure in the design or delivery of our service.

Alex A Steele Finance Director 17 October 2011

Corporate Responsibility

Corporate Responsibility

Corporate Responsibility is a key part of Waterman's ethos. This commitment to our clients, suppliers, employees and the communities in which we work is embodied in our Mission Statement:

Mission Statement

"To develop innovative, economic and sustainable solutions that successfully meet the needs of our clients, whilst adding value and a better quality of life for all. In doing so, we aim to provide an exciting and rewarding work environment for our employees and a successful, dynamic Group, meeting the aspirations of all our stakeholders."

Sustainability is an important part of the future of Waterman Group.

Governance

Waterman has a structure of governance that is key to ensuring that it delivers on all its goals and aspirations for sustainability. The Plc Board cascades information to the UK Management Board and International Holdings Board which are in turn responsible for feeding important strategic information to our company boards, directors, team leaders and ultimately every member of our staff.

Management Systems

Waterman has maintained quality and environmental management systems certified to ISO 9000 and ISO 14001 in order to guarantee continued high standards of service delivery and environmental management. Our health and safety management system has successfully passed Stage 1 OHSAS 18001 assessment and we expect to pass the Stage 2 assessment and achieve certification to OHSAS 18001 by the end of 2011.

Our principal environmental achievements over the last 12 months have been:

• Development of video conference facilities in principal offices reducing the need to travel
• Encouraging staff to cycle to work to promote a more healthy lifestyle has led to increasing numbers adopting this travel option
• Further office rationalisation resulting in reduced energy and water usage, and carbon emissions from travel between offices
• Increased levels of home working promoting a more flexible lifestyle and reduced travel emissions
• Increased types of recycled materials (plastics and cans in addition to paper and cardboard)

Environmental Performance

Carbon Dioxide Emissions From Business Travel

Road Air Rail Bus & Taxi

Total tonnes CO2 equivalent Kg CO2 equivalent/head

The total carbon emissions for road transport, air, rail, bus and taxi usage have all reduced. However CO2 emissions per employee have increased but this is due to a reduction in staff numbers.

We operate a sustainable travel policy for the promotion of a more environmentally sustainable mode of transport. This includes;

• Promoting public transport as the preferred option for our staff when travelling on business, rather than travelling by car or taxi
• IT systems to allow flexible and home working, reducing the need for long car journeys into our offices
• Providing shower facilities and cycle racks at our offices where we can, to encourage staff to cycle to work
• Interest free season ticket loans for our staff to enable use of public transport
• No parking facilities provided at our office in central London
• Relocating new offices within walking distance of a train station, where practicable; and
• Providing visitors to our offices with detailed maps showing public transport options for reaching us

Employee Health and Safety Compliance

The Group's policy and safe working procedures aim to prevent accidents and ill health by providing and maintaining adequate control of risks arising from all work activities within its offices or at associated site locations. These were reviewed and revised during the year and made available to all employees. The Group places the highest priority on the protection of its employees, construction industry workers not in its employment and individuals affected by our activities.

Through correct delegation of responsibilities, the principal objectives are to undertake to:

• Maintain safe and healthy working environments
• Consult employees on matters affecting their health and safety
• Provide information, instruction, training and supervision to all employees in order to enable them to undertake their work safely, taking health and safety into consideration
• Provide and maintain safe plant and equipment
• Ensure safe handling and use of substances

The Group's senior management fully support and are committed to all health and safety issues and provide sufficient funds and resources to enable correct implementation of the policy, whilst meeting the expectations of stakeholders. The successful implementation of the policy relies on all responsibilities being fulfilled and continuous improvement through regular monitoring and reviews.

Waterman Health & Safety (a division of Waterman Transport and Development Ltd.) continues to advise senior management on health and safety and staff wellbeing. The division reviews the Group's health and safety policy and procedures, advises upon new and impending changes to legislation and provides health and safety training to fire marshals and office health and safety managers.

The Group's health and safety system conforming with OHSAS 18001:2007 has been launched to all UK based employees. Compliance with this will be externally assessed by NQA as part of their next programme of routine audits. This resulted in OHSAS 18001:2007 being added into the Waterman Integrated Management System.

Health and safety training is delivered to all UK based employees and many international employees using a web based system hosted and maintained by the provider. This training is monitored by health & safety e-learning administrators appointed by the Group. The overall system is managed by Waterman Health & Safety who also provide training and workshops. The Group operates a health and safety consultative committee comprising of representatives from operating companies, which is responsible for consulting with staff on health and safety matters and passing concerns and recommendations to senior management.

Waterman Health & Safety undertakes an annual office and company health and safety inspection to assess the Group's overall health and safety performance and compliance with existing legislation and good practice. This audit showed that the health and safety performance and systems of each operating company and office are continuing to be maintained to a high standard.

We have had no serious incidents or breach of our policy, nor have we been involved in any prosecutions or complaints regarding health and safety.

Projects

Waterman works to extend the boundaries of design, whilst respecting the needs of the environment. A number of award-winning projects have been completed this year including the winner of Best Sustainable Project Watermark Place (entered by Fletcher Priest Architects) in November 2010 with the LABC National Building Excellence Award 2010.

Through its board, Waterman monitors client testimonials, compliments and complaints and these are promptly addressed. Ensuring that we meet our clients' needs and expectations has resulted in a high level of repeat business. We evaluate our suppliers and where possible use those with environmental systems in place. In order to achieve a more sustainable purchasing strategy, we are gradually reducing the number of suppliers, particularly for computer equipment, stationery items and cars.

Human Resources

Waterman is committed to providing innovative engineering and environmentally focused solutions that meet our client needs. This is achieved through the continuous development and training of our workforce, supported by Waterman's performance management process, the outcome of which supports the retention of our highly skilled workforce. As part of our attraction and retention initiatives, we continue to offer a flexible benefits package (reviewed annually), flexible working, sabbaticals, secondments and intercompany transfers where possible, which supports the retention of staff and the management of variable workloads in meeting our clients' needs. As a result of our investment in our workforce and the implementation of a performance and results focused appraisal scheme, we are committed to working towards Investors in People (IIP) certification.

Waterman continues to sponsor students through academic training, both at University and through day release at local educational establishments. Our sponsorship students receive financial support and are provided with the opportunity of work placements during vocational periods, securing employment with Waterman once they have graduated from University. Our 'day release' students, already in employment with us, have the benefit of gaining valuable 'on the job' experience and knowledge from our senior engineering and environmental consultant teams , supported also through our mentoring and coaching schemes.

The Graduate Forum is also well established within the Group, the aim of which is to provide a way for graduates to identify common interests, build relationships, improve training possibilities, encourage working groups of trainee chartered engineers and ultimately to ensure our graduates have the opportunity to progress in their professional and personal career development.

Workforce Diversity

	30 June 2011	30 June 2010
Female employees (UK)	22%	24%
Ethnic minority employees (UK)	17%	15%
Female managerial grade	8%	2%
Ethnic minority managerial	6%	6%
Number of staff on temporary contracts	11%	11%
Annual sickness rate	1%	1%

Community

We believe in giving back to the community and are involved in many community and charity projects. As a long term initiative, Waterman continues to be involved with Better Bankside – a Business Improvement District in London which provides a focus for community involvement. The Group has also supported initiatives to help families and the young with particular emphasis on those not in full time education, employment or training.

Members of our staff volunteer for a number of charitable initiatives, within their own communities and in the regions in which we operate, both in the UK and overseas. Staff from London, Sheffield, Birmingham and Melbourne, Australia were involved in voluntary charity events during the year, all of which are fully supported by Waterman, who contribute towards the sponsorship of individuals.

Sustainability Policy

The Group is committed to achieving a high level of awareness of the ethical and commercial importance of sustainability to the organisation and wherever practicable, to integrating sustainable and responsible practice into its day-to-day operations.

Sustainable development is the means of ensuring a better quality of life for all, now and in the future. It means effective conservation of the environment and prudent use of resources. It means equality of social progress and the maintenance of high stable levels of economic growth through working towards achieving more with less resource. It means more efficient use of energy to help reduce greenhouse gases and climate change impact.

Within its working practices the Group will:

Clarify to all companies and staff the aims of sustainability

Strive to select contractors and suppliers on the basis of shared values and standards of sustainable practice

Work in partnership with clients, contractors, architects and other consultants to achieve the aims of sustainability so as to:

• Protect and enhance the natural and built environment wherever possible
• Encourage the sustainable use of resources at all times
• Reduce waste generation and dispose of waste responsibly
• Reduce consumption of energy in construction and use
• Promote the use of sustainable modes of transport
• Assist in the creation of sustainable communities
• Follow best international practice on environmental legislation and standards
• Promote sustainable design, development and construction practices

Seek continual improvement in the sustainability performance of all aspects of our business and report our performance for the benefit of all stakeholders

Within the operation and management of its affairs, the Group will strive to:

• Adopt an holistic approach to business planning and practice, to include non-financial measures of success
• Implement quality, health and safety and environmental management systems to maintain continual improvement in these areas
• Provide a high standard of working environment for all employees and promote the adoption of a healthy work-life balance
• Promote efficiency in energy and water usage and paper and consumables recycling in all its places of business
• Support and encourage wherever possible staff members' participation in charitable or community activities
• Promote travel plans for all offices
• Support all professional and administrative activities with appropriate training, coaching and advice
• Conduct its business with the highest standards of professional and personal integrity and honesty.

The Group aims to develop and refine its environmental and sustainabiliy policies by remaining abreast of current and future best practice developments and corporate environmental standards. To this end, it supports the work of organisations such as the Environment Council, CIRIA, the Chartered Institute of Waste Management, CIWEM (The Chartered Institution of Water and Environmental Management ),British Urban Regeneration Association and is a corporate member of the Institute of Environmental Management and Assessment.

Statement of Directors' Responsibilities

The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the company and group for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the group and parent company financial statements respectively;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Each of the directors, whose names and functions are listed in the Directors' Remuneration Report confirm that, to the best of their knowledge:

• the group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the group; and
• the directors' report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal risks and uncertainties that it faces.

By Order of the Board of Directors

Graham R Hiscocks Company Secretary 17 October 2011

Directors' Remuneration Report

The Directors' Remuneration Report has been prepared in compliance with chapter 6 of the Companies Act 2006 and also meets the requirements of the Listing Rules of the Financial Services Authority and the Combined Code published by the Financial Reporting Council. This report sets out the Company's policy on the remuneration of executive and non-executive directors together with details of directors' remuneration packages and service contracts. The report consists of unaudited information with the exception of the sections entitled Directors' Interests in Shares, Remuneration of Directors, Long Term Incentive Plan, Conditional Share Bonus Awards and Interests in Share Options. A resolution to approve this report will be proposed to shareholders at the AGM on 09 December 2011.

Unaudited Information

Remuneration Committee

The remuneration committee has written terms of reference and reviews the remuneration policy for the executive and non-executive directors. The committee determines the level of remuneration and incentives for each executive director, and also considers these matters for the senior management of the Group as a whole. Total remuneration packages are reviewed annually.

The committee comprises Roger S Fidgen (Chairman), John G Archibald and Geoffrey H Wright who have served throughout the year. The committee met five times during the year and members of the committee have no personal financial interest in the Company other than as shareholders, no personal conflicts of interest and no day to day responsibility for business operations.

The remuneration of the non-executive directors is determined by the executive directors. During the year, no external party has provided advice that materially assisted the remuneration committee.

Remuneration Policy

The Company's policy is to attract, motivate and retain executives of a high calibre who will assist it to maintain and develop its competitive position and enhance shareholder value. The committee aims to achieve this by ensuring that remuneration packages are competitive whilst remaining in line with the performance of the Group and in the interests of shareholders.

The main elements of the executive directors' remuneration packages are:

• a) Basic salary, pension contributions and benefits in kind
• b) Performance related annual bonus payment
• c) Performance related awards under the Long Term Incentive Plan and Company Share Option Plan

The non-executive directors receive an agreed level of fees but do not receive any bonus payments, pension contributions or any other benefits as noted above.

a) Basic Salary, Pension Contributions And Benefits In Kind

Basic salary is reviewed annually having regard to:

• a) individual performance
• b) salaries paid by companies of similar size in the same sector
• c) the current financial performance of the Group
• d) the relationship between the remuneration of directors and other employees
• e) the effect of local living costs if directors are resident overseas

Pension contributions are currently paid at the rate of 10% of base salary, prior to any temporary adjustments.

Benefits in kind include the provision of a company car or car allowance, fuel allowance, private health insurance and rail season ticket.

b) Performance Related Annual Bonus

The Group operates an executive bonus scheme which rewards executive directors and management within the Group upon the achievement of financial targets.

The scheme is in two parts. Under the scheme, up to 15% of profit before taxation is made available for distribution between executive directors and management. Bonuses payable to executive directors and management take account of the performance of the Group, its operating divisions and the individual. No bonuses were awarded in the financial year ended 30 June 2011.

In addition, members of the Board receive an allocation of shares in the Company which will be deferred for a period of three years. These deferred shares are held by the trustees of the Company's Employee Benefit Trust. No conditional share bonuses were awarded in the year in respect of the financial year ended 30 June 2010. Any bonus and deferred shares in respect of the year ended 30 June 2011 will be paid during the year ended 30 June 2012 following approval by the remuneration committee.

The remuneration committee considers the bonus scheme to be both challenging and an incentive to the executive directors and management to meet the Group's strategic objectives.

c) Performance Related Awards Under The Long Term Incentive Plan And Company Share Option Plan

The Long Term Incentive Plan was introduced following shareholder approval at the 2005 AGM. It rewards executive directors and senior management within the Group upon attainment of financial targets. Executive directors will be entitled to receive their awards if the Group's growth in basic EPS exceeds the growth in the Retail Price Index (RPI) by an average of 3% per annum for the three financial years following the award date. Senior management must satisfy this condition to receive 50% of their award and will receive the remaining 50% if the profit before tax of their respective divisions grows by an average of 3% per annum above the growth in RPI during the same period.

The remuneration committee granted no conditional awards over shares in the Company to executive directors and senior management under the Long Term Incentive Plan during the year. No new share options were granted during the year.

d) Free Shares Awarded Under The Share Incentive Plan

The remuneration committee approves the distribution of free shares in the Company to staff under the Group's Share Incentive Plan arrangements. The executive directors also participate in this scheme and receive an appropriation of shares in line with the scheme rules. No shares were awarded under this scheme during the current year in respect of the year ended 30 June 2010.

Directors' Service Contracts

Currently, executive directors' service contracts are not for a fixed term, but may be terminated by either party in accordance with the notice period. There are no specific contractual provisions in relation to the payment of any termination payments over and above the stated notice period.

The details of the service contracts of the currently serving directors are as follows:

Name	Contract date	Notice period
R S Fidgen (Non-executive Chairman)	01 July 2004	None
N J Taylor	06 January 2003	12 months
C W Beresford	06 January 2003	6 months
J F G Waiting	01 July 2005	6 months
S D Harden	01 July 2007	6 months
A A Steele	19 February 2010	12 months
J G Archibald (Non-executive)	06 January 2003	3 months
G H Wright (Non-executive)	01 June 2007	None

Audited Information

			Contingent	Contingent
			Long Term	Long Term	Conditional	Conditional
			Incentive Plan	Incentive Plan	Share Bonus	Share Bonus
	Shares	Shares	shareholding	shareholding	Awards	Awards
Name	30 June 2011	30 June 2010	30 June 2011	30 June 2010	30 June 2011	30 June 2010
R S Fidgen (Non-executive Chairman)	35,000	35,000	-	-	-	-
N J Taylor	84,428	42,438	10,000	20,000	38,000	53,000
C W Beresford	72,123	62,123	10,000	20,000	25,000	35,000
J F G Waiting	41,815	31,815	10,000	20,000	25,000	35,000
S D Harden	29,771	19,771	10,000	20,000	25,000	35,000
A A Steele	-	-	5,000	5,000	-	-
J G Archibald (Non-executive)	6,052	6,052	-	-	-	-
G H Wright (Non-executive)	20,000	20,000	-	-	-	-

'Shares' are the directors' beneficial holdings in the ordinary shares of the Company and in respect of the executive directors include shares held in trust under the Company's Share Incentive Plan (SIP) being free shares granted under the rules of this scheme. Further details of the Contingent Long Term Incentive Plan and Conditional Share Bonus Awards are set out in the separate tables below.

All directors' shareholdings remain unchanged at 17 October 2011.

Remuneration of Directors

	Contractual	Waived				Total	Pension	Pension
	base salary	base salary			Total
	and fees	and fees	Benefits	Bonus	2011	2010	2011	2010
Name	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
R S Fidgen (Non-executive Chairman)	30	(3)	-	-	27	27	-	-
N J Taylor	225	(23)	29	-	231	231	23	23
C W Beresford	170	(17)	14	-	167	163	17	17
J F G Waiting	170	(18)	9	-	161	162	17	17
S D Harden	160	(16)	11	-	155	155	16	16
A A Steele **	125	(13)	15	-	127	45	12	4
J G Archibald (Non-executive)	25	(2)	-	-	23	23	-	-
G H Wright (Non-executive)	25	(2)	-	-	23	23	-	-
Former directors
J A Austin*	129	(13)	9	-	125	155	13	16
B J Gore*	137	(14)	13	-	136	178	14	18
G R Hiscocks*	114	(11)	15	-	118	150	11	15
Total	1,310	(132)	115	-	1,293	1,312	123	126

* Remuneration reported for J A Austin, B J Gore and G R Hiscocks in 2011 relates to the period from the beginning of the financial year until their resignations from the Board on 4 April 2011.

** Remuneration reported for A Steele in 2010 relates to the period from her appointment on 19 February 2010 to 30 June 2010.

In March 2009 the Group implemented cost reduction measures that included salary reductions in the majority of the businesses. In response to the testing conditions all of the directors chose to unconditionally waive 10% of their monthly salary and fee entitlements. Entitlement to pension and performance related pay remained unchanged. The salary and fee waivers continued throughout the year ended 30 June 2011.

Benefits provided and bonuses paid to executive directors are detailed within the Remuneration Policy section of this report. Pension contributions are only paid upon contractual base salary and are paid to personal pension plans. No bonuses were awarded in respect of the performance of the company during the year ended 30 June 2010.

Long Term Incentive Plan (LTIP)

At 30 June 2011, the following directors held conditional awards to subscribe for shares in the Company which are dependent upon the Company's future earnings per share growth as detailed within the Remuneration Policy section of this report. Awards are made at nil exercise price.

	Award	Earliest	Market price	Number of shares at	Number granted in	Number lapsed in	Number of shares at
Name	date	vesting date	at award date	30/06/10	year	year	30/06/11
N J Taylor	14/11/2008	14/11/2011	85p	10,000	-	-	10,000
	16/11/2007	16/11/2010	174p	10,000	-	10,000	-
C W Beresford	14/11/2008	14/11/2011	85p	10,000	-	-	10,000
	16/11/2007	16/11/2010	174p	10,000	-	10,000	-
J F G Waiting	14/11/2008	14/11/2011	85p	10,000	-	-	10,000
	16/11/2007	16/11/2010	174p	10,000	-	10,000	-
S D Harden	14/11/2008	14/11/2011	85p	10,000	-	-	10,000
	16/11/2007	16/11/2010	174p	10,000	-	10,000	-
A A Steele*	14/11/2008	14/11/2011	85p	5,000	-	-	5,000
Total				85,000	-	40,000	45,000

No shares were awarded in the LTIP to executive directors in the year ended 30 June 2011. On 16 November 2010 40,000 shares awarded under the LTIP on 16 November 2007 lapsed as the specified performance conditions were not achieved and no awarded shares vested on that date. At 30 June 2011 LTIP awards maturing in 2011 remained in respect of 45,000 ordinary shares (2010: 85,000) and the value of these awards was £nil (2010: £nil).

Conditional Share Bonus Awards

At 30 June 2011, the following directors held conditional bonus awards to subscribe for shares in the Company which are exercisable between three and ten years from the award date. Awards are made at £nil exercise price.

Name	Award date	Earliest vesting date	Market price at award date	Number of shares at 30/06/10	Number exercised in year	Number of shares at 30/06/11
N J Taylor	10/12/2008	10/12/2011	59p	38,000	-	38,000
	14/11/2007	14/11/2010	199.5p	15,000	15,000	-
C W Beresford	10/12/2008	10/12/2011	59p	25,000	-	25,000
	14/11/2007	14/11/2010	199.5p	10,000	10,000	-
J F G Waiting	10/12/2008	10/12/2011	59p	25,000	-	25,000
	14/11/2007	14/11/2010	199.5p	10,000	10,000	-
S D Harden	10/12/2008	10/12/2011	59p	25,000	-	25,000
	14/11/2007	14/11/2010	199.5p	10,000	10,000	-
Total				158,000	45,000	113,000

45,000 shares were exercised, no shares were awarded and none lapsed under this scheme during the year ended 30 June 2011. At 30 June 2011 Conditional Share Bonus Awards maturing in 2011 remained in respect of 113,000 ordinary shares (2010: 158,000).

Interests in Share Options

At 30 June 2011, the following directors held options to subscribe for shares in the Company under the 2007 Company Share Option Plan and the 1993 Executive Share Option Plan:

Name	Award date	No. of shares under option at 01/07/10	Number lapsed in year	No. of shares under option at 30/06/11	Exercise price / market price at award date	Exercise period
N J Taylor	03/08/2007	15,000	15,000	-	179.5p	31/10/2010-
						02/08/2017
C W Beresford	03/08/2007	15,000	15,000	-	179.5p	31/10/2010-
						02/08/2017
J F G Waiting	15/11/2002	50,000	-	50,000	44.5p	15/11/2005-
						14/11/2012
	03/08/2007	15,000	15,000	-	179.5p	31/10/2010-
						02/08/2017
S D Harden	03/08/2007	15,000	15,000	-	179.5p	31/10/2010-
						02/08/2017
Total		110,000	60,000	50,000

During the year, no share options were awarded or exercised under these schemes and 105,000 lapsed. The closing mid market price of the Company's shares on 30 June 2011 was 37p (2010: 43.5p) and ranged between 34p and 57p during the year.

By order of the Board of Directors

Roger S Fidgen Chairman of the Remuneration Committee 17 October 2011

Corporate Governance Report

Waterman Group plc ("the company") is committed to maintaining high standards of corporate governance throughout the Group. As a company listed on the London Stock Exchange, it is required to explain how it complies with the UK Corporate Governance Code ("the Code") published by the Financial Reporting Council in June 2010 and to confirm whether or not it has complied with the Code's provisions.

This report, together with the Directors' Remuneration Report on pages 35 to 39 describes how the Company has applied the principles of the Code and complied with the associated provisions during the year. The Board seeks to ensure that the governance framework operated by the Company is effective and enables it to comply with best practice principles as set out in the Code. The directors consider that, throughout the year ended 30 June 2011, the Company has complied with all of the principles and provisions of the Code.

The Board of Directors

The board's role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. The board will set the company's strategic aims and ensure that resources are in place to enable the company to meet its objectives and review its financial and operational performance. The board sets the Company's standards and values and aims to ensure that it meets its obligations to its stakeholders and others. All directors act in a manner which they consider to be in the best interests of the company, consistent with their statutory duties.

The board currently comprises five executive and three non-executive directors. The five executive directors have a wide range of experience. Nicholas Taylor was appointed Chief Executive in July 2007. In February 2010, Ms Alex Steele was appointed to the board as Finance Director. John Waiting, Craig Beresford and Simon Harden have operational responsibility for delivering engineering and environmental services to clients in the principal regions in which the Group operates. All directors have served throughout the year.

The three non-executive directors, all of whom have served throughout the year, have wide-ranging experience developed over many years in business. Their contribution to the running of the business has been both influential and effective. They have demonstrated their independence of character and judgement by challenging the materials presented to the board and the assertions and recommendations made by the executive directors. None of the non-executive directors has been employed by the company, has close family ties with the company, is a significant shareholder in the company or has served on the board for more than nine years. Roger Fidgen was appointed as Group Chairman in May 2005 having joined the Company as a non-executive director in 2004. He has worked in the property industry for over 30 years until his retirement, most recently as joint senior partner of international cost consultancy, Gardiner and Theobald. Our senior independent director, John Archibald joined the board in 2003 and has worked in banking and finance for over 30 years, most recently with Flemings, until his retirement in 2000. Geoffrey Wright joined the board in June 2007 following his retirement as construction director at Hammerson plc. The Chairman and non-executive directors meet without the executive directors present on at least one occasion each year.

The roles of the Chairman and Chief Executive are separate and there is a clear division of responsibility between each position. The Chairman, Roger Fidgen, is responsible for leadership and effectiveness of the board and for its governance. This includes setting the board's agenda, ensuring that adequate time is available for discussion of all agenda items, ensuring that directors continually update their skills and knowledge and ensuring that the directors receive accurate, timely and clear information. The Chief Executive, Nicholas Taylor, is responsible for implementing strategy, operational management and leadership of the company and the Group.

There is a formal schedule of matters reserved for decision by the board or its committees including strategy, corporate governance, approval of annual budgets, approval of company accounts, major capital investments, internal controls and risk management, senior management appointments, acquisitions, disposals and significant financing matters.

The board has a regular schedule of monthly meetings to consider matters reserved for its decision and other matters of significance to the business. An agenda with appropriate supporting papers is issued in advance of each board meeting to enable directors to be made aware of matters to be discussed. Minutes of each board meeting are issued after each meeting and approved at the following meeting.

The company arranges briefings from external advisors on matters such as legal, commercial and health and safety developments. Directors are encouraged to maintain and refresh their skills, CPD and knowledge of the company on a regular basis.

The advice and services of the company secretary are available to all directors. In addition, directors may take independent legal or professional advice on company matters at the company's expense. No independent legal or professional advice was taken during the year. The company secretary also assists the audit & risk committee when reviewing the effectiveness of internal controls and risk management and assists the Chairman on legal, compliance and corporate governance matters.

The directors believe that the composition of the board provides an appropriate balance of skills, experience and knowledge with which to conduct its business, and that the overall composition of the board remains well balanced and appropriate to meet its shareholder responsibilities and corporate governance obligations. At least one third of the board is required to retire by rotation each year. In addition, newly appointed directors will stand for election by shareholders at the first AGM following their appointment.

The Company provides insurance cover against the legal costs of defending directors and officers against civil proceedings taken against them by third parties and in respect of damages resulting from an unsuccessful defence.

Committees of the Board

The board has delegated certain responsibilities to its three committees, audit and risk, remuneration and nomination. The terms of reference for these committees are set by the board and reviewed annually and are available from the company secretary at the registered office. These committees exclusively comprise of non-executive directors with the exception of the nomination committee of which Nicholas Taylor is also a member. Other directors attend committee meetings by invitation. Minutes of all committee meetings are circulated to and reviewed by the board. The board's committees meet sufficiently regularly to enable them to discharge their governance responsibilities.

The Audit and Risk Committee

The committee met on six scheduled occasions during the year and has, throughout the year, comprised the three non-executive directors with John Archibald as Chairman. John is a chartered accountant and all members of the committee have relevant business and financial experience. Three meetings were held with the Company's auditors to receive their audit plan and to receive their reports following the interim review and annual audit. Three meetings were held to review the effectiveness of the internal control and risk management procedures operated by the Group.

The committee also reviewed the adequacy of the Company's policies on whistleblowing and bribery, monitored the cost effectiveness of audit and non-audit work performed by the external auditors and reviewed their independence. Where the auditors have provided non-audit services, the committee have ensured that auditor objectivity and independence was safeguarded taking account of relevant ethical guidance.

The Remuneration Committee

This committee met on 5 scheduled occasions to review the remuneration arrangements for the directors and senior management of the company. The committee comprises the three non-executive directors and is chaired by Roger Fidgen.

A summary of the work performed by this committee and its terms of reference are set out in the Directors' Remuneration Report.

The Nomination Committee

This committee is responsible for nominating candidates to the board, taking account of the balance of skills, knowledge and experience of the board members. Throughout the year, this committee has comprised the three non-executive directors together with Nicholas Taylor, Chief Executive. Roger Fidgen has chaired the committee throughout the year.

The committee met on one occasion during the year. No new appointments to the board have taken place during the year.

Board and Committee Meeting Attendance

The following table details the attendance of directors at board and committee meetings during the year:

	Board	Audit and Risk	Remuneration	Nomination
Scheduled Meetings	13	6	5	1
R S Fidgen (Non-executive Chairman)	13	6	5	1
N J Taylor	13	6**	4**	1
C W Beresford	12	-	-	-
J F G Waiting	13	-	-	-
S D Harden	12	-	-	-
A A Steele	13	6**	-	-
J G Archibald (Non-executive)	10	5	5	1
G H Wright (Non-executive)	11	5	5	1
Former Directors
J A Austin*	8	-	-	-
B J Gore*	9	-	-	-
G R Hiscocks*	10	6**	-	-

* J A Austin, B J Gore and G R Hiscocks resigned from the Board on 4 April 2011 and were eligible to attend 10 Board meetings.

**N J Taylor attended meetings of the Remuneration and Audit and Risk Committees by invitation since he is not a committee member.

G R Hiscocks and A A Steele attended meetings of the Audit and Risk Committee by invitation since they are not committee members.

Performance Evaluation

On 4 April 2011, following a strategic review of the operating structure of the company, three executive directors Graham Hiscocks, Arthur Austin and Barry Gore agreed to stand down from the board.

In June 2011, the board conducted a formal evaluation of individual directors, its own performance and that of its committees. The evaluation was led by the Chairman and Chief Executive and its results were published to and reviewed by the board. Performance was measured against the principles and provisions set out in the UK Corporate Governance Code. The board considered that the use of an external third party adviser to assist with this process was not necessary.

The results of the performance evaluation of the board reassured the directors that it continued to operate effectively and fulfil its governance obligations. No significant issues were raised. The criteria used for the performance evaluation of the board's three committees were based upon the terms of reference for each committee and the principles and provisions of the UK Corporate Governance Code. Each committee was found to be operating effectively, maintaining high standards of governance and responding to best practice developments.

Individual performance evaluations were undertaken against a checklist of tailored criteria and objectives. The Chairman confirms that all the directors continue to perform effectively and meet the requirements of their positions. The senior independent director confirms that the Chairman continues to perform effectively. Where individual performance weaknesses have been identified, programmes for improvement have been prepared which will be actioned during the next year.

Internal Control and Risk Management

The board is responsible for establishing, reviewing and maintaining the effectiveness of the Group's systems of internal control and risk management, for implementing agreed policies on risk management and for ensuring that the internal control systems and procedures enable effective management of business risks. It is the responsibility of management to ensure that the controls and procedures are followed and that any risk or control issues are promptly brought to the board's attention.

Each year, the boards of the principal operating companies within the Group perform an annual appraisal of the principal risks affecting their businesses, the potential consequences of these risks and the methods by which these risks can be monitored, managed and mitigated. On behalf of the board, the audit and risk committee reviews the results of these appraisals to ensure that the risks have been properly identified and considered and that risks which could have a material effect on the Group's performance or governance are effectively communicated to and reviewed by the board.

The board confirms that there is a system of procedures and controls in operation for identifying, evaluating and managing risks and that the system has operated throughout the year under review and continues to operate. However any system can only provide reasonable and not absolute assurance against material misstatement or loss. The board continuously strives to reduce operational and financial risks and to enhance the control environment in all operating companies within the Group.

The key features of the system of internal control operated by the Group are as follows:

• The Group publishes its mission statement, culture and values on its website. We emphasise our values of client focus, sustainability, staff care, technical excellence, teamwork and corporate development.
• The Group board regularly discusses matters such as corporate governance, risk management, strategic planning and financial reporting;
• The Group purchases insurance with limits of indemnity which are reviewed each year to provide adequate protection against potential losses arising from project liability and all other operational risks;
• A clearly defined organisational structure exists with levels of authority and division of responsibility;
• An executive director from the Group board also sits on the board of each principal operating company. He reports upon significant risks to business performance or governance to the Group board each month;
• Group strategy is reviewed annually in detail with ongoing monitoring at monthly board meetings;
• Budgets are prepared annually by operating company management and approved by the Group board. The financial performance of each principal operating company is monitored each month against budget and prior year results. Reforecasting of financial projections is undertaken quarterly;
• Key performance indicators are reported monthly by each discipline with an explanation for significant variances from forecast or budget. The Chief Executive and Finance Director provide monthly reports to the board on actual results achieved by the Group, updated forecasts and future prospects.
• Project managers can review the financial progress of each ongoing project at all times. Profits are only recognised when the ultimate outcome of a project can be reasonably foreseen and anticipated losses are written off as soon as they are identified.
• Fees proposals for large projects are reviewed and approved by two or more experienced directors. Material changes to costs or revenues or unexpected events which occur during the project are reported to the operating board and, where appropriate, the Group board;
• The Group board approves the annual capital expenditure budget and authorises major capital and revenue expenditure commitments;
• Operating company boards exercise operational control and financial management over their businesses. The managing director of each principal operating company sits as its representative on the UK or International Management Board which has responsibility for operational matters which are common to all operating companies in that geographic region;
• The Group employs suitably qualified management who are responsible for the operation of effective financial systems and controls and for managing treasury risk;
• Effective procedures are in place to protect the security of data held on the Group's IT systems and to ensure that an effective disaster recovery plan can be operated;
• The Group operates quality monitoring and validation processes to minimise the risk of errors, mistakes or delays which may lead to liability insurance claims;
• The Group provides detailed policy guidance and relevant training to staff on health and safety matters. A review of health and safety matters is regularly undertaken at board meetings.

The board has determined that it is not necessary to employ an internal audit function at this time. However, this matter will be regularly reviewed.

Investor Relations

The board recognises the importance of maintaining effective communication with its shareholders. This is achieved by attendance at meetings and by the issue of reports and newsletters.

The company provides full disclosure of its activities, financial performance, risks and future prospects in its annual and interim reports. These are made available to stakeholders in paper and electronic formats. The Company also issues newsletters to illustrate projects undertaken and other matters of interest.

All shareholders are invited to attend the Annual General Meeting at which the Group's annual report and financial statement are approved, and when directors will be present to respond to questions. The Chairmen of the Company's three committees will answer questions relating to the operation of the committees and the work undertaken. The Chief Executive and Finance Director meet with the company's principal shareholders, brokers, analysts and the media following the announcement of the year end and interim results and on other occasions as required. Feedback reports from institutional shareholders are compiled by the Company's broker and issued to the board to ensure that directors gain an understanding of the views of current and potential shareholders. The Chairman and senior non-executive director also make themselves available to meet with principal shareholders when required.

Directors' Report.

The directors present their report, together with the audited financial statements for the year ended 30 June 2011.

Principal Activities and Review of Business Operations

The principal activity of Waterman Group plc is that of a holding company. The principal activity of its subsidiary undertakings is the provision of design services and advice in the fields of civil, structural, mechanical, electrical and power engineering together with environmental and health and safety consultancy.

The Chairman's Statement together with the Operational and Financial Reviews provide a detailed commentary on the Group's performance and activities during the year, the risks to which it is exposed and details of its current activities and proposed developments. The business Key Performance Indicators are reported in the Financial Review and the environmental performance data is reported in the Corporate Responsibility Report.

Results and Dividends

The financial results for the year are set out in the Consolidated Income Statement. The profit attributable to the owners of the parent was £120,000 (2010: £5,139,000 loss as restated) and net assets as at 30 June 2011 were £34,319,000 (2010: £33,797,000). The directors recommend the payment of a final dividend of 0.1p which, together with the interim dividend of 0.1p paid in April 2011 makes a total distribution of 0.2p (2010: 1.8p) for the year. If approved at the Annual General Meeting (AGM) to be held on 09 December 2011, the final dividend will be paid on 10 January 2012 to shareholders on the register at close of business on 9 December 2011.

Directors and their Interests

The directors of the Company at the date of this report and throughout the year are shown in the Directors' Remuneration Report.

Arthur Austin,Barry Gore and Graham Hiscocks resigned from the Board on 4 April 2011. Craig Beresford, Roger Fidgen and John Waiting retire by rotation at the forthcoming AGM and, being eligible, offer themselves for re-election. Short biographies of the three directors referred to above are set out on a separate circular to shareholders accompanying the Annual Report and Financial Statement.

None of the directors held any interest, either during or at the end of the financial year, in any material contract or arrangement with the Company or any subsidiary undertaking.

Details of directors' service contracts and directors' interests in shares and options are shown in the Directors' Remuneration Report.

Substantial Interests in Shares

Other than directors' interests, as at 6 October 2011, the Company had been notified, in accordance with chapter 5 of the Disclosure and Transparency Rules, of the following interests of over 3% of its issued ordinary share capital:

	Number of shares held	%
P Gyllenhammar	7,470,896	24.3
Liontrust Asset Management	2,199,163	7.1
Universities Superannuation Scheme	1,985,000	6.4
F Clampitt	1,691,995	5.5
Henderson Global Investors	1,464,662	4.8
Executors of A G Thomson deceased	1,050,000	3.4

Share Capital

As at the date of this report, the Company's share capital consists of 30,758,824 issued and fully paid ordinary shares each with a nominal value of 10p listed on the London Stock Exchange. Shares may be held in certificated or uncertificated form. Further details of the Company's authorised and issued share capital, including changes during the year, are disclosed in note 18 to the consolidated financial statements.

Supplier Payment Policy

The Group agrees payment terms with its suppliers when it enters into contracts or relationships. The Group complies with the payment terms when it is satisfied that the supplier has delivered the goods or services in accordance with the agreed terms and conditions. The Group does not follow an established standard for the payment of suppliers.

At 30 June 2011, the Group had 58 days (2010: 64 days) purchases outstanding. The Company had 74 days (2010: 92 days) purchases outstanding.

Employment Policy

As a consultancy business, Waterman Group recognises that its staff are its most important asset. Staff are kept informed of developments within the Group through regular announcements, newsletters and electronic communications. Regular staff meetings enable their views to be taken into consideration.

The Group places great importance on its ability to attract and retain staff of the highest calibre. This is achieved by offering competitive salaries and benefits, accompanied by effective training and the creation of career development opportunities throughout the Group. Most companies now operate a flexible benefit scheme which enables staff to select from a range of benefits. A bonus payment scheme exists for current staff to introduce new staff with the requisite skills to join the Group.

Waterman operates an equal opportunities policy and is committed to ensuring that its workplaces are free from discrimination of any kind. Recruitment and employment decisions are made on the basis of fair and objective criteria. The requirements of job applicants and existing members of staff who suffer from disability are considered to ensure that wherever possible, reasonable adjustments are made to enable them to enter into or remain in employment with the Group.

Corporate Governance and Corporate Responsibility

A report on the Group's corporate governance and corporate responsibility principles and compliance is set out in the Corporate Governance and Corporate Responsibility sections of this report.

Financial Risk Management Policies

The Group's risk management objectives, exposure and policies are set out in note 1 to the consolidated financial statements.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the consolidated financial statements and notes. The directors have prepared a cashflow forecast and a forecast for covenant compliance to 30 June 2013. The financial covenants allow for a sensible tolerance in trading performance in relation to the forecasts. The directors are confident that the underlying forecasts are reasonable. In the current economic climate the Group is reliant on the ability of customers to pay debts and on the timing of projects coming on line. In adverse circumstances the board has a number of mitigating actions it could take to ensure covenant compliance. The Group has considerable financial resources together with long term contracts with a number of customers and suppliers across different geographic areas and industries. An analysis of the Group's borrowing facilities are disclosed in note 17 'Financial liabilities-borrowings'. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic climate. After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Financial Statement.

Events After the Balance Sheet Date

There were no disclosable events after the balance sheet date as at the date of this report.

Fixed Assets

Information relating to the current market value and the book value of the Group's land and freehold property is disclosed in the Financial Review.

Donations

Charitable donations during the year amounted to £6,032 (2010: £6,513). Individual amounts of greater than £200 were donated for the following purposes: health and medical £710, homeless £1,861 and educational £214. A further £2,714 was donated to non-specific charitable organisations. No political donations were made during the year.

Annual General Meeting

The AGM will be held at 10 30 am on 09 December 2011. Formal notice and details of the meeting are set out on a separate circular to shareholders accompanying the Annual Report and Financial Statement. At the 2010 AGM, the shareholders approved a resolution giving the Company authority to purchase up to 10 per cent of its issued ordinary share capital for the purposes of section 166 of the Companies Act 2006. This authority, which expires on 09 December 2011, has not been used and a resolution for its renewal will be proposed at the 2011 AGM.

Information relating to treasury shares purchased in the year is set out in note 27 to the consolidated financial statements.

Auditors And Disclosure of Information to Auditors

A resolution for the re-appointment of PricewaterhouseCoopers LLP, who have indicated their willingness to continue in office as auditors, and authorising the directors to determine their remuneration will be proposed at the Annual General Meeting.

For each of the persons who were directors at the time this report was prepared, the following applies:

• so far as the directors are aware, there is no relevant audit information (i.e. information needed by the Companies' auditors in connection with preparing their report) of which the Companies' auditors are unaware; and
• the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Companies' auditors are aware of that information.

By Order of the Board

Graham R Hiscocks Company Secretary 17 October 2011

Independent Auditors' Report to the Members of Waterman Group Plc

We have audited the group financial statements of Waterman Group plc for the year ended 30 June 2011 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Respective Responsibilities of Directors and Auditors

As explained more fully in the Directors' Responsibilities Statement set out on page 34, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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 the Audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Financial Statement to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material missstatements or inconsistencies we consider the implications for our report.

Opinion on Financial Statements

In our opinion the group financial statements:

• give a true and fair view of the state of the group's affairs as at 30 June 2011 and of its profit and cash flows for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation.

Opinion On Other Matters Prescribed By The Companies Act 2006

In our opinion:

• the information given in the Directors' Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements; and
• the information given in the Corporate Governance Statement set out on pages 40 to 42 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements.

Matters On Which We Are Required To Report By Exception

We have nothing to report in respect of the following:

• Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the parent company.

Under the Listing Rules we are required to review:

• the directors' statement, set out on page 44, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the UK Corporate Governance Code specified for our review and
• certain elements of the report to shareholders by the Board on directors remuneration.

Other Matter

We have reported separately on the parent company financial statements of Waterman Group plc for the year ended 30 June 2011 and on the information in the Directors' Remuneration Report that is described as having been audited.

Fiona Kelsey (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 17 October 2011

Consolidated Income Statement

for the year ended 30 June 2011

		Year ended 30 June 2011	Year ended 30 June 2010 Restated
	notes	£'000	£'000
Revenue-continuing operations	2	74,097	83,244
Employee benefits expense	3	(46,308)	(51,472)
Other operating charges pre exceptional items	4	(24,838)	(28,434)
Exceptional items	5	(43)	(5,638)
Other operating charges post exceptional items		(24,881)	(34,072)
Operating expenses		(71,189)	(85,544)
Earnings / (loss) before interest, taxes, depreciation and amortisation (EBITDA)		2,908	(2,300)
Depreciation of property, plant and equipment pre exceptional items	12	(1,048)	(1,461)
Exceptional items	5	(80)	-
Depreciation of property, plant and equipment post exceptional items		(1,128)	(1,461)
Amortisation of other intangible assets	11	(731)	(889)
Operating profit pre exceptional items		1,172	988
Exceptional items	5	(123)	(5,638)
Operating profit / (loss) post exceptional items		1,049	(4,650)
Interest payable	6	(515)	(560)
Interest receivable		78	166
Profit / (loss) before taxation		612	(5,044)
Taxation	7	(173)	657
Profit / (loss) for the financial year from continuing operations (see below)		439	(4,387)
Profit / (loss) attributable to – Owners of the parent	20	120	(5,139)
Profit attributable to – Non-controlling interest		319	752
		439	(4,387)
Basic earnings / (loss) per share	9	0.4p	(16.9p)
Diluted earnings / (loss) per share	9	0.4p	(16.9p)
Dividend paid per share	8	1.0p	1.8p
Dividend proposed per share	8	0.1p	0.9p

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2011

	Year ended 30 June 2011	Year ended 30 June 2010
	£'000	Restated £'000
Profit / (loss) for the financial year from continuing operations (see above)	439	(4,387)
Other comprehensive income / (expense) :
Currency translation adjustments	708	739
Deferred tax credit for the year	16	-
Share based payments credit	-	(111)
Change in valuation of own shares held by Employee Benefit Trust	47	(4)
Employee Benefit Trust (loss) / profit	(3)	4
Other comprehensive income for the year (net of tax)	768	628
Total comprehensive income / (expense) for the year	1,207	(3,759)
Total comprehensive income / (expense) attributable to –Owners of the parent	365	(4,861)
Total comprehensive income attributable to – Non-controlling interests	842	1,102

The notes on pages 50 to 73 are an integral part of these consolidated financial statements.

Consolidated Balance Sheet

as at 30 June 2011

		2011	2010 Restated
	notes	£'000	£'000
ASSETS
Non-current assets
Goodwill	10	17,193	16,483
Other intangible assets	11	968	1,648
Property, plant and equipment	12	10,239	10,888
Loan and receivables	13	10	10
Deferred taxation asset	24	846	239
		29,256	29,268
Current assets
Trade and other receivables	15	35,866	38,182
Cash and cash equivalents		1,411	4,908
		37,277	43,090
Total assets		66,533	72,358
LIABILITIES
Current liabilities
Trade and other payables	16	(19,538)	(22,809)
Financial liabilities - borrowings	17	(1,265)	(7,563)
		(20,803)	(30,372)
Non-current liabilities
Financial liabilities - borrowings	17	(8,764)	(3,720)
Provisions	23	(2,647)	(4,255)
Deferred taxation liability	24	-	(214)
		(11,411)	(8,189)
Total liabilities		(32,214)	(38,561)
Net assets		34,319	33,797
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Share capital	18	3,076	3,076
Share premium reserve	20	11,881	11,881
Merger reserve	20	3,144	3,144
Revaluation reserve	20	600	584
Retained earnings	20	12,852	12,806
		31,553	31,491
Non-controlling interest		2,766	2,306
Total equity		34,319	33,797

The financial statements on pages 46 to 73 were authorised for issue by the directors on 17 October 2011 and are subject to the approval of the shareholders at the AGM on 09 December 2011. They were signed on behalf of the directors by:-

R S Fidgen N J Taylor

Chairman Chief Executive

The notes on pages 50 to 73 are an integral part of these consolidated financial statements.

Consolidated Cash Flow Statement

for the year ended 30 June 2011

		Unaudited	Unaudited	Audited	Audited
		6 months to	6 months to	Year ended	Year ended
		31 December 2010	30 June 2011	30 June 2011	30 June 2010
	notes	£'000	£'000	£'000	£'000
Cash flows from operating activities
Cash (used in ) / generated from operations (see below)		(1,777)	1,368	(409)	3,357
Interest paid		(229)	(281)	(510)	(686)
Interest received		29	49	78	166
Tax paid		(261)	(44)	(305)	(1,002)
Net cash (used in) / from operating activities		(2,238)	1,092	(1,146)	1,835
Cash flows from investing activities
Deferred consideration paid		-	-	-	(425)
Purchase of property, plant and equipment (PPE) and other
intangible assets		(89)	(352)	(441)	(147)
Proceeds from sale of PPE and other intangible assets		-	4	4	1,589
Net cash (used in) / from investing activities		(89)	(348)	(437)	1,017
Cash flows from financing activities
Repayment of borrowing		(691)	(554)	(1,245)	(1,196)
Repayments on finance leases		(25)	(28)	(53)	(53)
Equity dividends paid	8	(383)	(303)	(686)	(1,073)
Net cash used in financing activities		(1,099)	(885)	(1,984)	(2,322)
Net (decrease) / increase in cash, cash equivalents and overdrafts		(3,426)	(141)	(3,567)	530
Effect of exchange rate changes	22	175	(105)	70	418
Net (decrease) / increase in cash, cash equivalents and overdrafts	22	(3,251)	(246)	(3,497)	948

		Unaudited	Unaudited	Audited	Audited
		6 months to	6 months to	Year ended	Year ended
Reconciliation of Profit/(loss) for the financial year		31 December 2010	30 June 2011	30 June 2011	30 June 2010
to cash (used in) / generated from operations	notes	£'000	£'000	£'000	£'000
Profit / (loss) for the financial year		141	298	439	(4,387)
Taxation	7	67	106	173	(657)
Interest payable	6	232	283	515	560
Interest receivable		(29)	(49)	(78)	(166)
Amortisation of other intangible assets	11	387	344	731	889
Depreciation	12	658	470	1,128	1,461
Impairment of Goodwill	10	-	-	-	317
Impairment of PPE	12	-	-	-	300
Profit on disposal of PPE and other intangible assets		(1)	(11)	(12)	(58)
Share based payments credit		-	-	-	(111)
Changes in working capital
Decrease / (increase) in trade and other receivables		2,033	(14)	2,019	15,232
(Decrease) / increase in trade and other payables		(4,210)	679	(3,531)	(10,534)
(Decrease) / increase in provisions		(1,055)	(738)	(1,793)	511
Cash (used in) / generated from operations (see above)		(1,777)	1,368	(409)	3,357

The notes on pages 50 to 73 are an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

for the year ended 30 June 2011

3,076 - - - - - - - - - - - 3,076 - - - - - - - 3,076 11,880 - - - - - - - - 1 - - 11,881 - - - - - - - 11,881 3,144 - - - - - - - - - - - 3,144 - - - - - - - 3,144 1,491 - (1,271) 364 - - - - (907) - - - 584 - 16 - - 16 - - 600 17,308 309 1,271 (364) (111) (4) 4 80 1,185 - (5,139) (548) 12,806 185 - 47 (3) 229 120 (303) 12,852 36,899 309 - - (111) (4) 4 80 278 1 (5,139) (548) 31,491 185 16 47 (3) 245 120 (303) 31,553 1,729 430 - - - - - (80) 350 - 752 (525) 2,306 523 - - - 523 319 (382) 2,766 38,628 739 - - (111) (4) 4 - 628 1 (4,387) (1,073) 33,797 708 16 47 (3) 768 439 (685) 34,319 Share capital £'000 Share premium reserve £'000 Merger Reserve £'000 Revaluation reserve £'000 Retained earnings £'000 Total £'000 Noncontrolling interest £'000 Balance at 01 July 2009 Currency translation adjustments Reserve transfer on disposal of Land and freehold property Deferred tax transfer on disposal of Land and freehold property Share based payments credit for the year Change in valuation of own shares held by Employee Benefit Trust Employee Benefit Trust profit Reserve transfer on change in ownership of Waterman Emirates Pty Limited Net (expense) / income recognised directly in equity New ordinary shares issued (Loss) / profit for the financial year (as restated) Dividend paid Balance at 30 June 2010 Currency translation adjustments Change in UK tax rate on deferred taxation Change in valuation of own shares held by Employee Benefit Trust Employee Benefit Trust loss Net income recognised directly in equity Profit for the financial year Dividend paid Balance at 30 June 2011 Total equity £'000 Attributable to the owners of the parent

Notes to the Consolidated Accounts

1 Accounting Policies

Accounting Convention

The consolidated financial statements have been prepared in accordance with 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 company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. The principal accounting policies which have been consistently applied to the prior year, unless otherwise stated, in the preparation of the consolidated financial statements are set out below.

Basis Of Preparation

The consolidated financial statements for the years ended 30 June 2011 and 30 June 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU on the historical cost basis with the exception of land and freehold property which have been modified to fair value at the date of transition to IFRS and separately identifiable intangibles acquired on business combinations which have been measured at fair value.

Restatement

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

Application Of New IFRSs And Interpretations

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

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 24 Related party disclosures (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)

Annual improvements 2009 (Amendments effective 01 July 2010)

b) At the date of authorisation of these financial statements, the following standards, amendments to standards and interpretations were in issue but not yet effective and have not been adopted early by the Group:

• IFRS 1 Hyper-inflation and fixed dates (Amendments, effective 01 July 2011)
• IFRS 7 Financial instruments: disclosures (Amendments, effective 01 July 2011)
• IFRS 9 Financial instruments (effective 01 July 2013)
• IFRS 10 Consolidated financial statements (effective 01 July 2013)
• IFRS 11 Joint arrangements (effective 01 July 2013)
• IFRS 12 Disclosures of interests in other entities (effective 01 July 2013)
• IFRS 13 Fair Value measurement (effective 01 July 2013)
• IAS 1 Presentation of financial statements on OCI (Amendments, effective 01 July 2012)
• IAS 12 Income taxes on deferred tax (Amendments, effective 01 July 2012)
• IAS 19 Employee Benefits (effective 01 July 2013 )
• IAS 24 Related party disclosures (Amendment, effective 01 July 2011)
• IAS 27 Separate financial statements (effective 01 July 2013)
• IAS 28 Associates and joint ventures (effective 01 July 2013)

Annual improvements 2010 (Amendments effective 01 July 2011)

Basis Of Consolidation

The consolidated financial statements consist of the accounts of Waterman Group plc and all of its subsidiaries (together 'the Group') as at 30 June each year. Subsidiaries are those entities over which the Group has the power to govern financial and operating policies, generally accompanying a shareholding that confers more than half of the voting rights. The results of the subsidiary undertakings acquired have been included from the date of acquisition being the date when control passed. Inter-company transactions, balances and unrealised gains on transactions between group companies are elminated. Unrealised losses are also eliminated.

Business Combinations

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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.

Foreign Currency Translation

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the balance sheet date and any exchange differences are taken to the consolidated income statement.

On consolidation, income statements and cash flows of foreign subsidiaries are translated from their functional currency into the Group's functional currency of pounds sterling using average rates that existed during the accounting period. The balance sheets of foreign subsidiaries and goodwill arising on consolidation are translated into pounds sterling at the rates of exchange ruling at the balance sheet date. Gains or losses on the translation of opening and closing net assets are recognised in the Consolidated Statement of Comprehensive Income and cumulatively in the Group's reserves.

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.

Significant Judgements

The Group believes that the most significant critical judgement areas in the application of its accounting policies are revenue recognition and the assessment of the percentage of completion achieved. The Group assesses contract progress and determines the proportion of contract work completed at the balance sheet date in relation to the total contract works. Other principal areas in which judgements have been made with supporting notes where these issues are discussed in further detail are provisions in respect of potential liability insurance claims (note 23), the impairment of trade receivables (note 15), the annual impairment testing of goodwill (note 10) and determining the provision for income taxes (notes 7 and 24).

Segmental Reporting

The directors regard the Group's segments of business to be building services, civil and transportation, energy,environment and design, structures and international multi-disciplinary. A business segment is a group of assets and operations enagged in providing services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. As the Group is affected by both differences in the types of services it provides and the geographical areas in which it operates the matrix approach of disclosing both the business and geographical segment formats is used.

Revenue

Revenue is stated net of VAT and is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. For short term contracts, the amount of revenue recognised reflects the work completed.

The Group has a number of long term contracts that span more than one financial period. In calculating revenue, the percentage of completion method is used, based on a review of contract progress and the proportion of contract work completed in relation to the total contract works. Profits are only recognised where they can be reliably measured, which is normally after the contract has reached 40% completion. Full provision is made for all known or anticipated losses on each contract immediately such losses are identified. Contract costs comprise direct labour, direct expenses and attributable overheads.

Gross amounts due from customers are stated at the value of the costs incurred plus recognised profits (less recognised losses) where they exceed progress billings. Progress billings not yet paid by customers are included within trade and other receivables. To the extent that progress billings exceed costs incurred plus recognised profits (less recognised losses) they are included in trade and other payables.

EMPLOYEE BENEFITS

a) Pension Obligations

The Group maintains a number of defined contribution schemes including a stakeholder scheme which is available to all qualifying staff. Company contributions to these schemes are charged to the consolidated income statement in the year to which they relate.

b) Share Incentive Plan (SIP)

The Group operates the SIP to reward and encourage its executives and staff. The SIP appropriates company shares to staff up to a value of 5% of the Group's profit before taxation each year by using funds provided by the Group. The distribution of issued shares is arranged through Waterman Trustees Limited, a related company formed to administer the Employee Benefit Trust (EBT) which controls the SIP. Shares held by the EBT at the balance sheet date are disclosed as a deduction from total equity.

c) Share Based Payments

The Group operates a Company Share Option Plan, an Executive Share Option Scheme and a Long Term Incentive Plan which are all equity settled. For all grants of share options and share awards, the fair value as at the date of grant is calculated using an appropriate option pricing model and the corresponding expense is recognised over the vesting period.

Exceptional Items

Items that are both material and non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated financial statements are referred to as exceptional items and are disclosed within their relevant business segment within note 2, segmental information.

Goodwill

Goodwill recognised under UK GAAP prior to 01 July 2004 (and subsequent to 01 July 1998), the date of transition to IFRS, is stated at net book value as at this date and has been frozen in accordance with IFRS 3 'Business Combinations'. Goodwill on business combinations recognised subsequent to 01 July 2004 is initially measured at cost being the excess of the cost of acquisition paid over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units for impairment testing. The recoverable amount of goodwill has been based on value in use as represented by the net present value of future cash flows discounted using the group's weighted average pre-tax real cost of capital.

Other Intangible Assets

Computer software licences acquired are capitalised on the basis of the costs incurred to acquire and bring to use specific software. Intangible assets identified in a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the carrying amount of an intangible asset is its cost or fair value less any accumulated amortisation and any accumulated impairment losses. Useful lives of intangible assets are assessed on acquisition and amortisation is charged as appropriate on a straight line basis. The annual amortisation rates applicable are as follows:

Computer software	20%-33%
Customer relationships arising on business combinations	17%
Order books arising on business combinations	33%

Property, Plant And Equipment (PPE) And Depreciation

PPE is stated at cost or fair value when acquired, less depreciation and when appropriate, provision for impairment. Freehold property has been revalued to its fair value as at the date of transition to IFRS and is now held at deemed cost. On disposal of a revalued asset, the relevant amount in the Revaluation reserve is transferred to Retained Earnings.

Depreciation is provided at rates calculated to write off the cost or fair value of PPE by equal annual instalments over their expected useful lives, having regard to their residual values, and is subject to an impairment review. Land is not depreciated. The annual depreciation rates applicable are as follows:

Freehold buildings	2%
Plant, equipment and motor vehicles	15% - 33%
Freehold land is not depreciated

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Income Statement during the financial period in which they are incurred. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Income Statement.

Impairment Of Non-Financial Assets

Assets that have an indefinite useful life- for example, Goodwill or Intangible assets not ready to use- are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

Financial Instruments

The Group's financial assets and liabilities are recorded at fair value less amortised cost, apart from the net assets and liabilities of overseas subsidiary undertakings which are translated into pounds sterling at rates of exchange ruling at the balance sheet date. They are classified as current or non-current according to when the receipt or payment falls due. The fair value of financial assets and liabilities of the Group are considered to be materially equivalent to their book value.

Financial Assets

The group classifies its financial assets depending on the purpose for which the financial assets were acquired. Management determined this classification at initial recognition as detailed below:

Loan And Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities that are greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group's loans and receivables comprise Trade and other receivables and Cash and cash equivalents in the consolidated balance sheet.

Trade Receivables

Trade receivables are recognised initially at fair value and subsequently at amortised cost less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement within Other operating charges. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against Other operating charges in the consolidated income statement.

Cash And Cash Equivalents

Cash and cash equivalents in the consolidated cash flow statement include cash and bank balances, short term deposits and bank overdrafts (included in Financial liabilities-borrowings in the consolidated balance sheet).

Trade And Other Payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method. Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Borrowings

Borrowings are initially recognised at fair value net of transaction costs incurred and subsequently at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income Statement over the period of the borrowings using the effective interest method.

Leases

Finance lease agreements, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Finance costs are charged to the consolidated income statement over the period of the agreement. Obligations under finance leases are included in Financial Liabilities- Borrowings net of finance costs allocated to future periods. Capitalised leased assets are depreciated over the shorter of the estimated life of the asset or the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Rentals paid under operating leases are charged to the consolidated income statement as incurred on a straight-line basis over the lease term.

Current And Deferred Tax

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax relating to items recognised directly in equity is recognised in equity and not in the consolidated income statement.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is likely that an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount can be reasonably estimated. Where the Group expects all or some of the obligation to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated income statement net of any reimbursement.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the balance sheet date. If material, provisions are determined by discounting the expected future cash flows using rates that reflect current market assessments of the time value of money.

Share Capital

Ordinary shares are classified as equity.

Dividend

Dividend distribution to the Company's shareholders is recognised as a liability in the consolidated financial statements when approved.

Financial Risk Management

The Group centrally manages borrowings, investing of surplus funds and financial risks. The objective of holding financial investments is to provide efficient cash and tax management and effective funding for the Group. The Group's financial instruments comprise borrowings, cash, deferred consideration and provisions along with various items, such as trade receivables and payables. The Group also has overdraft facilities in place to optimise the use of its resources. It is and continues to be the Group's policy that no speculative trading in derivatives shall be undertaken.

In accordance with IFRS 7, the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain requirements. No such arrangements have been identified.

The main risks arising from the Group's activities are liquidity risk, foreign currency risk, interest rate risk and credit risk. The board reviews and agrees policies for managing each of these risks which have remained unchanged throughout the year.

Liquidity Risk

Liquidity risk is the risk that suitable sources of funding for the Group's business activities may not be available. The Group's liquidity is managed centrally with operating companies forecasting their cash requirements to the parent company. In managing this risk, the Group has access to a range of funding at competitive rates through capital markets and banks. The parent company centrally co-ordinates relationships with banks, borrowing requirements, foreign exchange requirements and cash management. The Group believes that it has access to sufficient funding by using undrawn committed borrowing facilities to meet foreseeable borrowing requirements together with the use of retained profits and new equity.

The Group has continued with its policy of ensuring that there are sufficient funds to meet the expected funding requirements of the Group's operations and investment opportunities whilst monitoring its liquidity position through budgetary procedures, cash flow analysis and bank covenant reviews. The Group has a Dun and Bradstreet credit risk rating of 3 which indicates a low credit risk.

Foreign Currency Risk

The Group's exposure to exchange rate fluctuations arises on the translation of overseas net assets and profits into pounds sterling for accounting purposes together with contracts not undertaken in the Group's functional currency. The board continues to regularly consider and monitor the issue of such balance sheet exposure to minimise the impact of any exchange rate movements on operating profit by regular reporting to management. Management will implement appropriate hedging procedures should a potential material risk be identified.

Interest Rate Risk

Interest expense reflects the cost of the Group's borrowings. Interest income arises from investment of cash and short term deposits held by the Group. Interest rate risk is managed by monitoring market rates to ensure that optimal returns are achieved.

Credit Risk

The Group has no significant concentrations of credit risk. The Group has implemented policies that require appropriate credit checks on potential customers before sales commence and only uses financial institutions with high credit ratings.

2 Segmental Reporting

a) Group Business Segmental Analysis

The Chief Operating Decision Maker has been identified as the Board. The Board reviews the Group's internal management accounts in order to analyse performance and allocate resources. The segments shown below have been determined based on this information. The Board assesses the business from both a business discipline and geographic perspective. The five disciplines are Building services, Civil and transportation, Energy, environment and design, Structures and International multi-disciplinary. Performance is assessed on the basis of operating profit as disclosed in the Consolidated Income Statement before exceptional items. Revenue is reported and assessed on a consistent basis with revenue reported in the Consolidated Income Statement.

			Energy,		International
	Building	Civil and	environment		multi
30 June 2011	services	transportation	and design	structures	disciplinary	Total
Consolidated Income Statement	£'000	£'000	£'000	£'000	£'000	£'000
Revenue - total	8,205	29,485	7,063	13,232	21,521	79,506
Revenue- internal	(290)	(1,463)	(546)	(1,587)	(1,523)	(5,409)
Revenue	7,915	28,022	6,517	11,645	19,998	74,097
EBITDA pre exceptional items	541	373	289	1,233	515	2,951
Depreciation	(101)	(284)	(92)	(153)	(418)	(1,048)
Amortisation	(69)	(387)	(31)	(22)	(222)	(731)
Operating profit / (loss) pre exceptional items	371	(298)	166	1,058	(125)	1,172
Exceptional items	(84)	(456)	(53)	(35)	505	(123)
Operating profit / (loss) post exceptional items	287	(754)	113	1,023	380	1,049
Net finance costs						(437)
Profit before taxation						612
Taxation						(173)
Profit attributable to non-controlling interests						(319)
Profit attributable to the owners of the parent						120
**Adjusted operating profit / (loss)	407	(1)	166	1,058	30	1,660

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

** Adjusted operating profit is reported after adding back the amortisation charge on acquired intangible assets of £488,000 (2010: £515,000) and exceptional items of £123,000 (2010: £5,638,000).

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.

			Energy,		International
	Building	Civil and	environment		multi	Total
30 June 2010	services	transportation	and design	Structures	disciplinary	Restated
Consolidated Income Statement	£'000	£'000	£'000	£'000	£'000	£'000
Revenue - total	8,841	38,122	6,948	13,685	16,614	84,210
Revenue- internal	(729)	(5,980)	(983)	(2,784)	9,510	(966)
Revenue	8,112	32,142	5,965	10,901	26,124	83,244
EBITDA pre exceptional items	399	1,346	(703)	1,185	1,111	3,338
Depreciation	(90)	(405)	(99)	(104)	(763)	(1,461)
Amortisation	(81)	(481)	(39)	(24)	(264)	(889)
Operating profit / (loss) pre exceptional items	228	460	(841)	1,057	84	988
Exceptional items	(107)	(555)	(151)	-	(4,825)	(5,638)
Operating profit / (loss) post exceptional items	121	(95)	(992)	1,057	(4,741)	(4,650)
Net finance costs						(394)
Loss before taxation						(5,044)
Taxation						657
Profit attributable to non-controlling interests						(752)
Loss attributable to the owners of the parent						(5,139)
**Adjusted operating profit / (loss)	264	802	(841)	1,057	221	1,503

			Energy,		International
	Building	Civil and	environment		multi
30 June 2011	services	transportation	and design	Structures	disciplinary	Unallocated	Total
Consolidated Balance Sheet	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Goodwill	680	8,846	965	-	6,702	-	17,193
Other segment assets	5,316	16,748	1,220	16,516	11,583	(3,132)	48,251
Total segment assets	5,996	25,594	2,185	16,516	18,285	(3,132)	65,444
Unallocated assets
Current tax assets							243
Deferred tax assets							846
Total assets							66,533
Segment liabilities	(1,241)	(2,371)	(849)	(5,512)	(7,231)	(1,531)	(18,735)
Unallocated liabilities
Financial liabilities							(10,029)
Current tax liabilities							(3,450)
Deferred tax liabilities							-
Total liabilities							(32,214)
Capital expenditure	1	5	29	-	46	360	441
			Energy,		International
	Building	Civil and	environment		multi
	services	transportation	and design	Structures	disciplinary	Unallocated	Total
30 June 2010 Consolidated Balance Sheet	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Goodwill	680	8,838	965	-	6,000	-	16,483
Other segment assets	4,730	19,153	1,013	16,452	14,457	(1,099)	54,706
Total segment assets	5,410	27,991	1,978	16,452	20,457	(1,099)	71,189
Unallocated assets
Current tax assets							930
Deferred tax assets							239
Total assets							72,358
Segment liabilities	(2,605)	(3,223)	(921)	(5,394)	(9,573)	(2,153)	(23,869)
Unallocated liabilities
Financial liabilities							(11,283)
Current tax liabilities							(3,195)
Deferred tax liabilities							(214)
Total liabilities							(38,561)
Capital expenditure	-	5	-	-	210	(42)	173

Other than those disclosed in the table above unallocated assets principally comprise of cash and cash equivalents, other intangible assets and property, plant and equipment that are controlled by the parent company. Unallocated liabilities are primarily trade payables and accruals controlled by the parent company.

b) Group Geographical Segmental Analysis			Rest of
	UK	Europe	the World	Group	Total
30 June 2011	£'000	£'000	£'000	£'000	£'000
External revenue – by client location	54,100	3,435	16,562	-	74,097
Segment assets-by location of asset	50,293	1,200	17,085	(3,134)	65,444
Capital expenditure	35	7	39	360	441
			Rest of
	UK	Europe	the World	Group	Total
30 June 2010	£'000	£'000	£'000	£'000	£'000
External revenue – by client location	57,122	8,196	17,926	-	83,244
Segment assets-by location of asset	51,832	4,780	15,678	(1,099)	71,189
Capital expenditure	5	164	46	(42)	173

The Rest of the World external revenue, segment assets and capital expenditure are principally based in Australia and the Middle East.

3 Employee Benefits Expense

Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Staff costs including executive directors remuneration amounted to:
Wages and salaries 39,905	44,284
Termination benefits 554	650
Social security costs 3,979	4,449
Credit in respect of share based payment awards -	(111)
Pension costs 1,870	2,200
46,308	51,472
The average monthly number of employees including executive directors during the year were as follows:
Number	Number
Technical 822	977
Non-technical 198	230
1,020	1,207

The average number of contract staff during the year was 65 (2010:110). Pension contributions outstanding at 30 June 2011 were £199,383 (2010: £169,444).

4 Other Operating Charges

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Other operating charges / (gains) include:
During the year the Group (including its overseas subsidiary undertakings) obtained
the following services from the Company's auditor and its associates:
Fees payable to the Company's auditor for the audit of parent company and consolidated
financial statements	96	110
Fees payable to the Company's auditor and its associates for other services:
-the audit of the parent company's subsidiary undertakings pursuant to legislation	143	168
-other services pursuant to legislation	27	27
Operating lease rentals
- property	3,614	4,012
- plant and equipment	856	810
Gain on foreign exchange	(12)	(661)
Profit on disposal of fixed assets	(12)	(58)
Rents receivable	(112)	(286)

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.

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Property provisions and accruals	(115)	1,407
Work in progress and trade receivables provisions	(236)	3,498
Impairment of goodwill and property, plant and equipment (PPE)	-	617
Depreciation of PPE	80	-
Other restructuring costs	394	116
Exceptional items	123	5,638

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

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

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

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

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

6 Interest Payable

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Interest payable on bank loans and overdrafts	448	571
Interest payable on hire purchase contracts	5	14
Other interest payable	62	99
Discount on provisions and deferred consideration	-	(124)
Interest payable	515	560

7 Taxation

a) Analysis of Charge/(Credit) in the Year

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
United Kingdom
Corporation tax at 27.5% (2010: 28%)	337	(298)
Adjustments in respect of prior years	237	(743)
	574	(1,041)
Foreign tax
Corporation taxes	470	475
Adjustments in respect of prior years	(7)	(85)
Total current tax	1,037	(651)
United Kingdom
Origination and reversal of temporary differences	(442)	(34)
Adjustments in respect of prior years	(422)	28
Total deferred tax	(864)	(6)
Taxation	173	(657)

b) Factors Affecting Taxation for the Year

The following table shows a reconciliation from the theoretical corporation tax charge, using the UK corporation tax rate for 2011 of 27.5% (2010:28%) to the reported tax credit. The reconciling items represent, other than the impact of tax rate differentials and changes, non-taxable income or non-deductible expenses arising from the difference between the local tax base and the reported financial statements. The total tax charge in future years will be affected by any changes in the corporation tax rates in force in the countries in which the Group operates as shown in note 13 to the consolidated financial statements.

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Profit /(loss) before taxation	612	(5,044)
Taxation on profit /(loss) at standard UK rate of 27.5% (2010: 28%)	168	(1,412)
Effects of:
Expenses not deductible for tax purposes	389	147
Adjustments in respect of prior years	(192)	(800)
Adjustments in respect of foreign tax rates	24	41
Capital transactions	-	356
Losses (utilised) / not utilised	(216)	932
Unallowable losses	-	79
Total taxation	173	(657)

In the 2011 Budget statement, the UK Government announced a reduction of 1% in the UK Corporate Tax rate and this was enacted on 29 March 2011, reducing it to 26% effective from 1 April 2011. Legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 was then enacted in Finance Act 2011 on 19 July 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 23% by 1 April 2014. UK deferred tax has been calculated at 25% after the enactment of Finance Act 2011 prior to these financial statements being authorised for issue by the directors.

c) Deferred Taxation Credited to Equity

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Property, plant and equipment	16	364
	16	364

Deferred taxation on the revaluation of a freehold property was credited to the Revaluation reserve upon its disposal during the prior year. Corporation tax was then charged to Retained earnings.

8 Dividends

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Dividends charged to equity in the year
Final dividend paid in January 2011 of 0.9p (2010: 0.9p) per share	273	274
Interim dividend paid in April 2011 of 0.1p (2010: 0.9p) per share	30	274
Total dividend paid in year of 1.0p (2010: 1.8p) per share	303	548
Final dividend proposed for payment in January 2012 of 0.1p (2011: 0.9p) per share	31	273

A dividend of £383,031 (2010: £525,140) was paid to the non-controlling interest during the year.

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The final dividend will be paid on 10 January 2012 to all members on the shareholders register at 9 December 2011.

The Employee Benefit Trust has waived its entitlement to dividends which has reduced the 2011 interim dividend paid by £443 (2010: £4,373) and the 2010 final dividend paid by £3,986 (2009: £4,373).

9 Earnings per Share

		2011			2010
		Weighted			Weighted	2010
		average	2011	2010	average	Per share
	2011	number	Per share	Loss	number	amount
	Profit	of shares	amount	Restated	of shares	Restated
	£'000	(thousands)	(pence)	£'000	(thousands)	(pence)
Basic earnings / (loss) per share:
Earnings/ (loss) attributed to owners of the parent	120	30,501	0.4	(5,139)	30,483	(16.9)
Effect of dilutive share schemes	-	8	-	-	-	-
Diluted earnings / (loss) per share	120	30,509	0.4	(5,139)	30,483	(16.9)

The basic earnings / (loss) per share has been calculated on the profit attributable to the owners of the parent for the year and based on a weighted average of 30,501,241 (2010: 30,483,157) ordinary shares in issue and ranking for dividend during the year. The diluted earnings per share also takes account of share options and LTIP shares potentially convertible into new shares and the calculation is based on a weighted average of 30,508,767 (2010:30,483,157) shares in issue during the year.

10 Goodwill

	Group £'000
Cost
01 July 2009	17,467
Reduction	(1,097)
Exchange rate adjustments	607
01 July 2010	16,977
Exchange rate adjustments	710
30 June 2011	17,687
Impairment
01 July 2009	177
Charge for the year	317
01 July 2010	494
Charge for the year	-
30 June 2011	494
Net book amount
30 June 2011	17,193

30 June 2010

Goodwill is tested for impairment in accordance with IAS 36 'Impairment of assets' at least annually. The recoverable amount of goodwill has been based on value in use as represented by the net present value of future cash flows. Cash flows are projected forward for five years based on the Group's approved budgets and strategic plans between 2012 and 2016, beyond which they are inflated by between 2-2.25% per annum depending on the maturity of the markets in which the cash generating units (CGU) are operating. The cash flows of all CGU are then discounted using the Group's weighted average pre-tax real cost of capital of 9%. The latest impairment test performed on a consistent basis with that of a year earlier demonstrated that the total headroom between the recoverable amount of goodwill and the carrying value of the Goodwill, PPE and Other Intangible assets for all CGU's was £42.1m at 30 June 2011 (2010: £38.8m). No reasonable change to the assumptions would lead to any further impairment in any CGU.

The carrying amounts of goodwill by segment are set out in note 2 to the consolidated financial statements.

16,483

11 Other Intangible Assets

	Computer software	relationships	Order book	Total
	£'000	£'000	£'000	£'000
Cost
01 July 2009	2,809	2,550	204	5,563
Additions	32	-	-	32
Transfers to PPE	(2)	-	-	(2)
Disposals	(111)	-	-	(111)
Exchange rate adjustments	5	115	-	120
01 July 2010	2,733	2,665	204	5,602
Additions	18	-	-	18
Disposals	(407)	-	-	(407)
Exchange rate adjustments	54	132	-	186
30 June 2011	2,398	2,797	204	5,399
Amortisation
01 July 2009	2,003	989	113	3,105
Charge for the year	374	447	68	889
Transfers from PPE	24	-	-	24
Disposals	(109)	-	-	(109)
Exchange rate adjustments	(4)	49	-	45
01 July 2010	2,288	1,485	181	3,954
Charge for the year	243	465	23	731
Disposals	(386)	-	-	(386)
Exchange rate adjustments	49	83	-	(132)
30 June 2011	2,194	2,033	204	(4,431)
Net book amount
30 June 2011	204	764	-	968
30 June 2010	445	1,180	23	1,648

There are no intangible assets with indefinite lives.

12 Property, Plant and Equipment

	Land & freehold	Plant, equipment &
	property	motor vehicles	Total
	£'000	£'000	£'000
Cost or valuation
01 July 2009	10,749	12,075	22,824
Additions	-	141	141
Transfers from other intangible assets	-	2	2
Disposals	(1,500)	(572)	(2,072)
Exchange rate adjustments	-	152	152
01 July 2010	9,249	11,798	21,047
Additions	-	423	423
Disposals	-	(557)	(557)
Exchange rate adjustments	-	144	144
30 June 2011	9,249	11,808	21,057
Depreciation
01 July 2009	340	8,583	8,923
Charge for the year	65	1,396	1,461
Impairment charge for the year	-	300	300
Transfers to other intangible assets	-	(24)	(24)
Disposals	(33)	(452)	(485)
Exchange rate adjustments	-	(16)	(16)
01 July 2010	372	9,787	10,159
Charge for the year (including exceptional item)	62	1,066	1,128
Disposals	-	(586)	(586)
Exchange rate adjustments	-	117	117
30 June 2011	434	10,384	10,818
Net book amount
30 June 2011	8,815	1,424	10,239
30 June 2010	8,877	2,011	10,888

Included in the above are fixed assets that have been acquired under finance leases. The net book value of these assets is £14,975 (2010: £24,320) and accumulated depreciation on these assets is £192,794 (2010: £166,422).

The Group's freehold properties were revalued on transition to IFRS as at 01 July 2004 by independent qualified valuers. The valuations were undertaken in accordance with the Appraisal and Valuation Standards of the Royal Institute of Chartered Surveyors by GVA Grimley and BH2, who are both firms of independent chartered surveyors. The valuations were based on active market prices and reflect the existing value of the properties concerned.

These valuations have been incorporated into the Group financial statements and the resulting revaluation adjustments have been credited to the revaluation reserve net of deferred tax with this revaluation surplus not being distributable under English law. If the land and freehold property were carried at cost, the carrying amount would have been £8.0m (2010: £8.0m).

Certain group assets have been used as security for borrowings as disclosed in note 17 to the consolidated financial statements.

	30 June 2011 £'000	30 June 2010 £'000
Loan and receivables at net book value	10	10

The following companies are the principal subsidiary undertakings at 30 June 2011 and all are consolidated:

	Country of registration / incorparation	Class and percentage of ordinary equity and votes held	Nature of Business
Waterman AHW Pty Limited	Australia	80%	Mechanical, electrical and structural consultancy*
Waterman AHW (Qld) Pty Limited	Australia	80%	Mechanical, electrical and structural consultancy*
Waterman AHW (Victoria) Pty Limited	Australia	41%	Mechanical, electrical and structural consultancy****
Waterman Aspen Limited	England	100%	Engineering outsourcing consultancy**
Waterman Boreham Limited	England	100%	Traffic engineering and transport planning consultancy
Waterman Building Services Limited	England	100%	Mechanical and electrical consultancy
Waterman Consulting Engineers India Private Limited	India	100%	Structural engineering consultancy
Waterman Energy, Environment & Design Limited	England	100%	Environmental, energy, waste and power engineering consultancy
Waterman International (Asia) Pty Limited	Australia	80%	Intermediate holding company*
Waterman International Limited	England	100%	Multi-discipline consultancy*
Waterman International (London) Limited	England	100%	Multi-discipline consultancy*
Waterman International Holdings Limited	England	100%	Intermediate holding company
Waterman Middle East Pty Limited	Australia	100%	Mechanical, electrical and structural consultancy*
Waterman Structures Limited	England	100%	Structural engineering consultancy
Waterman Technology Ltd Co (Beijing)	China	100%	Civil and structural engineering consultancy*
Waterman Transport & Development Limited	England	100%	Civil engineering consultancy
Moylan Consulting Engineers Limited	Republic of Ireland	100%	Civil and structural engineering consultancy***
Moylan Engineering Limited	Republic of Ireland	100%	Intermediate holding company

The equity of these subsidiary undertakings is directly held by the Company except where indicated by asterisks.

* interest held indirectly through Waterman International Holdings Limited

** interest held indirectly through Waterman Transport & Development Limited

*** interest held indirectly through Moylan Engineering Limited

**** Waterman AHW (Victoria) Pty Limited is fully consolidated because the Group indirectly controls more than 50% of its voting rights through its control of Waterman International (Asia) Pty Limited.

Waterman International Limited operates from branches in Moscow, Russia and Almaty, Kazakhstan and purchased Waterman Middle East Pty Limited from Waterman International (Asia) Pty Limited on 3 November 2009. From this date Waterman Middle East Pty Limited became wholly owned by Waterman Group plc.

14 Long Term Contracts

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
Total costs incurred	110,254	134,871
Profit recognised as income (less recognised losses)	18,420	22,658
Work in progress for third parties	128,674	157,529
Invoicing on account to customers	(125,590)	(155,629)
	3,084	1,900
Of which work in progress for third parties is disclosed as:
Amounts due from customers on long term contracts (note 15)	10,524	10,799
Amounts due to customers on long term contracts (note 16)	(7,440)	(8,899)
	3,084	1,900

15 Trade and Other Receivables

	Group	Group
	30 June 2011	30 June 2010
	£'000	£'000
Trade receivables	28,402	31,290
Less: Provision for impairment of receivables	(8,385)	(9,112)
Trade receivables (net)	20,017	22,178
Amounts due from customers on long term contracts (note 14)	10,524	10,799
Other receivables	527	614
Current tax asset	243	930
Prepayments and accrued income	4,555	3,661
	35,866	38,182

As of 30 June 2011, trade receivables of £9.1m (2010: £12.8m) were considered for potential impairment. The amount provided for these balances was £8.4m (2010: £9.1m).The allocation of the provision according to the date from the issue of invoice is as follows:

	Group	Group
	30 June 2011	30 June 2010
	£'000	£'000
Less than 30 days	-	51
Between 30 and 60 days	5	28
Between 60 and 90 days	1	36
Between 90 and 120 days	16	52
Greater than 120 days	8,363	8,945
	8,385	9,112

As of 30 June 2011, trade receivables of £9.1m (2010: £12.8m) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables from the date of issue is as follows:

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
Less than 30 days	-	-
Between 30 and 60 days	2,354	3,017
Between 60 and 90 days	2,116	1,565
Between 90 and 120 days	1,117	758
Greater than 120 days	3,563	7,456
	9,150	12,796

15 Trade and Other Receivables (Continued)

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
Sterling	22,626	27,012
US dollar	194	117
Chinese renminbi	20	-
Euro	5,321	3,441
Australian dollar	3,348	4,401
Russian rouble	1,650	1,351
Polish zloty	-	75
UAE dirham	2,640	1,737
Indian rupee	67	48
	35,866	38,182

Movements on the Group provision for impairment of trade receivables are as follows:

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
At 01 July	9,112	7,334
Provision for receivables impairment	571	4,528
Receivables written off during the year as uncollectible	(919)	(2,489)
Unused amounts reversed/ collected	(856)	(663)
Exchange rate adjustments	477	402
At 30 June	8,385	9,112

An exceptional provision for receivables impairment of £nil (2010: £1,894,000) has been made in respect of a number of overseas projects. The other classes within Trade and Other Receivables do not contain any impaired assets.

16 Trade and Other Payables

	Group	Group
	30 June 2011	30 June 2010
	£'000	£'000
Trade payables	3,834	4,791
Amounts due to customers on long term contracts (note 14)	7,440	8,899
Other taxes and social security	3,450	3,195
Other payables	1,948	1,156
Accruals	2,866	4,768
	19,538	22,809

17 Financial Liabilities - Borrowings

	Group 30 June 2011	Group 30 June 2010
Current	£'000	£'000
Bank loans	1,226	7,518
Finance leases	39	45
	1,265	7,563
Non-current
Bank loans	8,733	3,659
Finance leases	31	61
	8,764	3,720

The Group had term loans totalling £6.2m (2010: £7.3m) and a mortgage of £3.7m (2010: £3.9m) disclosed above within Bank loans at 30 June 2011.

The Group has four sterling bank loans which are repayable between 2016 and 2021. Three of these loans are at floating interest rates of which two are between 1.26% and 2.75% (2010: 1% and 1.26%) above LIBOR and one at 2.75% (2010:1%) above bank base rate as at 30 June 2011. The final sterling bank loan is at a fixed interest rate of 6.99%. The Group also has a Euro bank loan which is repayable in 2013 at a floating interest rate of 2.75% (2010: 1.25%) above EURIBOR. These loans are secured on the Group's London head office and by a fixed and floating charge over certain Group assets.

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

The maturity profile of the carrying amount of the Group's non-current liabilities at 30 June 2011 was as follows:

	Bank loans £'000	Finance leases £'000	2011 Total £'000	Bank loans £'000	Finance leases £'000	2010 Total £'000
Between one and two years	1,314	31	1,345	277	32	309
Between two and five years	3,931	-	3,931	789	29	818
In more than five years	3,488	-	3,488	2,593	-	2,593
	8,733	31	8,764	3,659	61	3,720

17 Financial Liabilities - Borrowings (Continued)

All of the Group's liabilities are included in the table below except for current and deferred tax liabilities. The carrying amounts of those liabilities are denominated in the following currencies:

	30 June 2011	30 June 2011		30 June 2010	30 June 2010
	Floating rate	Fixed rate		Floating rate	Fixed rate
	financial liabilities	financial liabilities	30 June 2011	financial liabilities	financial liabilities	30 June 2010
	£'000	£'000	£'000	£'000	£'000	£'000
Trade and other payables
- Sterling	-	-	13,232	-	-	15,552
- US dollar	-	-	97	-	-	174
- Chinese renminbi	-	-	124	-	-	4
- Euro	-	-	2,380	-	-	2,311
- Australian dollar	-	-	1,550	-	-	1,313
- UAE dirham	-	-	1,019	-	-	2,191
- Russian rouble	-	-	1,113	-	-	931
- Polish zloty	-	-	13	-	-	314
- Indian rupee	-	-	10	-	-	19
	-	-	19,538	-	-	22,809
Bank loans and overdrafts
- Sterling	7,764	1,968	9,732	8,666	2,108	10,774
- Euro	227	-	227	403	-	403
Finance lease obligations
- UAE dirham	-	2	2	-	8	8
- Euro	-	68	68	-	98	98
	7,991	2,038	10,029	9,069	2,214	11,283

The fair value of the financial liabilities approximates to their book values. The finance lease interest rates are in the range 3.3% to 4.8%. Assets held under finance leases are secured on the assets concerned.

The minimum lease payments under finance leases fall due as follows:

	Group	Group
	30 June 2011	30 June 2010
	£'000	£'000
Within one year	42	50
Between one and five years	32	65
	74	115
Future finance charges	(4)	(9)
Present value of finance lease liabilities	70	106

18 Called Up Share Capital

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

		Issued and fully paid
	Number	£'000
At 01 July 2010 and 30 June 2011	30,758,824	3,076

The rights and obligations attaching to the Company's ordinary shares, in addition to those conferred on their holders by law, are set out in the Company's Articles of Association. On a show of hands, every shareholder present in person or by proxy has one vote and, on a poll, every shareholder present in person or by proxy has one vote for each share which they hold in accordance with the Companies Act 2006.

Under the Company's Executive Share Option Scheme and Company Share Option Plan, options may be granted to Group employees (including the directors) enabling them to subscribe for ordinary shares.

19 Share Based Payments

During the year, the Group had three share based payment arrangements in operation of which further details are set out below:

a) Share Option Scheme

The share option schemes make awards to Group employees (including the executive directors) which are settled in equity. The schemes permit options to be granted at an exercise price no lower than the market price of the Company's shares at the time of grant. Options vest after three years and must be exercised within ten years of the date of grant.

A summary of awards outstanding at 30 June 2011 is as follows:

Date option granted	Exercise price per share	Exercisable from	Exercisable to	2011 unexercised	2010 unexercised
13/02/01	90p	13/02/04	12/02/11	-	23,000
15/11/02	44.5p	15/11/05	14/11/12	213,000	213,000
03/08/07	179.5p	31/10/10	02/08/17	-	615,000
				213,000	851,000

During the current and prior year, no options for ordinary shares were exercised for £nil consideration and options over 638,000 ordinary shares lapsed (2010: 141,900). At 30 June 2011, options exercisable between 2011 and 2012 by the issue of new ordinary shares at a price of 44.5p remained unexercised in respect of 213,000 ordinary shares (2010: 851,000).

The Group has used the Black-Scholes model to value its share options, with no vesting conditions other than time and continuous service. The expected volatility for the share option arrangements is based on historical volatility determined by the analysis of daily share price movements over the seven years prior to the date of grant.

b) Long Term Incentive Plan (LTIP)

The LTIP for executive directors and senior management makes awards which are settled in equity. The performance conditions for executive directors are for the Group's growth in basic EPS to exceed the growth in the UK Retail Price Index by an average of 3% per annum over three years. The additional criterion for senior management is for the profit before tax of their respective divisions to grow by an average of 3% per annum in excess of the growth in RPI over three years. Senior management will receive 50% of their award entitlement upon the achievement of each target.

Nil shares were awarded in the LTIP to executive directors and senior management during the year. On 16 November 2010 110,000 shares awarded under the LTIP on 16 November 2007 lapsed as the specified performance conditions were not achieved. At 30 June 2011 LTIP awards maturing in 2011 remained in respect of 100,000 ordinary shares (2010: 210,000).

The Group used the Black-Scholes model to value its LTIP shares using the market price at the date of grant adjusted for the non-receipt of dividends until the vesting date is reached. A summary of awards outstanding at 30 June 2011 is:

			Awards	Awards
Award	Scheme	Maximum	outstanding at	outstanding at
date	maturity	term	30 June 2011	30 June 2010
16/11/07	3 years	3 years	-	110,000
14/11/08	3 years	3 years	100,000	100,000

c) Share Incentive Plan

Information in relation to the cash settled Share Incentive Plan can be found in note 27 to the consolidated financial statements.

20 Reserves

	Share premium	Merger	Revaluation	Retained
	reserve	reserve	reserve	earnings
	£'000	£'000	£'000	£'000
01 July 2010	11,881	3,144	584	12,806
Profit attributable to the owners of the parent	-	-	-	120
Dividends paid	-	-	-	(303)
Exchange rate adjustments	-	-	-	185
Change in valuation of own shares held by Employee Benefit Trust	-	-	-	47
Employee Benefit Trust loss	-	-	-	(3)
Change in UK tax rate on deferred taxation	-	-	16	-
30 June 2011	11,881	3,144	600	12,852

The merger reserve represents the value received in excess of nominal value on shares issued pursuant to business combinations where company law prohibits the recording of a premium. Included within the Retained earnings balance brought forward is an amount of £1,133,000 (2010: £1,133,000) relating to the write off of purchased goodwill prior to the transition to IFRS.

21 Reconciliation of Net Cash Flow to Net Debt

	Group	Group	Group	Group
	6 months to	6 months to	Year to	Year to
	31 December 2010	30 June 2011	30 June 2011	30 June 2010
	£'000	£'000	£'000	£'000
Decrease in cash balances in the period / year	(3,426)	(141)	(3,567)	(1,668)
Decrease in bank overdrafts in the period / year	-	-	-	2,198
(Decrease) / increase in cash in the period / year	(3,426)	(141)	(3,567)	530
Net decrease in borrowings	713	580	1,293	2,896
(Increase) / decrease in net debt resulting from cash flows	(2,713)	439	(2,274)	3,426
Exchange rate adjustments	143	(112)	31	392
(Increase) / decrease in net debt in the period / year	(2,570)	327	(2,243)	3,818
Opening net debt	(6,375)	(8,945)	(6,375)	(10,193)
Closing net debt	(8,945)	(8,618)	(8,618)	(6,375)

22 Analysis of Net Debt

	Unaudited
	Group	Group		Other non-cash	Exchange	Group
31 December 2010		01 July 2010	Cash flow	changes	movements	30 June 2011
	£'000	£'000	£'000	£'000	£'000	£'000
Cash balances	1,657	4,908	(3,567)	-	70	1,411
Bank overdrafts	-	-	-	-	-	-
Cash, cash equivalents and overdrafts	1,657	4,908	(3,567)	-	70	1,411
Current
Bank loans	(1,211)	(7,518)	1,245	5,074	(27)	(1,226)
Finance leases	(26)	(45)	53	(35)	(12)	(39)
Non-current
Bank loans	(9,302)	(3,659)	-	(5,074)	-	(8,733)
Finance leases	(63)	(61)	-	30	-	(31)
	(10,602)	(11,283)	1,298	(5)	(39)	(10,029)
Total	(8,945)	(6,375)	(2,269)	(5)	31	(8,618)

Other non-cash changes of £5,000 relate to interest payable on finance leases.

23 Provisions

	Liability			Liability
	insurance	Property	Group	insurance	Property	Group
	claims	provisions	30 June 2011	claims	provisions	30 June 2010
	£'000	£'000	£'000	£'000	£'000	£'000
01 July	2,863	1,392	4,255	3,801	-	3,801
Charged to the consolidated income statement	1,092	-	1,092	2,214	1,407	3,621
Utilised	(83)	(670)	(753)	(71)	-	(71)
Released to the consolidated income statement	(1,653)	(552)	(2,205)	(3,026)	-	(3,026)
Exchange rate adjustments	189	3	192	(56)	(15)	(71)
Unwinding of discount	6	60	66	1	-	1
30 June	2,414	233	2,647	2,863	1,392	4,255

This represents management's best estimate of costs to be incurred in respect of potential liability insurance claims and property provisions. The directors believe that all potential liability insurance claims and all potential property provisions will be settled within 2 years. All provisions have been discounted at the applicable nominal forward short-end Government liability rate as at 30 June 2011 where appropriate.

Further detail on property provisions are disclosed in note 5 to the consolidated financial statements.

24 Deferred Taxation

Deferred tax is provided in full on temporary differences under the liability method using a tax rate of 25% (2010: 27%) which is the standard rate of UK corporation tax with effect from 1 April 2012 (see note 7b). Full provision has been made for deferred taxation assets and liabilities which have been offset only to the extent that they relate to the same taxation regime.

Deferred Liability	Group 30 June 2011 £'000	Group 30 June 2010 £'000
At 01 July	214	781
Credited to the consolidated income statement	(163)	(205)
Credited to equity	-	(364)
Exchange rate adjustments	5	2
At 30 June	56	214

The credit to equity in the prior year relates to the tax associated with the sale of a UK freehold property.

Deferred Tax Asset	Group 30 June 2011 £'000	Group 30 June 2010 £'000
At 01 July	239	390
Credited / (charged) to the consolidated income statement	701	(199)
Credited to equity	16	-
Exchange rate adjustments	(54)	48
At 30 June	902	239

An analysis of the deferred tax balances and the movements in temporary differences of deferred tax assets and liabilities during the year (prior to the offsetting of balances within the same tax jurisdiction permitted by IAS 12) are shown below:

	Group			Foreign	Rate	Group
	01 July 2010	Equity	Income	exchange	change	30 June 2011
	£'000	£'000	£'000	£'000	£'000	£'000
Property, plant and equipment	100	16	(65)	-	(6)	45
Other intangible assets	(334)	-	141	(5)	7	(191)
Provisions	422	-	240	(54)	(4)	604
Pensions	46	-	4	-	(1)	49
Rolled over gains	(209)	-	-	-	15	(194)
Losses carried forward	-	-	533	-	-	533
Asset	25	16	853	(59)	11	846

	Group			Foreign	Rate	Group
	01 July 2009	Equity	Income	exchange	change	30 June 2010
	£'000	£'000	£'000	£'000	£'000	£'000
Property, plant and equipment	(314)	364	65	(3)	(12)	100
Other intangible assets	(460)	-	143	(20)	3	(334)
Provisions	457	-	(89)	69	(15)	422
Pensions	23	-	23	-	-	46
Rolled over gains	(217)	-	-	-	8	(209)
Capital losses carried forward	120	-	(120)	-	-	-
(Liability) / Asset	(391)	364	22	46	(16)	25

The deferred tax assets and liabilities at 30 June 2011, without taking into consideration the offsetting balances within the same jurisdiction are £1,231,000 (2010:£568,000) and £385,000 (2010:£543,000) respectively. The assets and liabilities are expected to reverse in more than one year aside from assets of £150,000 (2010:£150,000) and liabilities of £21,000 (2010:£24,000) which are expected to reverse in less than one year from the balance sheet date.

Deferred tax has been calculated using estimates based on the current manner of recovery of the assets' value on property, plant and equipment not eligible for capital allowances, that is recovery through continued use in the business unless the asset is held for sale. This method assumes no tax relief will be available; therefore, no tax base is available for inclusion within the calculation of deferred tax unless the assets' value is recoverable through sale rather than continued use.

The key assumptions in the calculation of deferred tax are set out below:

a) Capital expenditure – the percentage of capital expenditure that would quality for tax relief, incurred by each unit, has been estimated based on prior years' historical experience of the split between qualifying and non-qualifying expenditure.

b) Depreciation – the depreciation rate for assets that do not qualify for the initial recognition exemption has been estimated based on actual data for the most recent accounting periods.

c) Overseas tax losses- are not recognised to the extent that the losses cannot be utilised in the foreseeable future based on the latest profit projections for that territory.

25 Related Party Transactions

The directors have identified 19 (2010: 18) key management personnel whose compensation was as follows: -

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
Short term benefits	2,293	2,109
Post employment benefits	192	201
	2,485	2,310

26 Financial Commitments

There was £26,810 of capital expenditure contracted but not provided for at the year end (2010: £nil).

The Company and certain of its subsidiary undertakings cross guaranteed the bank loans of the Group at 30 June 2011. Invoice discounting facilities provided to two subsidiary undertakings are secured by a fixed and floating charge over the assets of those companies.

A guarantee has been given by a subsidiary undertaking in the normal course of business for a performance bond of AED 954,475 to cover the performance of work under a group contract.

At 30 June 2011 the future aggregate minimum lease payments under non-cancellable operating leases are as follows: -

		Property		Plant and equipment
	Group	Group	Group	Group
	30 June 2011	30 June 2010	30 June 2011	30 June 2010
	£'000	£'000	£'000	£'000
Commitment expiring:
- within one year	2,295	3,487	425	478
- within two to five years	4,232	6,271	338	397
- after five years	1,546	2,909	-	-
	8,073	12,667	763	875

27 Employee Benefit Trust (EBT)

The Group operates a Share Incentive Plan (SIP) to reward and encourage its executives and staff. The SIP is satisfied by issued shares and controlled through the EBT.

The SIP appropriates Company shares to staff up to a value of 5% of the Group's profit before taxation each year. The EBT is able to appropriate such shares using funds provided by the Group to meet obligations under the SIP. During the year, nil (2010:nil) shares were appropriated to staff in respect of profits earned during the year ended 30 June 2010 and no charge has therefore been borne by the participating Group companies. The EBT purchased nil (2010:nil) issued shares during the year at a cost of £nil (2010:£nil). The Group has no accruals (2010: £16,316) for payments to be made under the SIP in 2012.

The distribution of shares through this plan is arranged through Waterman Trustees Limited, a related company formed to administer the EBT and which held 122,184 (2010: 211,938) ordinary shares of 10p in the Company at 30 June 2011. At 30 June 2011 the market value of these shares was £45,208 (2010: £92,193). Dividends on these shares are payable to Waterman Trustees Limited and set against the costs of operating the schemes unless waived.

The assets of the EBT at 30 June 2011 have been incorporated into the Group Balance Sheet as follows:

	Group 30 June 2011 £'000	Group 30 June 2010 £'000
Cash	12	1
	12	1
Represented by:
Income tax	2	2
Amounts due to parent company	131	164
Accruals	16	16
Retained deficit	(92)	(89)
Own shares at valuation	(45)	(92)
	12	1

28 Financial Instruments

The carrying value of all of the Group's financial assets approximates to their fair value and they are classified as loans and receivables being the total of cash and cash equivalents and trade and other receivables. The carrying value of all of the Group's financial liabilities approximates to their fair value and they are classified as loans and receivables being trade and other payables, current borrowings and non-current borrowings.

Financial Risk Management

The Group's activities expose it to a variety of financial risks, including the effects of foreign currency exchange rates, liquidity and interest rates. An explanation of the board's objectives and strategies for holding and issuing financial instruments is set out in the Financial Review on page 33 with the relevant accounting policies explained in note 1 to the consolidated financial statements.

a ) Foreign Currency Risk

The Group is exposed to foreign exchange risk primarily with respect to the Australian dollar, Euro and US dollar. Most trading activity is denominated in the currencies relevant to the local subsidiaries thereby matching the revenue flows with the cost base.

Floating rate financial assets earn interest based primarily on UK, Euro and Australian base interest rates. The fair value of the financial assets equates to their book values. All of the Group's financial assets are due within one year.

The Group has £1.4m of cash and cash equivalents at the year end held in bank accounts (2010: £4.9m) which is immediately available for use. Cash surplus to short term requirements is usually invested overnight on the money market to earn interest at rates close to the prevailing local base rates.

At 30 June 2011, if sterling had weakened/strengthened by 10% against the Australian dollar with all other variables held constant, the profit for the financial year would have been £75,000 (2010: £283,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of Australian dollar denominated trade receivables.

At 30 June 2011, if sterling had weakened/strengthened by 10% against the Euro with all other variables held constant, the profit for the financial year would have been £23,000 (2010: £428,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of Euro denominated trade receivables and borrowings.

At 30 June 2011, if sterling had weakened/strengthened by 10% against the US dollar with all other variables held constant, the profit for the financial year would have been £50,000 (2010: £88,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of US dollar trade receivables.

The table below shows the extent to which group companies have monetary assets and liabilities in currencies other than their local currency. Foreign exchange differences on retranslation of these balances are taken to the consolidated income statement or to equity.

Functional currency of Group operation	2011 Sterling £'000	2010 Sterling £'000	2011 Euro £'000	2010 Euro £'000	2011 AUD £'000	2010 AUD £'000	2011 USD £'000	2010 USD £'000	2011 Other £'000	2010 Other £'000	2011 Total £'000	2010 Total £'000
Sterling	-	-	167	193	2,191	1,973	3,588	3,574	261	1,884	6,207	7,624
Euro	34	(500)	-	-	-	(5)	-	-	16	18	50	(487)
Australian dollar (AUD)	22	(1,962)	-	5	-	-	558	2,142	739	(1,666)	1,319	(1,481)
US dollar (USD)	83	(3,428)	(47)	51	-	-	-	-	264	711	300	(2,666)
Other	(1,240)	(1,729)	245	(18)	(402)	1,672	(184)	(631)	(614)	-	(2,195)	(706)
Total	(1,101)	(7,619)	365	231	1,789	3,640	3,962	5,085	666	947	5,681	2,284

b) Interest Rate Risk

The weighted average rate of interest on the floating rate financial liabilities at 30 June 2011 is 2.6% (2010: 1.7%) with a weighted average of 6.6 years (2010: 7.4 years). At 30 June 2011, the weighted average rate of interest on the fixed rate liabilities comprises 6.99% (2010: 6.99%) on sterling bank loans with a weighted average of 10 years (2010: 11 years) and 3.7% (2010: 3.7%) on the finance lease obligations with a weighted average of 1 year (2010: 2 years). The provisions are expected to mature within 2 years.

Short term flexibility in liquid resources is achieved by overdraft and invoice discounting facilities. At 30 June 2011, these facilities, where all conditions precedent have been met, were £7.5m (2010: £7.4m) which expire within one year.

At 30 June 2011, if interest rates on UK sterling denominated borrowings had been 50 basis points higher/lower with all other variables held constant, the loss for the financial year would have been £41,000 (2010: £49,000) lower/higher mainly as a result of higher/lower interest expense on floating rate borrowings.

The profile of the Group's Cash and cash equivalents is:

	30 June 2011	30 June 2011		30 June 2010	30 June 2010
	Floating rate	Fixed rate		Floating rate	Fixed rate
	financial assets	financial assets	30 June 2011	financial assets	financial assets	30 June 2010
	£'000	£'000	£'000	£'000	£'000	£'000
Cash
- Sterling	(2,507)	-	(2,507)	1,122	-	1,122
- US dollar	670	-	670	258	-	258
- Chinese renminbi	162	-	162	296	-	296
- Euro	1,136	-	1,136	604	-	604
- Australian dollar	1,139	554	1,693	1,438	454	1,892
- Russian rouble	11	-	11	192	-	192
- UAE dirham	160	-	160	458	-	458
- Other	86	-	86	86	-	86
	857	554	1,411	4,454	454	4,908

c) Liquidity Risk

All trade and other payables and borrowings are disclosed at their contractual undiscounted values since the impact of discounting is insignificant.

d) Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due to the Group's adherence to its credit risk policy. Management believes there is no further credit risk provision required in excess of normal provision for doubtful receivables.

Management assesses credit limits on a project by project basis. Levels of working capital balances are reviewed and acted upon on a monthly basis by senior management in order to mitigate such credit risk. Credit risk in respect of cash and deposits is limited and mitigated by the counterparties who are financial institutions with high credit ratings.

e) Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the costs of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio which is calculated as net debt divided by total capital. Net debt is defined as total current and non-current borrowings less cash and cash equivalents. Total capital is calculated as total shareholders' equity as shown in the consolidated balance sheet plus net debt. The gearing ratio at the end of the current year is 21.4% compared to 16.6% as at 30 June 2010. This change is principally due to an increase in net debt during the year .

29 Ultimate Controlling Party

In the opinion of the directors the Company has no controlling party.

Independent Auditors' Report to the Members of Waterman Group Plc

We have audited the parent company financial statements of Waterman Group plc for the year ended 30 June 2011 which comprise the Parent Company Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective Responsibilities Of Directors And Auditors

As explained more fully in the Directors' Responsibilities Statement set out on page 34, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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 The Audit Of The Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Financial Statement to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion On Financial Statements

In our opinion the parent company financial statements:

• give a true and fair view of the state of the company's affairs as at 30 June 2011;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion On Other Matters Prescribed By The Companies Act 2006

In our opinion:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors' Report for the financial year for which the parent company financial statements are prepared is consistent with the parent company financial statements.

Matters On Which We Are Required To Report By Exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Other Matter

We have reported separately on the group financial statements of Waterman Group plc for the year ended 30 June 2011.

Fiona Kelsey (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 17 October 2011

Parent Company Financial Statements

The following parent company financial statements are prepared under UK GAAP and relate to the Company and not to the Group. The statement of accounting policies which have been applied to these accounts can be found on page 76 and a separate independent auditors' report on page 74.

		2011	2010
Company Balance Sheet as at 30 June 2011	notes	£'000	£'000
Fixed assets
Tangible assets	34	8,866	9,177
Investments	35	19,641	19,680
		28,507	28,857
Current assets
Debtors	36	10,226	13,381
Cash at bank and in hand		2,361	2,129
		12,587	15,510
Creditors (amounts falling due within one year)	37	(12,524)	(18,704)
Net current assets / (liabilities)		63	(3,194)
Total assets less current liabilities		28,570	25,663
Creditors (amounts falling due after more than one year)	37	(8,733)	(3,647)
Net assets		19,837	22,016
Capital and reserves
Called up share capital	40	3,076	3,076
Share premium reserve	41	11,881	11,881
Merger reserve	41	3,144	3,144
Other reserve	41	140	140
Profit and loss reserve	41	1,596	3,775
Equity shareholders' funds	42	19,837	22,016

The financial statements which comprise the Company Balance Sheet and related notes were authorised for issue by the directors on 17 October 2011 and are subject to the approval of the shareholders at the AGM on 09 December 2011. They were signed on behalf of the directors by:-

R S Fidgen N J Taylor

Chairman Chief Executive

The notes on pages 76 to 80 are an integral part of these parent company financial statements.

Notes to the Parent Company Financial Statements

30 Accounting Policies

The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared under the historical cost convention and on a going concern basis in accordance with applicable United Kingdom accounting standards and law. The more significant accounting policies are set out below. They have all been applied consistently throughout the current and preceding year unless otherwise noted.

Pension Costs

The Company operates a defined contribution scheme including a stakeholder scheme which is open to all qualifying staff. Company contributions to these schemes are charged to the profit and loss account in the year to which they relate.

Tangible Fixed Assets And Depreciation

Tangible fixed assets are stated at cost when acquired, less depreciation and when appropriate, provision for impairment. Depreciation is provided at rates calculated to write off the cost of tangible fixed assets less estimated residual values over the expected useful economic lives of the assets concerned. The annual rates used are:

Plant, equipment and motor vehicles 15-33% per annum straight line Freehold land is not depreciated

Freehold buildings and long leasehold property 2% per annum straight line or lease period if less

Investments

Investments in subsidiaries are accounted for at cost less impairment.

Deferred Taxation

Deferred taxation is provided in full on an undiscounted basis on all timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in tax computations in periods different from those in which they are included in the financial statements.

A net deferred tax asset is regarded as recoverable and is recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be sufficient taxable profits in the foreseeable future from which the reversal of the underlying timing differences can be deducted.

Financial Risk Management

The Company policy for managing financial risk is in line with the Group financial risk management policy as set out in note 1 to the consolidated financial statements.

31 (Loss) / Profit For The Year

The Company has not presented its own profit and loss account or cash flow statement as permitted by section 408 of the Companies Act 2006. The parent company loss after tax of £1,875,942 (2010: £456,064 profit) is after dividends receivable from subsidiaries of £1,309,000 (2010: £548,000).

The auditors' remuneration for audit services to the Company was £20,000 (2010: £20,000).

32 Staff Costs

Employee costs during the year, including directors, amounted to:

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Wages and salaries	2,191	2,315
Social security costs	259	259
Pension costs	96	90
	2,546	2,664

Average monthly number of employees including executive directors during the year was as follows:

	Number	Number
Non-technical	58	65

Directors' emoluments during the year amounted to:

	Year ended 30 June 2011 £'000	Year ended 30 June 2010 £'000
Aggregate emoluments for qualifying services	576	679
Company contributions to money purchase pension schemes	50	60
Five directors have retirement benefits accruing under money purchase pension schemes (2010: 8).
Highest paid director
Aggregate emoluments including gains on exercise of share options	231	231
Company contributions to money purchase pension scheme	23	23

33 Dividends

Dividends proposed and paid in the year are disclosed in note 8 to the consolidated financial statements.

34 Tangible Assets

30 June 2011	755	5,774	6,529
Disposals	-	(155)	(155)
Charge for the year	68	603	671
01 July 2010	687	5,326	6,013
Depreciation
30 June 2011	8,730	6,665	15,395
Disposals	-	(155)	(155)
Additions	-	360	360
01 July 2010	8,730	6,460	15,190
Cost
	£'000	£'000	£'000
	freehold property	and motor vehicles	Total
	Land and	Plant, equipment

Net book amount

30 June 2011	7,975	891	8,866
30 June 2010	8,043	1,134	9,177

30 June 2011	17,778	1,863	19,641
Return of share capital	(10)	-	(10)
Impairment	(29)	-	(29)
01 July 2010	17,817	1,863	19,680
	£'000	£'000	£'000
35 Investments	Shares in Group undertakings	Long term loan to Group undertaking	Total

Further details on the company's principal subsidiary undertakings at 30 June 2011 are disclosed in note 13 to the consolidated financial statements.

36 Debtors

	Company	Company
	30 June 2011	30 June 2010
Amounts falling due within one year:	£'000	£'000
Trade debtors	3	15
Amounts owed by subsidiary undertakings	8,040	11,242
Other debtors	658	288
Corporation tax	194	377
Prepayments and accrued income	1,331	1,459
	10,226	13,381

Amounts owed by subsidiary undertakings are unsecured, interest free and repayable on demand. The Company's other debtors include £631,000 relating to deferred taxation (2010: £220,935). Further disclosure on deferred taxation can be found below:

	Company 30 June 2011	Company 30 June 2010
	£'000	£'000
The deferred tax asset comprises: Depreciation in excess of capital allowances	115	190
Short-term timing differences	73	31
Unutilised losses carried forward	115	-
	303	221
Asset at the beginning of the year including deferred tax asset on pension accrual	221	216
Amount credited to profit and loss reserve	82	5
Asset at the end of the year including deferred tax asset on pension accrual	303	221

37 Creditors

	Company	Company
	30 June 2011	30 June 2010
Amounts falling due within one year:	£'000	£'000
Bank loans and overdraft	10,093	15,930
Trade creditors	1,418	1,275
Amounts owed to subsidiary undertakings	127	505
Other creditors	22	8
Accruals	864	986
	12,524	18,704

Amounts owed to subsidiary undertakings are unsecured, interest free and repayable on demand.

	Company	Company
	30 June 2011	30 June 2010
	Bank loans	Bank loans
Amounts falling due after more than one year:	£'000	£'000
Repayable by instalments
Between one and two years	1,314	264
Between two and five years	3,931	790
Between five and ten years	3,488	2,593
	8,733	3,647

Further disclosure relating to the Company's bank loans is shown in note 17 to the consolidated financial statements.

38 Pension Costs

The Company operates a number of defined contribution schemes including a stakeholder scheme which is available to all qualifying staff. Company contributions to these schemes are charged to the profit and loss account in the year to which they relate. The total amounts charged are disclosed in note 32 to these parent company financial statements.

39 Operating Lease Commitments

		Property		Plant and equipment
	30 June 2011 £'000	30 June 2010 £'000	30 June 2011 £'000	30 June 2010 £'000
Commitment expiring:
- within one year	359	34	-	10
- within two to five years	392	2,011	4	6
- after five years	173	588	-	-
	924	2,633	4	16

40 Called up Share Capital

The detailed breakdown of share capital together with options and awards over the Company's shares outstanding at 30 June 2011 are set out in notes 18 and 19 to the consolidated financial statements.

41 Reserves

30 June 2011	11,881	3,144	140	1,596
Dividend	-	-	-	(303)
Loss for the year	-	-	-	(1,876)
01 July 2010	11,881	3,144	140	3,775
	£'000	£'000	£'000	£'000
	reserve	reserve	reserve	reserve
	Share premium	Merger	Non-distributable	Profit and loss

42 Reconciliation of Movements in Shareholders' Funds

	Company	Company
	30 June 2011	30 June 2010
	£'000	£'000
(Loss) / profit for the year	(1,876)	456
Dividends	(303)	(548)
	(2,179)	(92)
Net decrease to shareholders' funds	(2,179)	(91)
Shareholders' funds as at 01 July	22,016	22,107
Shareholders' funds as at 30 June	19,837	22,016

43 Related Party Transactions

The Company has taken advantage of the exemptions within FRS 8 Related Party Transactions not to disclose transactions between wholly owned Group companies.

The Company does have an interest in subsidiary undertakings where less than 90% of the voting rights are controlled within the Group. Transactions occurred with Waterman AHW Pty Limited in the normal course of business and the year end balance is disclosed below;

	Company	Company
	30 June 2011	30 June 2010
Amounts owed by related party	£'000	£'000
Waterman AHW Pty Limited	86	86

Five Year Results Summary

				Restated
	2007	2008	2009	2010	2011
	£'000	£'000	£'000	£'000	£'000
Revenue	103,903	136,418	122,401	83,244	74,097
Profit / (loss) before taxation	5,094	6,991	2,586	(5,044)	612
Profit / (loss) attributable to the owners of the parent	3,347	3,756	2,517	(5,139)	120
Basic earnings / (loss) per share	11.7p	12.9p	8.6p	(16.9p)	0.4p

The Five Year Results Summary above relates to the Group consolidated financial statements and not those of the parent company.

Share Dealing Service

A share dealing service is available to existing shareholders to buy or sell the Company's shares via Capita Share Dealing Services. Online and telephone dealing facilities provide an easy to access and simple to use service.

For further information on this service, or to buy or sell shares, please contact www.capitadeal.com for online dealing or 0871 664 0454 for telephone dealing (calls cost 10p per minute plus network extras).Lines are open Monday to Friday from 8 a.m.to 4.30 p.m.

	% of Trade
	Minimum Value	Minimum Charge	Maximum Charge
Telephone	1.5%	£25.00	£102.50
Internet	1.0%	£20.00	£75.00

An additional £1 PTM Levy is applicable for transactions over £10,000 and Stamp Duty applies to all purchases. Please note that the directors of the Company are not seeking to encourage the shareholders to either buy or sell their shares. Shareholders in any doubt as to what action to take are recommended to seek financial advice from an independent financial adviser authorised by the Financial Services and Markets Act 2000.

Advisers

Stockbrokers and Financial Advisers Evolution Securities Ltd 100 Wood Street London EC2V 7AN

Auditors

PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH

Solicitors Ashurst Broadwalk House 5 Appold Street London EC2A 2HA

Principal Bankers HSBC Bank plc 8 Victoria Street Westminster London SW1H 0NJ

Registrars and Transfer Office Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU

Company Registration Number 2188844

Financial Calendar

07 December 2011	Ordinary shares quoted ex-dividend
09 December 2011	Annual General Meeting 2011
09 December 2011	Record date for proposed final dividend
10 January 2012	Final dividend payable
February 2012	Interim results announced for the six months to 31 December 2011
April 2012	Interim dividend payable
October 2012	Preliminary announcement of results for the year to 30 June 2012
December 2012	Annual General Meeting 2012

Waterman Presence (UK)

Belfast

4th Floor, 51-53 Fountain Street, Belfast, County Antrim BT1 5EB t +44 28 9072 7680 f +44 28 9072 7681

Birmingham

Civic House, 156 Great Charles Street, Queensway, Birmingham B3 3HN t +44 121 212 7700 f +44 121 212 7701

Brentwood

Regent House, Hubert Road, Brentwood, Essex CM24 4JE t +44 1277 238 100 f +44 1277 238 150

Bristol

Merchants House, Wapping Road, Bristol BS1 4RW t +44 117 937 8200 f +44 177 937 8279

Cardiff

38 Cathedral Road, Cardiff CF11 9LL t +44 29 2038 4400 f +44 29 2038 4544

Derby

Lockington Hall Business Centre, Lockington, Derby DE74 2RH t +44 1509 674567 f +44 1509 674623

Dundee

47 Byron Street, Dundee DD3 6QT t +44 1382 832042 f +44 1382 828925

Edinburgh

2 - 4 Canning Street Lane, Edinburgh EH3 8ER t +44 131 221 7020 f +44 131 221 7099

Glasgow

Cumbrae House, 15 Carlton Court, Glasgow G5 9JP t +44 141 418 1900 f +44 141 418 1990

150 West Regent Street, Glasgow G2 2RQ t +44 141 222 4770 f +44 141 222 4771

Inverness

Thistle House Beechwood Park North Inverness IV2 3ED t: +44 1463 898023

Leeds

Bradshaw House, 31 Waterloo Lane, Bramley, Leeds LS13 2JB t +44 113 256 3322 f +44 113 257 5871

Vicarage Chambers, 9 Park Square East, Leeds LS1 2LH

t +44 113 209 1540 f +44 113 209 1541

Lingfield

Dippen Hall, Eastbourne Road, Blindley Heath, Lingfield RH7 6JX t +44 1342 893800 f +44 1342 894212

London

Pickfords Wharf, Clink Street, London SE1 9DG t +44 20 7928 7888 f +44 20 7928 3033

Manchester

South Central, 11 Peter Street, Manchester M2 5QR t +44 161 839 8392 f +44 161 839 8394

Newcastle-upon-Tyne

Generator Studios, Trafalgar Street, Newcastle-upon-Tyne NE1 2LA t +44 191 230 6200 f +44 191 230 6279

Nottingham

Halifax House, Halifax Place, Nottingham NG1 1QN t +44 115 948 2612 f +44 115 948 2610

Sheffield

Belgrave House, 47 Bank Street, Sheffield S1 2DR t +44 114 229 8900 f +44 114 229 8901

Waterman Presence (Overseas)

Australia

Suite 40, 1 Park Road Milton, Brisbane, QLD 4064 t +61 7 3512 7500 f +61 7 3217 5153

Level 4, 10 Help Street, Chatswood, Sydney, NSW 2067 t +61 29 411 9900 f +61 29 415 1717

60 Park Street, South Melbourne, Victoria 3205 t +61 39 685 9900 f +61 39 685 9999

China

107 D.D. Centre, 26 Jie Da Road 3rd Avenue, TEDA, Tianjin 300457 t +86 22 598 35150 f +86 22 598 35110

India

Seshasaai, 4/606, 1st Main Road, Nehru Nagar, Kottivakam, Chennai 6000041 t +91 442 454 2929 f +91 442 454 2931

Ireland

Wilson House, Fenian Street, Dublin 2 t +353 1 664 8900 f +353 1 661 3618

Kazakhstan

Prospekt Dostyk, 117/6, Central Entrance, 8th Floor 050059, Almaty t +7 7272 952616 f +7 7272 952618

Russia

7th Floor, Building 26 Ulitsa Pravdy, Moscow 125040 t +7 495 981 00 07 f +7 495 787 37 17

United Arab Emirates

Office M-29, Bin Arar Tower, Al Najda Street PO Box 112358, Abu Dhabi t +971 2 495 2817 f +971 2 674 0066

G01, Ibn Battuta Gate Office PO Box 117448, Dubai t +971 4 423 1600 f +971 4 454 2490

Pickfords Wharf, Clink Street, London SE1 9DG t +44 (0)20 7928 7888 f +44 (0)20 7928 3033 www.watermangroup.com

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