Weir Group Inc. — Annual Report 2013

Jun 30, 2013

Waterman Group Plc

Contents

• Aims, Strategy Pathway, Targets
• Highlights
• Positive Recovery
• Awards
• Chairman's Statement
• Structures
• Building Services
  • Energy, Environment & Design
• Civil & Transportation
• International
• Board of Directors
• Financial Statement
• Financial Review
• Corporate Responsibility
• Statement of Directors' Responsibilities
• Remuneration Committee Report
• Audit and Risk Committee Report
• Corporate Governance Report
• Directors' Report
• Independent Auditors' Report to the Group
• Consolidated Income Statement
• Consolidated Statement of Comprehensive Income
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement
• Consolidated Statement of Changes in Equity
• Notes to the Consolidated Financial Statements
• Independent Auditors' Report to the Company
• Parent Company Financial Statements
• Notes to the Parent Company Financial Statements
• Five Year Results Summary
• Company Information and Advisers
• Financial Calendar
• Waterman Presence

Aims

• Our vision is for Waterman to be Consultant of Choice to our employees, clients and shareholders.
• Our strategy is to focus on our core markets to gain a greater share of the available opportunities through the recognition of our design excellence and the calibre and relationships of our engineers and consultants.
• We seek to achieve a return on capital employed significantly higher than current levels.
• Our objective is to drive shareholder value.

Strategy Pathway

Our three year strategy for growth of profit and shareholder value has been developed around two main building blocks of economic factors and self help.

We aim to generate greater profits through:-

• Growing revenue and profit as our clients grow and invest in development.
• Increasing utilisation through resource sharing and continued investment in computer technology.
• Gaining a greater market share though our client relationships and acknowledged design excellence.

Targets

• Tripling of the adjusted profit before tax over the next three years.
• Move towards an adjusted earnings per share to dividend cover of 2 times over the economic cycle, subject to the Group having sufficient cash reserves.

Highlights

	2013	2012
Revenue	£66.8m	£68.8m
Earnings before interest,tax,depreciation, amortisation and exceptional items	£1.7m	£2.1m
Profit before tax	£0.4m	£0.5m
Adjusted profit before tax*	£1.1m	£1.1m
Basic Loss per share	(0.4p)	(0.3p)
Adjusted earnings/(loss) per share*	1.4p	(1.0p)
Total dividend per share	0.5p	0.3p
Net cash	£1.1m	£0.9m
Tangible net asset value per share	52p	52p

*Adjusted for amortisation of acquired intangible assets and exceptional items

Sectors

Positive Recovery

Awards

GE Sustainability Award

6 Bevis Marks April 2013

6 Bevis Marks effectively retains over 50% of the original structural mass as a part of an extensive sustainability agenda that shortened the construction programme.

More energy efficient than the building it replaces.

BCO Regional Award Best Corporate Workplace

BCSA Structural Steelwork Design Award

Quadrant:MK May 2013

In judging, the Quadrant:MK was considered a significant development that despite the sheer scale of the project still displayed intricate attention to detail in its completion. Described as a challenging and ambitious project it has allowed Network Rail to consolidate a large number of its regional offices into a single facility. The building design is future proof with sustainability at its heart.

AirW1 July 2013

The Judges cited: ''This is an exemplar for imaginative incorporation of existing steelwork in a striking modern office/retail/residential development.''

David Shaw, Head of Regent Street Portfolio at The Crown Estate also commented: "Waterman have been a key member of the Regent Street Quadrant 3 team from the beginning. The BCSA Structural Steelwork Award is very well deserved as the structural solution to the project and its execution was a crucial part of our success."

Waterman were selected as a finalist in the UK Consultant of the Year category at the NCE/ACE 2013 Consultant of the Year awards.

Chairman's Statement

e are very pleased with the encouraging progress that Waterman Group ("Waterman" or the "Group") is making. Despite the backdrop of challenging markets which is reflected in the results for the period, we have implemented a strategy to reposition the Group. The result is a solid platform from which we are planning to drive significant growth.

Market conditions have improved in our core markets. This bodes well and we are much more confident about the future. We are now in the first year of a three year plan to drive a sustainable improvement in our financial performance. We anticipate that over this three year period we will build upon the current positive momentum, which we plan will result in a significant improvement in the Group's profitability. Our target is to triple the Group's adjusted profit before tax over the next three years. The executive team has developed a long term business plan to support this projected growth, which we anticipate will build value for our shareholders.

To reflect our confidence in the outlook for the Group's future performance the Board has recommended to shareholders a final dividend of 0.3p (2012: 0.2p) making a total dividend for the year of 0.5p. This is an increase of 67% on last year.

Improving UK Market

Our main business is focused on the UK market where over three quarters of the Group's revenue is generated and where we are pleased to report that we are seeing real signs of growth. This is due to a combination of the restructuring that we have already carried out and growth in demand for the Group's services as the UK economy improves. Our clients in the property sector are much more positive and are committing to starting large scale development schemes. We are benefiting from our close relationships with these long term customers and this is driving the growth of our order book. Encouragingly, we are also increasing our market share as larger competitors are more heavily focused on other sectors.

The Group is very well placed in the UK market. We enjoy an excellent reputation and we are very confident that our position in the market will continue to strengthen, driving revenue and profit growth. We are in the first year of reporting an improved positive performance, but looking forward, we expect this business to be the main driver of our growth.

Strategic Initiatives

We have benefited from initiatives we have taken in recent years which have resulted in reductions in operating costs. The Board has continued to reduce the Group's exposure to markets which no longer provide us with prospects of adequate returns in the medium term.

During the last financial year, we have withdrawn from China and have restructured our London international operations and integrated them into our structural, environmental, building services and civil and transportation centres of excellence. By drawing upon existing client and consultant relationships we anticipate generating overseas project opportunities within a more cost effective structure.

On 29 July 2013, as part of an ongoing evaluation of the prospects in all our businesses, the Board decided to withdraw from the United Arab Emirates. In the financial year to 30 June 2014 we currently anticipate that we will incur exceptional costs of around £1.9m with a cash outflow of around £0.8m after anticipated receipts associated with the orderly wind down of operations and financial settlements in respect to debtors and work in progress.

Order Book Growth

Reflecting our improving markets and our strengthening market share, our order book has grown by 5% to £105m. Much of this is as a direct result of our leading position in the UK property market. Our commitment to maintaining our position as a niche consultant in this sector is setting us apart from some of our larger competitors. We continue to work with the top developers, who are committing to major new development projects.

During the period, we have secured several significant commissions including:-

• The structural design of the 1,000,000 (gross) sq ft new UK headquarters for Google UK Ltd at King's Cross, London. In July 2013 Waterman's design team was relocated to site for the construction phase.
• In a strategic partnership, Atkins and Waterman have been appointed as the sole Tier 1 supplier to the West Midlands Highways Alliance framework. This framework contract will deliver a broad range of municipal highways and engineering consultancy services across the region for four years from June 2013.
• In Australia, Waterman has been appointed as technical advisers to the Victoria State Government for all engineering services on the new AUD400m, 500 bed Ravenhall Prison in Melbourne.

Full Years Results

In the year to 30 June 2013, Waterman Group achieved revenue of £66.8m (2012: £68.8m). The adjusted pre tax profit before exceptional items was £1.1m (2012: £1.1m). The adjusted pre tax profit excludes £0.3m (2012: £0.5m) for amortisation of acquired intangible assets and exceptional items of £0.4m (2012: £0.1m).

The board believes that the Group's adjusted pre tax profit before exceptional items should be reported showing the amount due to non controlling interests in the Group's Australian businesses and that available to Waterman shareholders.

As shown below, the adjusted pre tax profit available to Waterman shareholders rose by £103,000 (26%) from £403,000 to £506,000. Whilst the effect of the slow down in the Australian economy reduced the Australian business contribution by £548,000, there was a significant improvement of £651,000 from the Group's wholly owned businesses.

	2013	2012	Change
	£'000	£'000	£'000
Adjusted PBT excluding exceptional items	1,059	1,052
Kazakhstan loss in closure year	0	312
Sub Total	1,059	1,364
Due to non-controlling interests	553	961
Waterman shareholders	506	403	+103
Australian businesses contribution	127	675	-548
Wholly owned businesses	379	(272)	+651

The basic earnings per share was a loss of 0.4p (2012: 0.3p loss). Adjusted earnings per share before amortisation of acquired intangible assets and exceptional items was a profit of 1.4p (2012: loss of 1.0p).

As at 30 June 2013, total net assets per share were 107p (2012: 109p), tangible net assets per share were 52p (2012: 52p) and net funds were £1.1m (2012: £0.9m).

Dividend & Dividend Policy

Reflecting our confidence in the future performance of the Group, we are increasing the dividend that we are paying to shareholders.

The Board is proposing to pay a final dividend of 0.3p per share (2012: 0.2p). Subject to approval by shareholders at the Annual General Meeting, the final dividend will be payable on 10 January 2014 to shareholders on the register on 13 December 2013. The final dividend together with the interim dividend of 0.2p paid on 19 April 2013 makes a total dividend for the year of 0.5p (2012: 0.3p), an increase of 67%.

The full year dividend is covered 2.8 times by adjusted earnings per share.

Looking forward, the Board's policy is to pursue a progressive dividend policy, with dividend cover broadly reflecting the growth in underlying earnings over time and the Group's outlook and prospects. The Board also aims to move towards an adjusted earnings per share to dividend cover of 2 times over the economic cycle, subject to sufficient cash being generated by the Group and its investment and working capital needs. Achieving the Board's target to triple adjusted PBT over the next three years would accordingly translate into substantial growth in dividends.

People

To underline our improving market position and the increasing demand for our services for the first time in four years we have embarked on a recruitment drive. We are expanding and enhancing our engineering teams to service the growth in opportunities and projects, particularly in the property, transport, waste and energy sectors.

I am pleased that the reputation of Waterman and the culture within the Group enables us to attract some outstanding candidates from graduate to director level. In response to an increase in our future workload our employee numbers have grown by 3% to 990 at 30 June 2013.

Waterman retains its strong brand and our loyal and experienced employees are our key asset. These employees have long term established relationships with clients which continue to generate opportunities and commissions in our core property, infrastructure and public sector markets.

The operational and management boards will be further rationalised and strengthened as we move forward to provide opportunities for the next generation of directors to contribute towards and share in the success of Waterman.

Board

Ric Piper joined the Board on 15 January 2013 as a Non-Executive director. John Archibald stepped down as Senior Independent Director on 28 February 2013 following which Ric has been appointed as Senior Independent Director and Chairman of the Audit and Risk Committee.

I thank John for his valuable contribution to Waterman over the last ten years.

Strategy

The Board's vision is for Waterman to be "Consultant of Choice" for our employees, clients and shareholders.

Our strategy is to focus on our core markets to gain a greater share of the available opportunities through the recognition of our design excellence and the calibre and relationships of our engineers and consultants. The restructuring completed to date will enhance our ability to service local markets and to integrate our teams more effectively to take advantage of available resources and increase utilisation.

Waterman's two main markets are the UK and Australia, which in the future will generate almost 94% of the Group's revenue. Whilst we are reliant on the strength of these economies to achieve our future objectives, we have mature, long established operations in these countries.

Outlook

The Board is increasingly confident that the steps we have taken to reposition the Group are now bearing fruit. Waterman is experiencing growth in several markets in the UK. In particular, our London based property clients are becoming increasingly active. This is providing opportunities and revenue, not only on commercial and residential developments in London, but also on retail developments throughout the UK.

The Group's secondment business, Waterman Aspen, which outsources engineers to County, Borough and City Councils on long term contracts, has in the first two months of the current financial year increased the number of staff on secondment by 16% to 248. Further secondment opportunities are anticipated in the short term.

In Australia, the economy is less predictable and the Federal Government elections in September 2013 have impacted on the timing of decisions for projects in the healthcare, judicial and education sectors which provide a significant proportion of our future workload in this region. Our offices in Australia in spite of the delays are continuing to make a positive contribution to the Group.

We anticipate that we will also be boosted by the actions we have taken during the last financial year to restructure our international operations in China and the UK. This is anticipated to increase the Group's annual profitability in the current and future financial years by £0.2m. Furthermore, the winding down of our operations in the United Arab Emirates is expected to further improve annual profitability by £0.3m from the beginning of the 2014/15 financial year.

Whilst it is still early in the financial year, the Board is looking forward with confidence. Waterman has now entered a new period of growth as a stronger and more focused business, whilst retaining the senior management who have the strong client relationships established over many decades.

Finally, on behalf of the Board, I would like to express our appreciation to all our shareholders, clients and staff who have supported Waterman over the years through our periods of restructuring and consolidation as we responded to the changing market conditions. I am grateful for the patience shown during what has been a difficult period. We are confident that over the next three years, the steps that we have taken to re-position the business will deliver an improved performance. This will enable the Board to deliver value for our shareholders and to increase the dividend consistently. The future for Waterman is much more positive than it has been for some years and I look forward to keeping shareholders informed of our progress.

Roger Fidgen Chairman 1 November 2013

STRUCTURES

aterman's structural business is able to report significant signs of improvement across the property sector. Structural teams are working on a variety of opportunities throughout the UK, including a number of projects that have moved forward as the market has become more buoyant. W

New commissions have increased the company's short to medium term order book. The recovery in London is more established and it is anticipated that this will continue and extend over time to the regions.

St James's Market, London, United Kingdom

Financial Performance

18% Group Revenue

£12m £1.1m 9.1%

2012 - £10.6m 2012 - £1.1m 2012 - 10.5%

Revenue Margin Operating Profit* * Operating profit is before exceptional items and acquired intangibles.

Commercial

London's commercial office sector continues to generate significant workload with both long term projects and new commissions. Waterman has commenced design work on the 90,000m2 new UK headquarters for Google UK Ltd at Kings Cross, London.

Land Securities has instructed the commencement of 1 and 2 New Ludgate, which will provide 40,000m2 of Grade A commercial space and foundation work has started on site. A second commission from Land Securities has been gained to proceed with the procurement of the construction of 1 New Street Square, London, a striking building providing 16 storeys of office space.

6 Bevis Marks, a 15,000m2 commercial building designed by Waterman for CORE is due to complete in November 2013 and recently won the Ground Engineering (GE) Sustainability Award for the innovative approach to the re-use of the existing foundations.

Planning consent was secured in January 2013 for 48 Leicester Square which will provide a mix of 17,500m2 of office and retail space. The project is for an overseas client with CORE as development manager. The design integrates the existing façade that was constructed over a lengthy period from 1926 to 1959, into a modern and inspirational architectural solution.

In Jersey, Waterman has been appointed to provide multi-disciplinary design services on the Jersey International Finance Centre located in The Esplanade Quarter. The project consists of six buildings and an underground car park, totalling 50,000m2 of Grade A office space and 520 car park spaces. Waterman has initially provided advice on the planning application for the development but has recently been instructed to progress the detailed design of one of the buildings.

Images courtesy of Wagstaffs Designs

Residential

The residential market has performed well and workload in multi storey, high quality apartment buildings is delivering a significant volume of long term work. Waterman is involved with projects in many London boroughs, but particularly along the South Bank from Vauxhall to London Bridge. Additionally, Waterman designed schemes in the West End, Chelsea and the City are being progressed with confidence by our clients.

Neo Bankside, adjacent to the Tate Modern Gallery is now nearing completion and new projects such as Clarges Estate in Mayfair have recently commenced. Earlier this year Barratt East London appointed Waterman to design seven buildings at its East London development, Barrier Park East. The two 14 storey buildings will provide 284 one, two and three bed apartments.

Student accommodation projects are under development in various locations. The Mayflower Halls scheme at Southampton for Osbourne Developments is making good progress and will provide over 1,000 rooms and facilities for a modern student environment when completed in 2014. The structural work on the 350 room student accommodation for Greenwich University with McLaren Construction is nearing completion.

Urban Regeneration

As areas of towns and cities become outmoded and in need of redevelopment, opportunities for major urban regeneration arise, providing a mix of commercial, retail and residential space. Waterman is currently involved in projects which include in excess of 400,000m2 of potential future development in inner city areas with developers such as Hammerson, Land Securities, Intu, Westfield and Lend Lease.

Land Securities are proceeding with the procurement of the construction of 1 New Street Square, London, a striking building providing 16 storeys of office space.

Waterman's on-going relationship with The Crown Estate has resulted in its continued involvement in the regeneration of the Regent Street and St James's area of London and retail led schemes in Oxford and Exeter which are being developed jointly by The Crown Estate and Land Securities.

Waterman has been appointed for the structural design of Block W4, Regent Street. The development comprises a six storey, steel framed building above a two level basement, providing retail accommodation at ground and basement and 12,000m2 of commercial space above ground floor. The project retains listed façades and one of the remaining listed Nash designed vaults in the basement, which was apparently used by the Royal Family as a wine cellar until 1950.

Block W5, a second building designed by Waterman in Regent Street providing 11,000m2 of commercial offices has recently commenced on site.

Waterman has been appointed for the redevelopment of two sites also owned by The Crown Estate between Haymarket and Lower Regent Street, known as St James's Market. This development consists of two substantial buildings providing in total 31,000m2 of commercial and retail lettable area and is anticipated to commence on site later this year.

Waterman has been providing early scheme advice and support to the successful planning application for Barts Square, a large mixed use redevelopment in West Smithfield. The proposed scheme includes 215 high quality apartments, 23,000m2 of office space across two buildings and 2,300m2 of complimentary retail, restaurant and leisure use.

Energy / Industrial

Work on the major new electricity substation in Edinburgh at Dewar Place has made considerable progress on site and the new facility will shortly be providing a more secure power supply to a large area of Edinburgh. Further phases of work at the site are planned for the future.

Waterman is working closely with construction companies and process engineers on energy from waste PFI projects. The North Allerton and Hertfordshire schemes are making progress and design work is expected to commence this year.

The 31,000m2 extension to the Princes soft foods drinks factory in Bradford has commenced on site. A new manufacturing facility in Lincoln for specialist steel forging company, Bifrangi is nearing completion and this will include the largest press in the UK, weighing 1,700 tonnes.

Education

As part of the BAM delivery team, Waterman has completed the Science Academy in Bradford which is a free school. Additional projects with BAM are the Maltby Academy and Boulevard Academy in Hull which are both on site and due to be completed in 2013

Waterman's strong relationship with contractors has resulted in commissions for additional primary schools in Sheffield and London. Work has begun on the Priority Schools Building Programme which includes two secondary schools in Stratford, East London and another in Greenwich.

Retail

Waterman's workload in the retail sector has gradually increased during the year and the company is currently providing early planning advice on over 500,000m2 of future development.

Tender information is being prepared on the 100,000m2 Victoria Gate, Leeds development for Hammerson with the first phase of design for the new John Lewis store well underway. Friars Walk in Newport, South Wales will provide a new town centre development of 39,000m2 and the scheme has recently secured planning consent.

The major supermarket retailers have changed their strategy to focus more on smaller units. Waterman's work for Tesco on the Express roll out programme is continuing and the company is advising on a large number of these projects throughout the UK.

BUILDING SERVICES

W aterman's building services business has seen a significant growth in its core markets in the second half of the year with a resultant improvement in margins. It has gained a greater share of work from the London market, particularly in the commercial and residential sectors. Alongside this, there has been more activity in all the regions across a diverse range of market sectors.

1 & 2 New Ludgate, London United Kingdom

Commercial

The demand for commercial office space in London has improved throughout the year. This has been reflected in the recent successful letting of Waterman designed projects, 1 St Paul Churchyard for AXA, completed in June 2013 and Finsbury Circus House completed for CORE / Union Investment in spring 2013. In addition 6 Bevis Marks, a 15,000m2 commercial development is due to complete in 2013 and Waterman provided multi discipline services on this project.

Waterman has been appointed on several new build schemes, including 251-258 Tottenham Court Road, a commercial office and retail scheme for Exemplar which was submitted for planning this summer. The improvement in the market is further reflected in Land Securities' decision to progress with the 40,000m2 1 & 2 New Ludgate scheme, as well as the recent Stanhope / Mitsui purchase of the One Angel Court site to develop the scheme previously designed by architect Fletcher Priest and Waterman in 2011.

Residential

Image courtesy of Hammerson

Waterman has continued to secure future commissions on prestigious residential and mixed use developments. The residential market has remained robust in London and commissions have been received on several significant schemes including the mixed use Clarges Estate Development in Mayfair for British Land and Old Burlington Street for Native Land. Several projects have progressed to site including Buildings P1 and T1 for Argent at Kings Cross and the Bentley House student accommodation development for Quintain / Wellcome Trust.

Hotels and Leisure

The last six months have seen an improvement in the hotel and leisure market and this is expected to provide new opportunities in the coming year. The design of the 100 bedroom Bow Street Boutique Hotel which is being developed within the Grade 2 listed former Magistrates Court and Police Station for Rudolf Ploberger, has been completed and the project has now progressed to site.

Retail

The retail sector has been providing work for the company's regional offices. Design is being carried out for retail parks in Leeds, Bristol and Birmingham including a major redevelopment of Battery Retail Park in Selly Oak which is at planning stage for Hammerson. Waterman is providing engineering services design for the on-going upgrades to the Bentall Centre at Kingston for Aviva and The Meadows retail centre at Chelmsford for Legal and General.

Education

Despite tthe reduction in government spending, Waterman has maintained its workload in the education sector, with nine secondary school projects completed during the year. The Building Schools for the Future (BSF) programme is still providing work with the Moat Community College, Ellesmere School and English Martyrs' Catholic School successfully completed on behalf of the Dodd Group as part of the Leicester BSF programme. St Albans Academy in Birmingham which received a National RIBA regional award was also completed in the year. Waterman has been appointed by BAM for the services design of Stratford School Academy at the Grosvenor Road and Upton Lane sites. The higher education sector has also contributed to workload with projects including an energy centre and a student residence scheme.

6 Bevis Marks, a 15,000m2 commercial development is due to complete in 2013 and Waterman provided multi discipline services on this project.

Industrial and Commercial

Commissions have been received by the Bristol office for further phases of the Manufacturing Technology Centre (MTC) in Coventry. In June 2013 Waterman was appointed on the MTC consultancy framework and has recently started design work for the new Aerospace Confidential Facility. Following completion of the Precast Concrete Facility in Steetley for Explore Manufacturing, Waterman's original building services team has been reappointed for the proposed £20m extension to the facility.

Critical Systems and Facilities Management

Waterman Critical Systems group has enjoyed growth particularly within the facilities management transition planning market. This has resulted in a number of new commissions from Jones Lang LaSalle to support its Integrated Facilities Management transitions for various clients both in the UK and internationally including Nippon Sheet Glass Company and HSBC.

During the year Waterman was shortlisted for the CIBSE Client Energy Management Award 2013, due to achieving a year on year 20% energy cost reduction for client Slaughter & May.

The data centre market has continued to grow with demand for both new and upgraded facilities increasing. The Critical Systems group is starting the next phase of works on the infrastructure upgrades for Telecity Group and Visa Europe, plus projects for Ark Data Centres on their Cody Park and Spring Park campuses.

New commissions have been received from Talk Talk and the next phase of development at both of the Ark Data Centre campuses is now underway. In addition to providing design services and risk management, Waterman has now established itself as a market leader in the specialist field of certification and system verification, a service increasingly required by data centre operators.

Performing Arts

Waterman has a growing reputation in this important niche sector. The Everyman Theatre in Liverpool is close to completion and will include a new 400 seat theatre and a dedicated youth and community space. It will set a high benchmark for environmental sustainability with the inclusion of a natural ventilation system. Waterman has been appointed to the redevelopment on the site of the prestigious Shakespeare Theatre in Shoreditch which was discovered last year after an extensive archaeological dig. Under plans submitted to Hackney Council, the plot will be transformed into a 250 seat open-air amphitheatre, with an accompanying museum and exhibition space that will include the preserved and

ENERGY ENVIRONMENT & DESIGN

aterman's environmental business has strengthened its position as one of the UK's leading environmental consultancies. This was achieved by the delivery of a 12% growth in work done and a significant increase in profitability. W

Good progress has been made in the diversification of the business with investment in the waste permitting and planning team, growth from the aviation sector and development of Waterman's on-line products, EnviroRisk and Greenspace.

The company will look to maintain its long term relationships with clients by developing services and products which provide pragmatic, commercial advice and added value.

Elephant and Castle Regeneration, London, United Kingdom

11% Group Revenue

Image courtesy of Elephant & Castle Regeneration, park view. Lend Lease, in partnership with Southwark Council

£7.3m £490k 6.8% 2012 - £6.5m 2012 - £217k 2012 - 3.4%

* Operating profit is before exceptional items and acquired intangibles.

Revenue Operating Profit* Margin

Due Diligence & Environmental Management

It has been an excellent period for Waterman's due diligence service. The team consolidated its reputation as a leading advisor in the aviation sector. Commissions in the year included providing advice to companies bidding for Belfast, Stansted and Stockholm Skavsta Airports; supporting the successful acquisition of Hochtief Airports by PSP Investments, which included Budapest, Dusseldorf, Hamburg, Tirana, Athens and Sydney; on-going transactional support on four Russian airports; and advising on the sale and acquisition of Newcastle Airport.

The team has strengthened its position with private equity and institutional investor clients, due to the expansion of its Responsible Investment service. EnviroRisk Online was successfully launched during the year allowing online ordering of a wider range of Environmental Screening Reports in support of commercial lending.

Waterman's Greenspace Environmental Management System tool, which provides corporate environmental, health, safety and carbon management services, has been further developed and retains its leading market position. New applications include the Superuser function which allows efficient and cost effective control of multisite portfolios, attracting clients such as Network Rail and Tata Steel. There has also been growth internationally and Greenspace has been used by multinational corporations in Sweden, Holland and Australia to manage direct operations and/or supply chains.

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

Waterman has strengthened its position as a leading provider of pre-planning and EIA services for urban regeneration projects. EIAs have been undertaken for a number of major schemes which have recently received planning permission. Projects include Elizabeth House Waterloo for Elizabeth House Limited Partnership, Ram Brewery for Minerva, Smithfield Quarter for Henderson Global Investors (planning application and application for listed building consent currently 'called-in' by the Secretary of State), Portland House in Victoria for Land Securities, and the major regeneration of Elephant and Castle for Lend Lease.

Waterman has been retained by the Royal Mail Group as EIA consultant to support its proposals and planning applications in relation to the Mount Pleasant sorting office site into a mixed use development, providing 681 residential units, office and retail units and shared community space. Canary Wharf Group plc appointed Waterman as EIA consultant for two tall building developments; Heron Quays West and Newfoundland, adjacent to West India Docks. Planning applications were submitted to the London Borough of Tower Hamlets for these schemes in Spring 2013.

Outside London, Waterman has continued to increase its regional presence. EIAs have been carried out for Victoria Gate development in Leeds for Hammerson and for the expansion of WestQuay in Southampton. Waterman continues to support Wilson Bowden Developments' regeneration of Macclesfield town centre and has been retained by British Land and Centros for the development of a ten acre city centre site in Lancaster, known as Canal Corridor North.

In Scotland, Waterman has undertaken EIAs for two residential developments on the Edmonstone Estate in the greenbelt of south east Edinburgh. Additional new commissions include the provision of EIA services to Persimmon Homes and Gladedale for residential development within a new Community Growth Area to provide approximately 3,000 dwellings for the villages of Gartcosh and Glenboig in North Lanarkshire.

Waterman continues to provide sustainability services on high profile projects, including the new US Embassy in Vauxhall, Quadrant 2 in Regent Street for The Crown Estate and redevelopment of the Clarges Estate, a major new 19,350m2 residential led, mixed use scheme in Mayfair for British Land.

Waterman's landscape, archaeology and ecology teams have continued to deliver pre-planning services to sectors. The teams are currently working on a number Key Strategic Site in North Wales for Barwood Land and Estates, Tidbury Green in Solihull for Lioncourt Homes

Waterman's land quality team was appointed by the Bristow Group to support its bid for the £1.6bn ten year contract to take over the UK's helicopter search and rescue (SAR) operations on behalf of the Maritime and Coastguard Agency. Following the award of the contract in early 2013, Waterman has been providing a range of pre-planning assessments to support Bristow's planning applications for new SAR facilities, together with geoenvironmental site investigations for use in the design process.

Other key appointments have included work for the Royal Mail Group and LXB Retail Properties. Work has continued on the former 500 hectare US Air Force Base in Upper Heyford, Oxfordshire.

US Embassy, Vauxhall, London, United Kingdom Image courtesy of Kieran Timberlake

Other Markets

Waterman has continued to diversify the environmental business into non-property sectors. Recent commissions include the EIA for an Energy Recovery Centre in Hampshire, an EIA to accompany an application for the demolition of two gas holders in north London and the provision of various technical services relating to the decommissioning and demolition of a former paper mill in South Yorkshire. In Scotland, the team completed a number of assessments for small scale wind farms and hydro-electric proposals at sites in Perthshire, Lanarkshire and Ayrshire, motorway improvement works on the M90 in Fife, and continuing EIA and related work on several proposed energy from waste sites.

Waterman's waste planning team prepared environmental permit applications for waste transfer and treatment facilities in London, Kent and East Sussex and these included planning applications for the majority of sites. It also successfully provided an environmental permit application for the dismantling of aircraft at an airport in south east England.

In addition to providing support on numerous planning appeals, Waterman was appointed to assist a local authority to manage landfill legacy issues. Legislation compliance training has been given to clients, particularly in respect of their obligations under the Duty of Care, the application and understanding of the European Waste Catalogue code list, Waste Acceptance Criteria and Waste Acceptance Protocol.

Other public sector commissions have included technical studies to support a planning application for a new cemetery for Crawley Borough Council and a detailed constraints analysis for a proposed bypass through an environmentally sensitive area for Eastleigh

EnviroRisk Online was successfully launched during the year allowing online ordering of a wider range of Environmental Screening Reports in support of commercial lending.

CIVIL & TRANSPORTATION

aterman's civil and transportation consultancy business has experienced a mixed performance resulting from legacy operational issues and a recovery plan is underway.

Waterman Transport & Development and Waterman Boreham have been merged together and the restructure of the company and management has now been completed. Many offices have been affected by uneven workload and resources have been streamlined to increase utilisation.

Whilst London remains a buoyant market, 85% of our civil engineering resource is located in the UK regions to provide local services in transport, development planning, infrastructure design, power, energy and waste. The regions remain a tough market while investment activity by our clients is reduced.

Waterman Aspen, our civil engineering secondment business is growing again and has won several significant frameworks for the outsourcing of engineers into County, Borough and City Councils on long term contracts.

Cyfarthfa Retail Park, Swansea, United Kingdom

Financial Performance

Image courtesy of Hammerson

£25.6m £(303k) (1.2%) 2012 - £25.1m 2012 - £(232k) 2012 - (0.9%)

Revenue Operating (Loss)* Margin

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

Development Planning and Infrastructure Design

Waterman's engineering planning teams have experienced consistent workload during the year, particularly as a result of the demand for flood risk and water management services. More than one hundred projects of this type have been completed. Allied to this there was an improvement in the number of infrastructure schemes that have progressed to detailed design.

The teams have worked on a number of urban regeneration schemes throughout the UK. Work has continued on the Eastgate development in Leeds and The Junction Development in Oldbury and work is set to continue on both of these projects into 2014. Engineering planning work was carried out for the Whitgift development in Croydon and a number of smaller schemes have been progressed as part of the continuing development of central Milton Keynes.

Design work has been completed for the Laurieston Transformation and Regeneration project in Glasgow, and continues on the Mill Street Development in Aberystwyth, which is due to be tendered in early 2014.

Revenue has been generated from the residential sector across all regions and Waterman has carried out work on over 150 residential schemes for clients including Taylor Wimpey, Barratt Homes, Berkeley, Miller Homes, Persimmon Homes and Robertson.

Work in the retail sector has continued in the year. On-going projects include work at West Quay in Southampton, Westgate in Oxford, Cyfarthfa Retail Park in Swansea and Albotsinch Retail Park in Paisley. The Elliots Field project in Rugby has been submitted for planning and is expected to commence on site in 2014. Work was completed on a number of projects for Tesco and in June 2013 Waterman was reappointed to the Tesco framework for transport planning and highway design.

In other sectors, the Midlands team has been working on the Motor Industry Research Association (MIRA) technology park near Tamworth, designing the infrastructure necessary to allow the first phase of this development to commence. Work continues on further phases of the Manufacturing Technology Centre (MTC) at Anstey Park, Coventry; a major industrial research facility allowing collaboration between some of the UK's global manufacturers and the Universities of Birmingham, Nottingham and Loughborough.

In Scotland, work has progressed on Hampden Stadium in Glasgow, which is to be converted to host the 2014 Commonwealth Games. Design work is complete and the team will assist in the delivery of the temporary facilities in time for the opening ceremony. Waterman has also been appointed to provide engineering services for a number of other venues for the Games

Power, Energy and Waste

The current uncertainty regarding the future source of power generation in the UK, Waterman has continued to carry out work at a number of UK power stations. In particular, a major selective non catalytic reduction (SNCR) scheme has been completed at Fiddlers Ferry Power Station. Commissions for further upgrade projects are expected in the future.

Work has continued on a large number of schemes for the Transmission Distribution and Renewable energy divisions of Scottish and Southern Energy (SSE). Although this work will decrease as the grid reinforcement scheme in Scotland is completed, the company is well placed to win further work in this market sector in Scotland.

Waterman has been involved in the planning and design of wind turbine schemes throughout the UK and it is anticipated that this will provide continuing workload into 2014. In addition to this form of renewable energy, the company has recently been commissioned to plan and design a series of small scale hydroelectric schemes.

Consultancy advice has been provided on a number of anaerobic digestion waste to energy schemes and this has been associated with proving the viability of the schemes to obtain funding. This work is now complete and funding has been agreed for at least two schemes, which will allow them to progress to the design stage in late autumn 2013.

The conventional power generation and distribution market, the renewable energy, and waste to energy markets are anticipated to provide an increasing level of work for Waterman in the short to medium term, given the project experience that the company can demonstrate to potential clients.

Transport

The volume of work from the rail sector has been maintained during the year. The £75m Royal Arsenal and Woolwich Crossrail Station structure was completed on budget and ahead of programme. Work has continued on the associated development and this should be completed by the end of 2013. The specialised service offered by the rail team in London to developers who wish to obtain asset protection approvals from Network Rail and London Underground continues to be in high demand.

Waterman is currently working on five major projects in London and the sector is anticipated to provide continuous workload for the foreseeable future. The team also has experience of designing below ground structures and has recently been working on the enabling works at King's Cross for the major development by Argent Estates, which will be occupied by Google.

The rail team has been designing station upgrades as part of the National Station Improvement Programme and has been working on Woking, Clapham, Cambridge, Dover Priory, St Pancras and Severn Sisters stations. Design studies are currently being progressed to return the redundant Eurostar platforms at Waterloo back into operation. In Manchester, Waterman has frameworks with both Merseytravel, which is the integrated transport authority for Merseyside, and Metrolink RATP, which operates the Manchester tram system. The Waterman AutoRail database continues to be widely

used as the primary source of information for the UK rail network. Waterman has been reappointed by Network Rail to maintain the database and issue regular updates to subscribers, which include Network Rail, train operating companies, consultants and contractors.

The Waterman AutoRail database continues to be widely used as the primary source of information for the UK rail network. Waterman has been reappointed by Network Rail to maintain the database and issue regular updates to subscribers, which include Network Rail, train operating companies, consultants and contractors.

In the highway sector, Waterman continues to be involved in a number of schemes throughout the UK. Ongoing work includes additional phases of the Bedford Southern Bypass for Bedford Borough Council, a financial and environmental appraisal for the proposed Botley Bypass in Hampshire and the design of the South Montrose link road in Scotland.

Projects have been undertaken at both Gatwick and Heathrow Airports as part of the consultancy framework with British Airways. In addition, the team successfully completed a number of projects for London City Airport and further work in the aviation sector is being pursued.

Public Sector

Waterman has a number of active frameworks with councils in both England and Scotland and further frameworks are currently being tendered. Waterman's objective is to increase the proportion of work provided by public sector frameworks across all regional teams.

In the health care sector, design work has been completed on Ballymena Health and Care Centre in Northern Ireland and the project is due to start on site early in 2014. Other projects include the Kilbryde Hospice in East Kilbride and a number of medical centres and GP surgeries.

A series of projects have been undertaken in the education sector across a number of schools and further education establishments. A major project has been the Port Glasgow Joint Campus, which has been under construction during the year and is due for completion by the end of 2013. The team has now been appointed for the design of a new special needs school in Linwood near Glasgow. Engineering advice has been provided to Manchester Metropolitan University, Glasgow University Library and Sussex Coast College.

Secondment Services

Waterman Aspen provides secondment services primarily to the public sector and the recovery that started in January 2012 has increased during the second half of the financial year. The number of staff in secondments increased and by June 2013 it was over 200. A further 26 secondments were added in July and the demand is anticipated to remain high for the coming year.

Waterman is part of the East Midlands Highways Alliance Professional Services framework with URS and this has provided a significant level of work since it was won in 2011. In a strategic partnership, Atkins together with Waterman have been appointed as the sole Tier 1 supplier to the West Midlands Highways Alliance framework for a period of four years from June 2013. This has proved to be an immediate success providing a number of requirements for seconded staff.

Outside of these two frameworks, demand for seconded staff from councils has increased throughout England, whilst in Scotland the level of secondments has been maintained. A significant number of staff have been seconded into the rail industry and further expansion into this market is expected.

Health and Safety

Waterman Health and Safety provides consultancy services to clients across all market sectors in which Waterman operates.

The recovery of the property markets, both in London and the rest of the UK, has seen an increase in demand for health and safety consultancy services. This, coupled with framework agreements with Bristol Schools, Plymouth University, Enfield Council and long term projects at Broadmoor Hospital and the Haggerton and Kingsland regeneration project in London, has resulted in a sustained increase in workload during the year.

In addition to property market work, the team has seen an increase in work from the power and energy sector.

The volume of work from the rail sector has been maintained during the year. The £75m Royal Arsenal and Woolwich Station structure was completed on budget and ahead of programme.

INTERNATIONAL

aterman's international operations have continued to experience challenging conditions as projects stalled.

Action has been taken to reorganise and refocus the business to meet the demands of the available markets. During the year we withdrew from China and integrated our London operations into our UK structures and Building Services teams.

Waterman's future overseas focus is now on our main operations in Australia, Ireland and Russia where the economies are improving and where we have an established operation.

The Quay Project, Sydney, Australia

£16.5m £(326k) (2.0%) 2012 - £20.7m 2012 - £99k 2012 - 0.5%

Revenue Operating (Loss)* Margin * Operating (loss) is before exceptional items and acquired intangibles.

Australia

25% Group Revenue

Market conditions in Australia have been affected by slowing economies in China and the demand for minerals. Strategic diversification into stronger sectors has resulted in the Australian businesses continuing to generate healthy profitability. Work has focused on local projects across the country from the public and private sectors.

Projects in the telecommunications, education and residential sectors have contributed to the revenue of the Sydney office. Investment in the telecommunications sector is mostly driven by Australia's National Broadband Network infrastructure rollout and this resulted in Waterman undertaking significant infrastructure fibre cable design projects during the year.

Australian universities have continued to invest in infrastructure buildings and in Sydney, Waterman has been involved in the design of student accommodation, faculty facilities and a nanoscience research centre. In the expanding residential sector, the company has been working on several major developments including The Quay project for Parkview consisting of two towers, seventeen storeys in height. Other residential commissions include developments at exclusive suburbs in Lane Cove, Freshwater and Mosman and a major defence housing project. During the year, Waterman continued as lead consultant on behalf of Transport for New South Wales for the decommissioning of Sydney's iconic Monorail which is being removed to make way for further development around the city.

Major projects secured by our Sydney office include:

• 20,000m² fitout for international investment bank Goldman Sachs
• Barangaroo Headland Park for Baulderstone
• Goodman Fielder food manufacturing facilities
• High density data centre for Telstra

Image courtesy of WMK Architecture

• New support facilities for the electricity network operator Transgrid

Waterman's Melbourne office has continued to focus on diversifying its sector spread and has been actively marketing in the defence, justice and mixed use aged care sectors. Core business sectors such as residential, retail and education have remained slow, whilst others such as sport and recreation, court and prison works have increased in activity.

In Melbourne, work has continued on several projects including the Albury Wodonga Cancer Centre, Caulfield Hospital acute brain injury unit, Frankston Hospital emergency department, Kangaroo Flat indoor aquatic centre facility, La Trobe University rural health building and the Maroondan indoor aquatic centre.

Additional work has been secured throughout the year and the focus on marketing in some of the more specialist sectors has resulted in maintaining forward workload. Melbourne's extensive experience in the healthcare sector has resulted in tenders for work both nationally and internationally with several architectural partners. Targeted marketing into the expanding justice sector has generated several new commissions for court and prison complexes and it is anticipated that this will be a future area of growth for the business.

Recent projects secured by the Melbourne office include:

• 500 bed new Ravenhall Prison
• AUD260m Monash Children's Hospital
• AUD140m high rise residential development at St Kilda Road
• 20 storey hotel complex at Flinders Lane
• 120 bed aged care facility for BUPA

Commonwealth of Independent States (CIS)

Waterman's office in Moscow, Russia is the base of operations in the CIS, offering services throughout the region. Over the last twelve months trading conditions have continued to be difficult with competitive fee levels but with a reasonably steady workload and an increasing level of enquiries.

Phase two of the Khamovniki complex, a mixed use primarily residential development of 444,600m2 in Moscow has commenced and Waterman has completed the detailed design and has started working drawings for the substructure. There are a further three phases of the project to be developed in the future.

Other Waterman designed developments in Moscow which are currently progressing through the construction phases on site are Smolensky Basage, a 60,000m2 primarily commercial development and Smolensky Boulevard, a mixed use development.

During the year, several new commissions were won including a commercial development in St Petersburg, a large Jewish community project in Moscow and serviced apartments at Sadovnicheskaya. Waterman has continued to work as retained consultants for the Tsum retail centre in Moscow, completing the fit out of several retail units and has recently been appointed for the Hugo Boss store.

Europe

Waterman's European operations, which are focused on Ireland and Poland, have continued to experience the effects of the depressed conditions in the Euro zone and broader European market.

However, the second half of the financial year has seen positive signs that a tentative recovery is underway in both the Irish and Polish property markets and Waterman is well placed in both countries to take advantage of improved conditions.

In spite of the continuous decline in the construction sector in Ireland, Waterman has improved its market share and maintained its capacity. The Dublin team remains busy, with the civils group in particular benefiting from a number of planning commissions in the latter part of the year, as developers begin to reconsider development options after five years of inactivity. The entry of international property investors to the Irish market has given additional impetus to the nascent recovery.

Residential developers have been focused on Dublin and the east coast of Ireland. Waterman has submitted planning applications for a number of housing schemes and construction has commenced on two developments at Adamstown and Clongriffin. In the retail sector detailed designs have been completed for several supermarket developments including the Honeypark Neighbourhood shopping centre and a retail outlet in Terenure with works now progressing on site. The Aldi store at East Wall Road was completed and handed over in the year.

Whilst there has been little activity in the commercial sector in Dublin over the last five years, the demand for high quality office space is increasing. Waterman has been appointed by US Property Investment Fund, Kennedy Wilson, to provide multi disciplinary engineering services for a planned large commercial development at the prime Dublin city centre site at Sir John Rogerson's Quay. Kennedy Wilson has also retained Waterman to provide design services for the Clancy Quay mixed use development in Dublin.

The multi-user education campus in Monaghan and two other schools were completed on site during the year. Waterman is developing designs for five further educational facilities including the Kingswood Exemplar secondary school on behalf of the Irish Department of Education as a prototype for future school developments.

The property sector has improved gradually in Central Europe and opportunities have arisen in the refurbishment and upgrading of existing assets, due diligence work and early stage planning activities. In Poland, Waterman has continued to secure a steady stream of due diligence and BREEAM assessment work. Technical approvals were gained for the 100,000m2 retail development at Bialystock. Feasibility work was completed for the refurbishment of the 26,000m2 Pramerica office tower in Krakow, the tallest building in the city and Waterman is now progressing the detail design. The company has been retained as due diligence advisors for several retail, residential and commercial property transactions. Commissions have been completed for the Polish energy company PGE, together with transportation studies in support of a major extension to the Bremowo shopping centre in Warsaw.

The London based international team has completed a beachfront high-rise residential development in Accra, Ghana and the design of a major mixed development at Rostov in conjunction with Waterman's Moscow office. Variations in international workload during the year have led to the reorganisation of the London team and its amalgamation with the structural and building services teams responsible for UK work. This gives a more sustainable model for the future, with greater resources available and with the international expertise embedded in the teams. The new approach to service the global markets is showing some early signs of success with the recent appointment of Waterman to provide multidiscipline engineering planning and design services for the prestigious Trinity Place residential development in St Petersburg.

Middle East

The year has again been a difficult one for Waterman's Middle East operations with slow market conditions in the UAE and high competition for projects driving fee levels down.

The early part of the year was busy with commissions such as the 100,000m2 MICA retail mall on Kish Island and the Kazanah data centres in Dubai and Abu Dhabi. In addition to this work, Waterman was appointed for the design of a hotel and office complex in Lebanon by MAF Properties based in Dubai. In November, the

company's involvement in the major Al Muneera project at Al Raha Beach was finally concluded at the end of the contractor's defects period. MEP design work on the sixty storey City of Lights Office development was completed and the site inspection stage will continue until December 2013.

The second half of the year was quieter and ongoing projects included a new hotel for Meeras in Dubai, data centres in Mauritius and Oman, and the concept stage for the main hotel and residences at Khams Shamat in Sabourra. Site services on the refurbishment of the Deira City Centre Hotel in Dubai for MAF are continuing and the project is expected to complete in September 2013.

Waterman has recently completed its commission for the development of the ICT Strategy for the Heart of Doha project in Doha. The data centre operations team has continued to provide facilities management services on the three year term contract until December 2013 for the Injazat data centre in Abu Dhabi which was originally designed by Waterman.

On 29 July 2013, as part of an ongoing evaluation of the prospects in all our businesses, the Board decided to withdraw from the United Arab Emirates. In the financial year to 30 June 2014 we currently anticipate that we will incur exceptional costs of around £1.9m with a cash outflow of around £0.8m after anticipated receipts associated with the orderly wind down of operations and financial settlements in respect to debtors and work in progress.

Nicholas Taylor Chief Executive 1 November 2013

campus in Monaghan and two other schools were completed on site during the year. Waterman is developing designs for five further educational facilities including the Kingswood Exemplar secondary school on behalf of the Irish Department of Education as a prototype for future school developments.

The multi-user education

Board of Directors

Roger Fidgen Non-Executive Chairman

• Member of the Audit and Risk Committee
• Chairman of the Nomination Committee
• Member of the Remuneration Committee

Ric Piper Senior Independent Non-Executive Director

• Chairman of the Audit and Risk Commitee
• Member of the Nomination Committee
• Member of the Remuneration Committee

Geoffrey Wright Independent Non-Executive Director

• Member of the Audit and Risk Committee
• Member of the Nomination Committee
• Chairman of the Remuneration Committee

Alex Steele Finance Director

Nicholas Taylor Chief Executive

• Member of the Nomination Committee

Craig Beresford Executive Director

• Managing Director of Waterman Structures

Simon Harden Executive Director

• Managing Director of Waterman International

John Waiting Executive Director

• Managing Director of Waterman Transport and Development

Financial Statement Contents

• Financial Statement
• Financial Review
• Corporate Responsibility
• Statement of Directors' Responsibilities
• Remuneration Committee Report
• Audit and Risk Committee Report
• Corporate Governance Report
• Directors' Report
• Independent Auditors' Report to the Group
• Consolidated Income Statement
• Consolidated Statement of Comprehensive Income
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement
• Consolidated Statement of Changes in Equity
• Notes to the Consolidated Financial Statements
• Independent Auditors' Report to the Company
• Parent Company Financial Statements
• Notes to the Parent Company Financial Statements
• Five Year Results Summary
• Company Information and Advisers
• Financial Calendar
• Waterman Presence

Financial Review

Performance Summary

Group revenue of £66.8m (2012: £68.8m) was down by £2.0m (3%). In the UK, revenue increased by £2.0m (4%) to £50.2m (2012: £48.2m). Revenue from our International businesses decreased by £4.2m (20%) to £16.5m (2012: £20.7m), mainly as a result of reductions in revenue from our UAE and Australian operations which fell by 137% and 16% respectively.

Reported profit before tax was £0.4m (2012: £0.5m) after charging exceptional items of £0.4m (2012: £0.1m). The Board believes that a more representative measure is adjusted profit before tax, which was £1.1m (2012: £1.1m). Adjusted profit is calculated before exceptional items of £0.4m (2012: £0.1m) and amortisation of acquired intangible assets of £0.3m (2012: £0.5m).

Reported operating profit was £0.5m (2012: £1.0m). Excluding exceptional items and the amortisation of acquired intangibles, adjusted operating profit is £1.2m (2012: £1.3m) and adjusted operating margin was 1.7% (2012: 1.8%).

The exceptional items of £0.4m (2012: £0.1m) mainly relate to costs of closure of our Chinese operation, and restructuring costs in China and the UK. Further information is provided in Note 5 Exceptional Items in the Consolidated Financial Statements.

Key Performance Indicators

The Board uses a number of Key Performance Indicators (KPI's) to monitor financial performance. These include revenue, adjusted operating profit, cash collection v costs incurred and return on operating capital employed. These KPI's are monitored against budget and targets.

For the reasons noted above, revenue was below the prior year figure and budget. The remaining KPI's remained broadly stable in the current year.

The financial performance by discipline is reported in Note 2 Segmental Reporting to the Consolidated Financial Statements.

The Building Services, Energy Environment and Design, and Structures disciplines met or exceeded their targeted KPI's. Our International business was impacted by the factors noted above. As a result, revenue, adjusted operating profit and return on operating capital employed were below target. Our Civil and Transportation business was below target on both adjusted operating profit and return on capital employed.

The Group's primary management measure of return on capital employed was 7.6% (2012: 6.1%) as set out below:

	2013	2013	2012	2012	2011
	£000	£000	£000	£000	£000
Adjusted operating profit		1,162		1,263
Capital employed comprises:
Total equity	32,786		33,598		34,319
Net (cash) / debt	(1,116)		(883)		8,618
Goodwill	(16,713)		(17,110)		(17,193)
	14,957		15,605		25,744
Average capital employed		15,281		20,675
Return on average capital employed (%)		7.6%		6.1%

Looking ahead, the Board is targeting, over time, a return on capital employed of 20%.

Taxation

The tax charge for the year was £84,000 (2012: £40,000 credit), representing an effective tax rate of 23.7%. This rate is in line with the UK corporation tax rate of 23.75% for the period. The benefits of research and development tax credits offset the impact of the higher Australian tax rate and the effect of unrecognised losses. The taxation charge includes a net credit mainly from one off tax refunds of £57,000. If the credit were to be deducted from the charge, the taxation charge would be £141,000 representing an effective rate of 39.9%.

Earnings per Share

Basic EPS was a loss of 0.4p (2012: loss of 0.3p). Adjusted EPS was 1.4p (2012: loss of 1.0p). Adjusted EPS is calculated as follows:

Year ended		Year ended
	30 June 2013	30 June 2012
	£'000	£'000
Items attributable to the owners of the parent
Loss after taxation	(111)	(91)
Amortisation of acquired intangibles after taxation	208	334
Exceptional items after taxation	316	(63)
Adjusted profit / (loss) after tax	413	(320)
Adjusted earnings / (loss) per share	1.4p	(1.0p)

Dividends

Reflecting its confidence in the outlook for the Group, the Board proposes an increased final dividend of 0.3 p per share (2012: 0.2 p), which, if approved by shareholders at the Annual General Meeting to be held on Friday 6 December 2013, will be payable on 10 January 2014 to those shareholders on the share register on 13 December 2013. When added to the interim dividend of 0.2 p per share (2012: 0.1p), the total dividend for the year will increase to 0.5 p per share (2012: 0.3 p) giving dividend cover on adjusted earnings per share of 2.8 times.

Group Consolidated Balance Sheet

At 30 June 2013 the Group had net assets of £32.8m (2012: £33.6m), with 30.8m fully paid ordinary shares in issue (2012: 30.8m).

Capital Expenditure, Property, Plant and Equipment and Goodwill

Capital expenditure in the year was £0.6m (2012: £0.4m). The Group continues to invest in improvements within our offices and high specification computers to run the latest design software.

Property, plant and equipment at 30 June 2013 of £2.4m (2012: £2.4m) consists of a freehold property in Leeds with a net book value of £1.4m, office equipment and furniture, leasehold improvements, motor vehicles and computer equipment.

Net tangible assets at 30 June 2013 were £15.9m (2012: £16.0m) equivalent to 52p (2012: 52p) per share.

Goodwill of £16.7m (2012: £17.1m) was held at 30 June 2013. The reduction from the prior year is due to the effect of movements in foreign exchange. Goodwill was reviewed for impairment at 30 June 2013. The Group undertakes impairment reviews on an annual basis and when there are any indications that the carrying value may not be recoverable. Following an impairment review, the Board was satisfied that no provision for impairment was considered necessary at 30 June 2013. Further details of the review are included in Note 10 Goodwill to the Consolidated Financial Statements.

Working Capital, Cash Flow and Net Funds

	30 June 2013	30 June 2012
Working Capital	£'000	£'000
Net trade receivables	18,404	18,154
Accrued income	178	1,654
Trade payables	(2,557)	(3,034)
Amounts due from customers on long term contracts	10,963	10,243
Fees invoiced in advance	(8,652)	(7,714)
Net work in progress	2,311	2,529
Total	18,336	19,303

At 30 June 2013, debtor days outstanding were 82 days, a reduction of 4 days from the previous year end, working capital days outstanding were 82 days, a reduction of 12 days and net cash from operating activities was an inflow of £1.4m (2012: outflow of £0.5m).

Net funds at 30 June 2013 were £1.1m (2012: £0.9m). Net funds consist of cash and cash equivalents of £2.8m (2012: £3m) less a term loan of £1.7m (2012: £2.1m). At 30 June 2013, £1.8m (2012: £2.3m) of the cash and cash equivalents was held in subsidiaries not wholly owned by the Group, of which £0.8m (2012: £0.9m) was attributable to the non-controlling interest.

Bank Facilities

At 30 June 2013, the Group's principal banking facilities were a £4.0m overdraft facility and £1.7m term loan with HSBC Bank PLC, and a £2.5m confidential invoice discounting facility from Close Invoice Finance Limited. The term loan is repayable by quarterly instalments until 2017. At 30 June 2013, the overdraft facility was not used, and the balance on the confidential invoice discounting facility was £0.4m.

Post Balance Sheet Event

In July 2013, the Group decided to withdraw from the UAE. In the financial year to 30 June 2014, the Group anticipates that it will incur an exceptional provision of around £1.9m with a cash outflow of around £0.8m after anticipated costs associated with the orderly wind down of operations and financial settlements in respect to debtors and work in progress.

Critical Accounting Policies

The Statement of Significant Accounting Policies is set out in Note 1 to the Consolidated Financial Statements.

Estimates, assumptions concerning the future, and judgments are made in the preparation of the Consolidated Financial Statements. They affect the application of the Group's accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors including expectations of future events that are believed to be reasonable under the circumstances.

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

• Contract Accounting: Revenue recognition, the valuation of trade receivables and amounts recoverable on contracts and the assessment of the percentage of completion achieved. The Group assesses contract progress and determines the proportion of contract work completed at the balance sheet date in relation to the total contract works. This policy requires forecasts to be made on the projected outcomes of projects. These forecasts require assessments and judgments to be made on matters including changes in work scope, changes in costs and costs to completion. While the assumptions made are based on professional judgments, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reporting results;
• Insurance Claims: Provisions in respect of potential liability insurance claims;
• Goodwill: The annual impairment testing of goodwill; and
• Deferred Tax: As set out in note 1, deferred tax is accounted for on temporary differences using the liability method, with deferred tax liabilities being provided for in full and deferred tax assets being recognised only to the extent that it is judged probable that future taxable profit will arise against which the temporary differences can be utilised.

Group Financial Risk Management

The Board reviews and agrees policies for managing financial risks. The Group's finance team is responsible for managing investment and funding requirements including banking and cash flow monitoring. It seeks to ensure that adequate liquidity exists at all times in order to meet its cash requirements.

The Group strategy is to finance its operations through a mixture of cash generated from operations and where necessary, equity finance and borrowings by way of bank facilities and working capital finance.

The Group's financial instruments comprise borrowings, cash and various items, such as trade receivables and trade payables that arise from its operations. The main purpose of these financial instruments is to finance the Group's operations. The Group does not trade in financial instruments. The main risks arising from the Group's financial instruments are described below.

Liquidity and Interest Rate Risk

As reported above, the Group had net funds of £1.1m at the year-end comprising £3.2m of cash less £2.1m of debt. The Group's exposure to market risk for changes in interest rates relates primarily to the Group's bank loan, overdraft and sales financing facility debt obligations. Bank interest is charged on a floating rate basis.

Credit Risk

Credit checks are performed on all potential customers. Receivable balances are monitored on an ongoing basis. There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 3% (2012: 3%) of total receivables balances at 30 June 2013.

Foreign Currency Risk

The Group has exposure to currency risk on business transactions where revenues and costs are in different currencies, and on translation of assets and liabilities from local currency into sterling. Revenues and costs in the same currency are matched to form natural hedges wherever possible. The Group would also implement hedging procedures or purchase currency hedges where a material exposure is identified.

Alex A Steele Finance Director 1 November 2013

Corporate Responsibility Report

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 seeks to ensure that it delivers on all its goals and aspirations for sustainability. The Plc Board cascades information to the UK Management Board and International Management Board which are in turn responsible for feeding important strategic information to our operating company boards, directors, team leaders, and ultimately every member of our staff.

Management Systems

Waterman has maintained quality, environmental and health & safety management systems certified to ISO 9001, ISO 14001 and BS OHSAS 18001 in order to guarantee continued high standards of service delivery and environmental and health and safety management.

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

• Continued roll out of Lync communications system throughout UK offices reducing need to travel leading to increased levels of home working and increased use of video conferencing throughout UK offices;
• Increased awareness and adoption of the Ride2Work scheme to encourage a healthier lifestyle;
• Further office rationalisation resulting in reduced energy and water usage, and carbon emissions from travel between offices;
• Continued adoption of virtual servers as a replacement for hard servers contributing towards reduced power consumption;
• Wider recycling of waste and IT consumables;
• Further office refurbishments resulting in more energy efficient equipment such as low energy lighting and kitchen appliances;
• Continued reductions in the number of printers and plotters resulting in reduced energy usage; and
• Certain offices are increasing the employee density to improve efficient use of energy per floor plate

Environmental Performance

Carbon Dioxide Emissions From Business Travel

The slight increase in rail travel coincides with the significant decrease in air travel. Additionally, improved awareness and use of telecommunication and video conferencing facilities have reduced the need for business travel.

Energy

Energy is used in our offices for heating and lighting and the operation of IT and other office equipment. We have carried out energy audits of our UK based offices in order to monitor usage with a view to maximise energy efficiency and reduce carbon emission through staff training, good housekeeping and actively managing control systems.

Water Use

Our principal use of water is in kitchen and washroom facilities. Accordingly, it is not one of our significant environmental impacts.

Transport - Business Travel

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 & Safety Compliance

The Group places the highest priority on the protection of its employees, construction industry workers not in its employment and individuals affected by its activities. The Group's health & safety policy and safe working procedures aim to prevent accidents, incidents 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 as necessary during the year and made available to all employees. The current health & safety policy is dated July 2013. The health and safety system continues to comply with OHSAS 18001.

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; and
• Ensure safe handling and use of substances.

The Group's senior management continues to commit the Group and the relevant Group companies to health and safety. Funds and resources are provided to enable correct implementation of the policy, whilst meeting the expectations of stakeholders.

Waterman Health & Safety (a division of Waterman Transport & Development Limited ) continues to advise on health and safety and staff wellbeing. It acts as health and safety advisor to all operating companies within the Group and regularly liaise with the Health & Safety Executive nationally and as required with the enforcement officers from the HSE and Local Authority relevant to each UK office location. The division reviews the Group's health and safety policy and procedures, advises on new and impending changes to legislation, and provides health and safety training to staff on general health and safety matters, on the Construction (Design & Management) Regulations 2007, on construction site safety, and on fire and emergency related matters.

The Group operates a health and safety consultative committee comprising representatives from operating companies. The committee is responsible for consulting with staff on health and safety matters and for passing concerns and recommendations to senior management.

Each office has a named Office Health & Safety Director and a named Office Health & Safety Manager. They are responsible for managing health and safety in the areas occupied by Waterman. All of the relevant Directors and Managers have received specific training during the past year, and receive regular health and safety information and advice from Waterman Health & Safety on a regular basis and when required. Waterman Health and Safety is also responsible for arranging Consultative Committee meetings in each Waterman office every six months.

All legal Directors (and other appropriate senior managers) have received specific training on their duties regarding health and safety legislation.

The Group maintains membership of various health and safety organisations and assessment systems including CHAS (Construction Health & Safety Assessment Scheme) and SafeContractor.

The annual office and Company health and safety inspection was undertaken during the year in order to review the Group's overall health and safety performance and compliance with the Group's health and safety system as well as existing legislation and good practice. This audit showed that the health and safety performance of each Company and office continued to improve and confirmed that the health and safety systems are being maintained to a high standard.

Face to face training was reinstated this year with the exception of Waterman Aspen who decided to continue using the e-learning for their staff's health and safety training. Face to face training is provided by Waterman Health & Safety and includes occupational health, construction health and safety and CDM. Over 65% of Waterman employees received health and safety training during the year.

Asbestos Awareness training was provided by an external company for those employees who are likely to come into contact with asbestos during the course of their work.

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. There have been no reportable injuries in the last three years.

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 and a selection is outlined below:

July 2013	Structural Steelwork Design Awards	Winner AirW1
May 2013	British Council for Offices' (BCO) Award	Winner Quadrant: MK for best corporate workplace
May 2013	Ground Engineering (GE) Sustainability Award	Winner 6 Bevis Marks
March 2013	NCE/ACE Awards	Shortlisted as UK Consultant of the Year Waterman
October 2012	British Construction Awards	Winner Quadrant 3; AirW1, has won an award for 'Best Practice' at the British Construction Industry Awards

Through its Board, Waterman monitors client testimonials, compliments and complaints which are promptly addressed. Ensuring that we meet our client's 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 recognises the value and contribution of all employees. Through continual development and training, our core skills and experience are both enhanced and retained, ensuring that we continue to provide innovative engineering and environmentally focused solutions that meet our clients' needs.

In this financial year as a result of winning substantial new work, all disciplines have been actively recruiting. With the winning of high profile and innovative projects Waterman has continued to attract and retain a highly-skilled workforce, whose technical excellence is further supported through both personal and career development opportunities at all levels.

Waterman continues to be a member of the Technician Apprenticeship Consortium (TAC) and to invest in and support the professional development of apprentices within the Company. In addition to our apprentice within Structures, Waterman has taken on a Building Services apprentice for the year ahead, both studying at South Thames College, London. The Company also provides financial support to sponsorship students, those at University and those studying part time, on a paid day release, at local educational establishments. During their full-time studies sponsorship students are given the opportunity of work placements, specifically during vocational periods and once graduated are eligible to secure permanent employment within Waterman. Our employees on day release continue to gain valuable 'on-the-job' experience and knowledge from our senior engineering and environmental consultant teams, supported through our mentoring and coaching schemes.

Our Graduate Forum, across all disciplines, supports the professional and personal development of our graduates throughout the Company and provides them with the opportunity to identify common interests, build relationships and improve training possibilities in collaboration with our client/ contacts we are able to provide secondment opportunities, which encourages working groups of budding chartered engineers.

In the engagement and retention of our staff and as a key part of our reward strategy, the flexible benefits scheme continues to offer staff a selection of benefits that include for choices on health and wellbeing, through cycle for work, gym membership, private health and dental care. The Company also offers salary sacrifice options for benefits such as pension, cycle for work and childcare vouchers as a way of maximising individual's take home pay.

As a part of our employment policies and practices Waterman recognises that during their careers with the company there will be lifestyle changes that affect our employees. For this purpose we work with our staff to look at ways in which we can support those changes and are able to offer flexible working, sabbaticals, secondments and/or intercompany transfers.

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.

Workforce Diversity

	2012/13	2011/12	2010/11
Female employees (UK)	21%	22%	22%
Ethnic minority employees (UK)	11%	12%	17%
Female managerial grade	11%	8%	8%
Ethnic minority managerial	6%	6%	6%
Number of staff on temporary contracts	17%	14%	11%
Annual sickness rate	1%	1%	1%

Community

Waterman's long term community project in London is Better Bankside, which is in addition to the many charity projects and volunteering initiatives that members of our teams continue to take part in and support. For Better Bankside, working with a number of supporting client/contacts within the community, Waterman promotes and contributes to such events as Christmas gift aid, which helps local families, the young and aged, with particular emphasis on those not in full time education, employment or training.

During this year members of our teams have supported communities, both locally, within the regions and internationally. Charitable and volunteering events supported by Waterman have included teams for marathons, cycling, sky diving and other fundraising initiatives for cancer charities, children's hospitals, stroke association and community hospices. WaterAid continues to be a major fundraising initiative within the Company, which targets raising £20,000 over a two year period for the Maji Programme in Tanzania.

During 2013, Waterman became an official corporate supporter of Carbon Leapfrog, a charity that helps support carbon reduction projects in the UK. Waterman provides high value technical advice to these projects on a pro bono basis to help overcome hurdles to their progress and is currently supporting a community renewable hydro scheme.

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, both now and in the future. It means effective conservation of the environment and prudent use of resources. It also means equality of social progress, the maintenance of high stable levels of economic growth through working towards achieving more with less resource and the 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; and
• 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; and
• Conduct its business with the highest standards of professional and personal integrity and honesty.

Environmental Policy

The Group is committed to achieving a high standard of environmental awareness at all levels within the organisation and to promoting environmentally responsible practice both within the work place and beyond. The Group believes that everyone has a part to play in safeguarding and enhancing the environment. The guiding principles of the Group's environmental policy are to strive to:

• Prevent pollution and protect and enhance the natural environment wherever possible
• Encourage the sustainable use of natural resources
• Regularly set, and monitor the achievement of, objectives and targets to promote the continual improvement in environmental performance of all aspects of our business
• Reduce waste generation through re-use and recycling wherever practicable and dispose of all waste responsibly and safely;
• Comply with relevant environmental legislation and adopt internal standards based on international best practice;
• Encourage all staff to adopt energy, water and resource efficiency and conservation measures;
• Promote awareness of environmental issues amongst staff, clients and other interested parties;
• Select contractors, suppliers and materials that meet acceptable environmental standards;
• Promote environmentally sympathetic design and construction practice wherever possible;
• Promote the best use of environmentally sustainable modes of transport; and
• Document, implement, maintain and communicate this policy to all employees.

The Group aims to develop and refine its environmental policy 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 Institution of Wastes Management (CIWM), The Chartered Institution of Water and Environmental Management (CIWEM), The Institute of Environmental Management and Assessment (IEMA) and The Institution of Civil Engineers (ICE).

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 Group for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgments 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; and
• 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

Nicholas J Taylor Group Chief Executive 1 November 2013

Report from the Remuneration Committee

I am pleased to present the Committee's annual report for 2013.

Unaudited Information

Remuneration Committee

The Remuneration Committee comprises Mr Geoff Wright (Chairman) who has been a member since 2007, Mr Roger Fidgen who has been a member since 2004 and Mr Ric Piper, a member since March 2013. All members are non-executive and independent. Until his retirement from the board in February 2013, Mr John Archibald was also a member of the Committee. The Committee would like to thank John for his contribution to the Committee's deliberations for the last 10 years.

The key responsibilities of the Remuneration Committee are:

• Determine and agree the remuneration policy and pension arrangements for the Company's directors and senior management
• Set the remuneration for all Executive Directors and the Company Secretary each year
• Set targets for all performance related pay schemes operated by the Company
• Establish the selection criteria and terms of reference for any remuneration consultants who advise the Committee
• Monitor the remuneration arrangements for companies of similar size and complexity to ensure that the Directors' remuneration packages remain competitive

The remuneration of the Chairman and the Non-Executive Directors is determined by the Executive Directors. Members of the Committee have no personal financial interest in the Company other than as shareholders. They have no day to day responsibility for business operations and no personal conflicts of interest.

The Committee met on five occasions during the financial year.

Operation of the Committee

The Committee's Terms of Reference were reviewed and updated in February 2013 to conform to current best practice. No significant changes were deemed necessary. They are available on request from the Company Secretary.

The main activities of the Committee during the year were as follows:

• Annual review of Executive Directors basic salary;
• Determination of senior management bonus payments for the financial year; and
• Consultation with external consultants in respect to potential alternative incentive schemes that meet the Group's strategic objectives.

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 Conduct Authority and The UK Corporate Governance 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 Annual General Meeting on 6 December 2013.

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. In determining remuneration, consideration will be given to reward levels throughout the Group as well as in the external employment market. The Group aims to reward all employees fairly, based upon their role, their performance and salary levels in the wider market.

The main elements of the Executive Directors and senior management remuneration packages are:

• Basic salary, pension contributions and benefits in kind;
• Performance related annual bonus payment;
• Performance related awards under the Long Term Incentive Plan and Company Share Option Plan; and
• Free shares awarded under the Share Incentive Plan.

The Chairman and 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:

• Personal performance;
• Financial performance of the divisions over which the executive exerts influence;
• Salaries paid by companies of similar size in the same sector;
• Financial performance of the Group;
• Relationship between the remuneration of Directors and other employees; and
• Effect of local living costs if directors are resident overseas.

Pension contributions are currently paid by the Company at the rate of 10% of base salary, prior to any temporary adjustments. Benefits in kind include the provision of a motor car and fuel or car allowance, private medical insurance, permanent health insurance, life assurance and rail season ticket.

b) Performance Related Annual Bonus

The Group operates an executive bonus scheme which rewards Executive Directors and management in cash upon the achievement of certain financial targets. The scheme is in two parts. Up to 15% of profit before taxation is made available for distribution between Executive Directors and management. One Executive Director received a bonus payment in the financial year ended 30 June 2013 resulting from the performance of the Structures division.

In addition, Executive Directors and senior managers may receive an allocation of bonus shares in the Company which are conditional on financial performance in the previous financial year. These conditional bonus shares are held by the Trustees of the Company's Employee Benefit Trust until exercised. No conditional share bonus awards were made in respect of the financial year ended 30 June 2013.

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

The Long Term Incentive Plan ("LTIP") rewards Executive Directors and senior management upon the 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 will receive 50% of their award if the Group's growth in basic EPS exceeds the growth in RPI by 3% with the remaining 50% being settled if the profit before tax of the divisions over which the executive exerts influence grows by a 3% per annum above the growth in RPI. No LTIP awards were made to executive directors and senior management 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 during the year to staff or Directors in respect of the year ended 30 June 2013.

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)	1 July 2004	None
N J Taylor	6 January 2003	12 months
C W Beresford	6 January 2003	6 months
J F G Waiting	1 July 2005	6 months
S D Harden	1 July 2007	6 months
A A Steele	19 February 2010	12 months
R J Piper (Non-executive)	15 January 2013	12 months from contract start date, then 1 month
G H Wright (Non-executive)	1 June 2007	None

Audited Information Directors' Interests in Shares

Name	Shares 30 June 2013	Shares 30 June 2012	Contingent Long Term Incentive Plan shareholding 30 June 2013	Contingent Long Term Incentive Plan shareholding 30 June 2012	Conditional Share Bonus Awards 30 June 2013	Conditional Share Bonus Awards 30 June 2012
R S Fidgen (Non-executive Chairman)	50,000	35,000	-	-	-	-
N J Taylor	85,128	84,428	-	-	38,000	38,000
C W Beresford	72,123	72,123	-	-	25,000	25,000
J F G Waiting	41,815	41,815	-	-	25,000	25,000
S D Harden	44,464	29,771	-	-	-	25,000
A A Steele	-	-	-	-	-	-
R J Piper (Non-executive)	-	-	-	-	-	-
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 Conditional Share Bonus Awards are set out in the tables below.

During the financial year, N J Taylor purchased 700 Waterman shares at 44.9p each on 9 October 2012 and R S Fidgen purchased 15,000 Waterman shares at 44.5p each on 1 March 2013. On 3 December 2012, S D Harden exercised his conditional share bonus award over 25,000 shares and immediately sold 10,307 shares to meet his income tax liability arising on the exercise of this award. He retained ownership of the balance of 14,693 shares.

After the year end, N J Taylor exercised his conditional share bonus award over 38,000 Waterman shares on 7 October 2013 and immediately sold these in the open market for 54.5p. In addition, he purchased 40,000 Waterman shares at 54.0p and 38,000 shares at 56.0p on 7 October 2013 together with 300 shares at 57.67p and 10,700 shares at 59.5p on 8 October 2013. R S Fidgen purchased 35,000 Waterman shares at 56.0p on 7 October 2013 and G H Wright purchased 15,000 Waterman shares at 61.0p on 10 October 2013 and 15,000 Waterman shares at 61.0p on 11 October 2013. C W Beresford exercised his conditional bonus award over 25,000 Waterman shares on 22 October 2013.

Remuneration Of Directors

Name	Salary and fees paid £'000	Benefits £'000	Bonus £'000	Total 2013 £'000	Total 2012 £'000	Pension 2013 £'000	Pension 2012 £'000
R S Fidgen (Non-executive Chairman)	40	-	-	40	33	-	-
N J Taylor	225	30	-	255	255	23	23
C W Beresford	175	14	6	195	184	17	17
J F G Waiting	157	9	-	166	161	17	17
S D Harden	160	13	-	173	157	16	16
A A Steele	147	17	-	164	156	15	14
J G Archibald (Non-executive) to 28 February 2013	23	-	-	23	29	-	-
R J Piper (Non-executive) from 15 January 2013	16	-	-	16	-	-	-
G H Wright (Non-executive)	35	-	-	35	28	-	-
Total	978	83	6	1,067	1,003	88	87

Benefits provided and bonuses paid to Executive Directors are described in the Remuneration Policy section of this report. Pension contributions are paid by the Company upon base salary and are paid to personal pension plans.

The fees paid to Non-Executive Directors were increased to align with fees paid by other companies of a similar size and complexity.

Long Term Incentive Plan (LTIP)

No LTIP awards have been made to Executive Directors and senior management since 14 November 2008 following the downturn in the Company's markets. At 30 June 2013, no Directors held awards to subscribe for LTIP shares in the Company (2012: nil).

Conditional Share Bonus Awards

At 30 June 2013, 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 30/06/13	Number of shares at 30/06/12
N J Taylor	10/12/2008	10/12/2011	59p	38,000	38,000
C W Beresford	10/12/2008	10/12/2011	59p	25,000	25,000
J F G Waiting	10/12/2008	10/12/2011	59p	25,000	25,000
S D Harden	10/12/2008	10/12/2011	59p	-	25,000
Total				88,000	113,000

During the year ended 30 June 2013, 25,000 shares were exercised (2012: nil) by S D Harden under this scheme. At 30 June 2013 Conditional Share Bonus Awards maturing before December 2018 remained unexercised in respect of 88,000 ordinary shares (2012: 113,000). After the year end, N J Taylor exercised his conditional share bonus award over 38,000 shares and C W Beresford exercised his conditional share bonus award over 25,000 shares.

INTERESTS IN SHARE OPTIONS

No new share options were granted during the year.

At 30 June 2013, no Director held options to subscribe for shares in the Company under the 1993 Executive Share Option Plan (2012: 50,000). During the year, 50,000 share options held by J F G Waiting lapsed under this scheme (2012: nil).

The closing mid-market price of the Company's shares on 30 June 2013 was 48.5p (2012: 48.0p) and ranged between 36.5p and 49.0p during the year.

On behalf of the Board

Geoff Wright Chairman of the Remuneration Committee 1 November 2013

Report from the Audit and Risk Committee

I am pleased to present the Committee's annual report on its activities, my first since joining the Committee and becoming its Chairman in March 2013.

The Audit and Risk Committee comprises Roger Fidgen (a member since 2005), Geoff Wright (a member since 2007) and Ric Piper (a member since January 2013).

Prior to Ric Piper's appointment as Chairman, the Committee was chaired by John Archibald until he retired from the Board on 28 February 2013. The Committee would like to thank John for his valuable contribution as Chairman for 9 years.

Ric Piper qualified as a chartered accountant in 1977 and is a current member of the Financial Reporting Review Panel (FRRP). The Board considers that he has recent and relevant financial experience.

The key responsibilities of the Audit and Risk Committee are:

• Monitoring the integrity of the half yearly and annual financial statements and formal announcements relating to the Group's financial performance;
• Reviewing significant financial reporting issues and accounting policies and disclosures in financial reports;
• Reviewing the effectiveness of the Group's internal control procedures and risk management systems;
• Considering how the Group's internal audit requirements shall be satisfied and making recommendations to the Board;
• Making recommendations to the Board on the appointment or re-appointment of the Group's independent external auditors;
• A review of the independent auditor's audit strategy and implementation plan and it's findings in relation to the Annual Report and half-year report; • Overseeing the Board's relationship with the independent external auditors including their continuing independence and, where appropriate, the
• selection of new independent external auditors; and
• Ensuring that an effective whistle blowing procedure is in place.

The Committee met four times during the financial year. The Committee met privately with the external auditor during the year.

Operation of the Committee

The Committee's Terms of Reference were reviewed and updated in January 2013 to conform to current best practice. No significant changes were deemed necessary. They are available on request from the Company Secretary.

The main activities of the Committee during the year were as follows:

• Financial Statements. The Committee reviewed the interim and full year financial statements. Presentations were made by management and the auditor about the key technical and judgmental matters relevant to the financial statements. Significant areas considered by the auditor and the Committee were contract valuations, exceptional items, goodwill valuation and working capital forecasts and banking covenants. The Committee was satisfied that it was appropriate for the Board to approve the financial statements.
• Internal financial control systems. The Committee reviewed the recommendations made by the independent auditor and management's responses and actions. The Committee was satisfied that it was appropriate for the Board to make the statements regarding internal controls included in the Corporate Governance Report.
• Internal audit. During the year, the Committee undertook its annual review of the benefits and costs of having an internal audit activity. It recommended to the Board that internal audit would not be of net benefit.

The Chairman of the Committee reported to the Board on the Committee's activities after each meeting, identifying relevant matters requiring communication to the Board and recommendations on the steps to be taken.

Independent Auditor

The appointment of the independent external auditor is approved by shareholders annually. The independent auditor's audit of the financial statements is conducted in accordance with International Standards on Auditing, ISA (UK and Ireland) issued by the Auditing Practices Board.

There are no contractual obligations that act to restrict the committee's choice of external auditor. In December 2012, the board proposed and shareholders approved the appointment of PricewaterhouseCoopers LLP (PwC) as the Company's registered independent public accounting firm for the financial year ending 30 June 2013.

The Committee has kept under review, future regulatory and best practice developments in connection with its role and responsibilities. In particular, it has considered the requirements under the 2012 UK Governance Code for the independent audit contract to be put out to tender every 10 years. PwC were appointed as the Company's independent auditor in 1988. The Committee will keep this matter under regular review in the light of best practice developments. Any recommendation for the reappointment of the independent auditor will continue to be subject to rigorous review each year. This year, having considered the effectiveness and performance of the independent auditor, the Committee has recommended to the Board the reappointment of PwC as independent auditor of the Company for the next financial year.

The independent auditor provides the following services:

• A report to the Committee giving an overview of the results, significant contracts and judgments and observations on the control environment;
• An opinion on the truth and fairness of the Group and Company financial statements;
• An internal control report, following its audit, highlighting to management any areas of weakness or concern.

The Audit and Risk Committee monitors the cost effectiveness of audit and non-audit work performed by the independent auditor and also considers the potential impact of any of this work on independence. Approval is required prior to the independent auditor commencing any material non-audit work in accordance with a Group policy approved by the Committee. Certain work, such as providing book-keeping services is prohibited. Further, the Committee seeks positive evidence of the independence of the independent auditor through its challenge to management.

The Committee also regulates the appointment of former employees of the independent auditor to positions in the Group.

The Committee regularly reviews all fees for non-audit work paid to the independent auditor. Details of these fees can be found in note 4 to the financial statements. The Committee concluded that the level of non-audit fees which represent 8% of the audit fees of the Group did not have a negative impact on PwC's independence.

The independent external auditor also operates procedures to safeguard their objectivity and independence. These include periodic rotation of audit partner, use of independent concurring partners, use of a technical review panel (where appropriate) and annual independence confirmations by all staff. The independent external auditor reports to the Committee on matters including independence and non-audit work on an annual basis.

Evaluation of the Committee

In the context of the change of Chairmanship of the Committee during the year, no evaluation was undertaken.

Approval

This report was approved by the Committee on behalf of the Board on the date shown below and signed on its behalf by:

Ric Piper Chairman of the Audit and Risk Committee 1 November 2013

Chairman's Statement On Corporate Governance

I am pleased to report upon the work of the Board of Waterman Group during the last financial year. In discharging its responsibility for ensuring the long term success of the Company, the Board balances its time between forward looking matters (such as strategy, business development and opportunities for growth and improvement, and oversight matters (such as financial performance, risk management, compliance and monitoring). Board meetings have been wide ranging, taking account of the challenges and opportunities presented in our markets and determining how best to respond.

At each Board meeting, the Chief Executive reports upon the key issues, strategy and investor relations. The Finance Director reports upon financial performance and future projections, whilst the other three executive directors review business progress, prospects and opportunities for their areas of responsibility. Reports from other business disciplines (such as Health & Safety, HR and IT) are also presented. This approach allows all the directors to challenge and debate the performance achieved, future prospects and strategic proposals.

Each year, a full Board performance evaluation is undertaken covering achievement during the year, risk management and contribution to board decision making. This review also aims to identify any skills gaps and training needs.

The Directors currently in office are listed on page 40. There have been two changes during the year. Ric Piper joined the Board on 15 January 2013 as a Non-Executive director. John Archibald has stepped down as Senior Independent Director on 28 February 2013. Ric succeeded John as Senior Independent Director and Chairman of the Audit and Risk Committee.

No director has a service contract for a term exceeding one year.

The following pages describe how the Company complies with the UK Corporate Governance Code. I hope you will find these and the entire Annual Report and Accounts to be both useful and informative.

Roger Fidgen Chairman

Compliance with the UK Corporate Governance Code

Waterman Group plc ("Waterman") and its subsidiaries are committed to maintaining high standards of corporate governance. As a listed Company, Waterman 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 39 to 42 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 2013, the Company has complied with all of the principles of the Code which apply to a company which is not included in the FTSE 350.

Roger Fidgen has served on the Board as a non-executive director for nine years including being Chairman for the last seven years. Provision B.7.1 of the Code states that non-executive directors who have served longer than nine years should be subject to annual re-election. Mr Fidgen has confirmed his intention to resign and will stand down before the 2014 Annual General Meeting. He was last re-elected to the Board in December 2011 and, in accordance with the Company's articles, is not due for re-election at the Annual General Meeting in December 2013.

A new edition of the Code was published in September 2012 and applies to reporting periods beginning on or after 1 October 2012. Waterman will report on its compliance with this version of the Code in its Annual Report in 2014.

The Board of Directors

The Board currently comprises five Executive and three Non-Executive Directors. The Board considers that collectively they have the appropriate balance of skills, experience and knowledge to discharge the Board's duties and responsibilities effectively and that the overall composition of the Board remains well balanced and appropriate to meet its shareholder responsibilities and corporate governance obligations.

The main duties of the Board are to:

• Set the Company's standards values and aims to ensure that it meets its obligations to its stakeholders and others;
• Agree and set the strategic aims for the business, ensuring resources are adequate to meet its objectives;
• Agree objectives, policies and strategies to enable the business to grow;
• Monitor the progress and development of the business taking account of the economic, political and social environments in which it operates;
• Monitor and control the financial health of the business and the performance of the executive management;
• Approve the financial statements, shareholder communications and major transactions including for capital expenditure, premises, acquisitions, disposals and investments in new markets or joint ventures;
• Approve the dividend policy and interim dividends;
• Ensure that effective policies for risk management, health and safety and corporate governance are in place and applied throughout the Group, and meet the required standards of regulatory compliance;
• Ensure that the risk management and internal control systems and procedures are adequate and operating effectively; and
• Ensure that remuneration arrangements and succession planning arrangements are adequate and appropriate.

The current members of the Board are set out on page 40. All Directors act in a manner which they consider to be in the best interests of the Company, consistent with their statutory duties as set out in the Companies Act 2006.

The five Executive Directors have a wide range of experience. Nicholas Taylor, a civil and structural engineer was appointed Chief Executive in July 2007. In February 2010, Alex Steele, a chartered accountant, was appointed to the Board as Finance Director. John Waiting, Craig Beresford and

Simon Harden are qualified engineers who have responsibility for the principal operational divisions which deliver services to clients in the regions in which the Group operates. All Executive Directors have served throughout the year.

The three Non-Executive Directors are all considered to be independent and have wide-ranging experience developed over many years in business. As noted above, on 28 February 2013, John Archibald, the Senior Independent Director and a chartered accountant retired after ten years on the Board and was replaced by Ric Piper. Ric is a chartered accountant with many years of business and financial experience. Roger Fidgen and Geoff Wright have served on the Board throughout the year. The contribution of the Non-Executive Directors to the running of the business has been both influential and effective. They have demonstrated their independence of character and judgment by constructively challenging the reports, proposals and recommendations tabled by the Executive Directors. None of the non-executive directors has been an employee of the Company, has had a material business relationship with the Company, has close family ties to the Company or its advisers, holds a material shareholding or has any conflict of interest which has not been disclosed to the Board.

The Board met on 12 occasions during the year. The Board's role is to promote the success of the Company for the benefit of shareholders by providing entrepreneurial leadership. In so doing, the Directors must have regard to the interests of the Company's employees and other stakeholders, the risks and consequences of its decisions and the need to maintain the Company's longstanding reputation for high standards of service and business conduct.

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, that Directors continually update their skills and knowledge and that the Board receives accurate, timely and clear information. The Chief Executive, Nicholas Taylor, is responsible for implementing the Group's strategy, directing its profitable operation and giving leadership and direction to the Group.

There is a formal schedule of matters reserved for decision by the Board or its Committees which include strategy, corporate governance, approval of annual budgets, approval of financial statements, major capital expenditures, investment strategy, 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 by Directors at the following meeting.

The Company arranges briefings and updates when required from professional advisors on legal, commercial and health and safety matters. Directors are encouraged to maintain and refresh their skills, continuing professional development (CPD) and knowledge of the Group and its markets 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 corporate matters at the Company's expense. The Company Secretary also assists the Audit and Risk Committee when reviewing the effectiveness of internal controls and risk management and assists the Chairman on legal, compliance and corporate governance matters.

In accordance with Company's Articles of Association, Directors are required to retire after three years or earlier and may submit themselves for re-appointment. In addition, newly appointed Directors will stand for election by shareholders at the first Annual General Meeting 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

Certain matters are delegated to Committees of the Board and their duties are described in the Terms of Reference summarised below. The Terms of Reference for these Committees are set by the Board and reviewed annually. They 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 the Chief Executive is also a member. Executive Directors, auditors and the Company Secretary 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 operates to monitor the veracity of the financial statements and the integrity of the financial reporting, to liaise with the Company's auditors and ensure their independence, and to review the effectiveness of the Group's internal control procedures and risk management systems. It met on four occasions during the financial year.

A review of the duties and work performed by this Committee is set out in the Report from the Audit and Risk Committee on page 43.

The Remuneration Committee

This Committee met on five occasions during the financial year to review the remuneration arrangements for the Directors and senior management of the Group. The Committee is comprised exclusively of Independent Non-Executive Directors and is chaired by Geoff Wright.

A review of the duties and work performed by this Committee are set out in the Report from the Remuneration Committee on page 39.

The Nomination Committee

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

The Committee met on five occasions during the financial year.

The Committee conducted a process to find a suitable replacement for John Archibald who had stated his intention to retire from February 2013. The Committee identified three candidates with appropriate business experience and followed a selection procedure which resulted in the appointment of Ric Piper to the Board on 15 January 2013.

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	12	4	5	5
R S Fidgen	11	3	4	5
N J Taylor	11	4*	5*	5
C W Beresford	12	-	-	-
J F G Waiting	12	-	-	-
S D Harden	11	-	-	-
A A Steele	12	4**	-	-
J G Archibald (retired 28 February 2013)	7	3	2	4
R J Piper (appointed 15 January 2013)	6	3	2	1
G H Wright	11	4	5	5

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

Performance Evaluation

In August 2013, the Board conducted a formal evaluation its own performance, its committees and its directors. The evaluation was led by the Chairman and Chief Executive and its results were published to and reviewed by the Board.

The performance of the Board 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 to fulfil its governance obligations. No significant shortcomings were identified.

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 set out in the UK Corporate Governance Code. Each Committee has operated 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 for action 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 are 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. Any risks which could have a material effect on the Group's performance or governance are communicated to and considered by the Board with appropriate risk mitigation put in place.

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 manage and control 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. The Mission Statement emphasises the Group values of client focus, sustainability, staff care, technical excellence, teamwork and corporate development;
• The 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 limits of indemnity against losses arising from project liability and other operational risks;
• A clearly defined organisational structure exists with levels of authority and division of responsibility;
• The Board approves the annual capital expenditure budget and authorises major capital and revenue expenditure commitments;
• The Board tasks the UK Management Board and International Management Board to implement its strategy and meet the Group's performance targets.
• An executive director from the UK Management Board and International Management 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 via the UK and International management boards each month;
• Group strategy is reviewed annually by the Board and the Group's Management Boards. Ongoing monitoring is conducted at monthly Board meetings;
• Budgets are prepared annually by operating companies and approved by the Board. The financial performance of each principal operating company is monitored each month against budget and prior year results. Reforecasting of financial projections is performed quarterly;
• Reviews of key performance indicators for each operating company are performed each month. The Finance Director provides monthly reports to the Board on actual results achieved by the Group and updated forecasts. The Chief Executive review the Group's future prospects;
• Project managers can monitor the financial progress of each ongoing project at any time. 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 Directors. Material changes to costs or revenues or unexpected events which occur during the project are reported to the operating company board and, where appropriate, to the Board;
• 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 management board or International management board. The management boards have responsibility for meeting budgets or targets and for operational matters which are common to all operating companies in that geographic region;
• The Group employs 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 and resilience of data held on the Group's IT systems, and to ensure that its systems can be restored quickly in the event of a major system failure;
• The Group operates quality monitoring and validation processes to minimise the risk of errors, mistakes or delays which may lead to liability insurance claims; and
• 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 all board meetings.

Having received advice from the Audit and Risk Committee, the Board has determined that it is not necessary to employ an internal audit function at this time. However this will be reviewed annually.

Principal Risks and Uncertainties

The Group has a number of potential risks and uncertainties which could have a material impact on its long-term performance. Many of these are common to other companies operating in the Group's chosen markets. The Board recognises that effective risk management is fundamental to helping achieve the Group's strategic objectives.

To enable it to deliver value to all stakeholders, the Board endeavours to mitigate these risks where possible. In order to achieve its business objectives, the Group must respond effectively to the associated risks. The Group has established risk management procedures, involving the identification and monitoring of strategic and operational risks at various levels of management. The Board and the Audit & Risk Committee regularly review material risks identified and risk management is embedded in the annual budgeting and strategic planning processes. The Board identifies, monitors and reviews what it considers to be the Group's major current strategic risks. It is not, however, possible to fully mitigate all risks that the Group encounters.

The principal risks for the Group have been assessed as follows:

Risk	Impact	Mitigation
Economic Outlook
Economic and market conditions
Changes to economic and market conditions will impact upon expenditure on construction projects from both public sector and private sector clients.	Reduced demand for our services can result in project cancellation, payment default and client failure.	Our strategy is to reduce risk by diversification, providing a range of professional services to a range of clients and markets in the UK and selected overseas markets. We focus attention on markets with attractive growth prospects,
Demand for our services will be affected and resources will need to be adjusted to align with changing demand for our services.	Increased demand for our services can result in shortage of staff resources and pressure on working capital.	where the Group can make acceptable returns on capital employed and on clients with stable finances. We align resources to meet actual and projected levels of demand.

We aim to invoice clients promptly for services rendered and secure payment at the earliest opportunity. By doing this, we aim to minimise the risk of payment failure and the level of working capital employed on projects.

Risk Impact Mitigation

Reputation and staff

Reputation

The Group's reputation is key to its success.

Meeting clients' expectations to deliver a high quality service at a competitive price and to time encourages clients to regularly re-appoint Waterman for substantial and high profile projects and commissions.

Our good reputation and ability to secure the most exciting and challenging projects aids our ability to attract the best staff available.

Reputational failure would present a significant risk to future growth and financial performance.

In all offices, the Group uses reliable and tested design software with effective staff training to develop innovative solutions to design issues and client needs. Robust quality control systems ensure that all work is thoroughly checked before issue. We currently hold accreditation to various quality standards including ISO 9001, ISO 14001 and OHSAS 18001.

Our integrated enterprise resource planning system enables project costs and performance to be effectively managed and reported directly into the financial systems.

Our policies and procedures reinforce the importance of high ethical standards.

Staff recruitment, retention and quality

Recruitment and retention of the highest quality staff is essential to enable the Group to respond to technical challenges with innovative solutions on a timely basis.

Regulations, Systems and Control

Regulatory and legal

The Group must comply with the laws and regulations of the countries in which it operates.

Compliance with Health and Safety laws and environmental legislation is of particular concern during the planning, design and construction phases of a project.

effective solutions to technical challenges will adversely affect our reputation and ability to win high quality new work.

Failure to meet quality standards or provide

We will recruit and retain the best quality staff by paying competitive salaries, providing exciting project challenges and comfortable working conditions.

Breaches of laws or regulations can result in fines, imprisonment and reputational damage.

The Group has effective policies and procedures in place setting out its approach to regulatory and legal matters. In house specialists regularly update our documentation and external advisers audit the compliance with written policies and procedures.

The Group remains vigilant regarding any changes to laws and regulations in each of the countries in which it operates. External advice is sought from lawyers or consultants to minimise the risk of a breach.

Systems and IT

In common with most businesses, the Group must provide and maintain effective operational and IT systems for the protection of its intellectual capital, service delivery and provision of reliable information to its clients and management.

System failures may result in staff downtime, data loss, failure to meet project deadlines and poor or untimely information for business management.

All UK businesses operate on a common set of IT platforms for service delivery and management reporting which are backed up daily to an off-site facility. A business continuity plan is in place to minimise disruption if an office becomes unusable.

Overseas offices arrange system backups and business continuity arrangements with local providers.

Impact	Mitigation
Organic growth will require robust systems and controls to ensure that Company policies and procedures are followed.	A common enterprise resource planning system operates in all UK offices. This is scalable to meet increased levels of activity. The varying demands arising from growth in overseas locations are monitored continuously by local and Group management.
Acquisition growth will require cultural changes and integration of resources and systems.	Experienced managers are appointed to oversee the cultural and systems integration of newly acquired businesses. Initiatives are introduced to encourage the integration of all staff and compliance with the Group's policies and procedures.
This could interrupt service delivery, threaten life or cause reputational damage to the business.	Systems data is backed up daily to off-site facilities. Contingency plans are in place to replace and replicate hardware resources quickly. Staff would be asked to relocate to other offices or work from home until new office premises are established.
Failure to maintain adequate levels of liquidity could result in the Group's inability to exploit opportunities for growth.	Executive management continuously monitor the adequacy of the Group's liquidity. Company budgets and forecasts will indicate when additional funding is expected to be required.
Insufficient funds could result in a going concern qualification and/or a withdrawal of support from banks.	Bank facilities are re-negotiated annually and quarterly reports are submitted to our banks for their review.
A transaction gain or loss will arise which will be recognised in the Income Statement.	Wherever possible, revenues and costs will be matched in the same currency.
A translation gain or loss will arise which may be recognised in the Income Statement or taken to Reserves.	For large exposures, the Group aims to provide natural hedges against foreign exchange translation risk. Where this is not possible, executive management consider the use of financial hedging products.
Failure to meet shareholder expectations will result in a low share price, insufficient capital for growth and inability to secure new and large projects which offer good profit margins. Our reputation and ability to grow will suffer accordingly.	Levels of financial authorisation operate to ensure that all major bids are properly reviewed to ensure that pricing levels are adequate before commissions are accepted. The need to control project variations and scope creep is monitored to ensure that potential problems are identified and actioned

the planned financial outcome.

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 Group discloses 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 Group also issues newsletters to illustrate projects in which it has been involved 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 tabled for approval and when directors will be present to respond to questions on the Group's performance during the year and the work performed by the Board and its three Committees.

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 all directors are made aware of the range of views expressed by current and potential shareholders. The Chairman and Senior Independent Director also make themselves available to meet with principal shareholders if and when required.

Directors' Report

The directors present their report, together with the audited Consolidated Financial Statements for the year ended 30 June 2013.

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 on page 31 and the environmental performance data is reported in the Corporate Responsibility Report on page 34.

Results and Dividends

The profit after taxation for the year was £269,000 (2012: £570,000). The loss attributable to the owners of the parent was £111,000 (2012: loss of £91,000).

Subject to shareholder approval at the Annual General Meeting, the final dividend of 0.3p per ordinary share will be paid on 10 January 2014 to shareholders on the register at the close of business on 13 December 2013. With the interim dividend of 0.2p per ordinary share paid in April 2013, the total distribution for the year will be is 0.5p (2012: 0.3p) per ordinary share.

Directors and Their Interests

The Directors of the Company at the date of this report are set out in the Directors' Remuneration Report on page 40. John Archibald, Senior Independent Director, retired from the Board on 28 February 2013 and Ric Piper joined the Board on 15 January 2013. Ric Piper was appointed Senior Independent Director from 1 March 2013. All other Directors served on the Board throughout the year.

In accordance with the Company's Articles of Association, Nicholas Taylor will retire by rotation at the forthcoming AGM and, being eligible, offers himself for re-election. Ric Piper was appointed to the Board on 15 January 2013 and offers himself for election. Short biographies of the two directors are set out on a separate circular to shareholders accompanying the Annual Report and Financial Statement.

The Board considers that the performance of each of the Directors continues to be effective and that each of them demonstrates a strong commitment to their role.

The Company maintains Directors and Officers Liability Insurance which gives appropriate cover for any legal action brought against its Directors.

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 31 October 2013, 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	8,872,628	28.8
AB Traction	3,300,000	10.7
Liontrust Asset Management	2,199,163	7.1
F Clampitt	1,691,995	5.5
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 issued share capital, including changes during the year, are disclosed in note 20 to the Consolidated Financial Statements. Information relating to treasury shares purchased in the year is set out in note 28 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. No one supplier is considered to be essential to the business of the Group. At 30 June 2013, the Group had 39 (2012: 47) days purchases outstanding. The Company had 50 (2012: 104) days purchases outstanding

Employment Policy

As a consultancy business, Waterman Group recognises that its staff are its most important asset. Their individual talent and collective experience help the Group stand out from its competitors. Staff are kept informed of developments within the Group through regular announcements, newsletters and electronic communications. Regular meetings of staff or staff representatives enable their views to be heard and 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. All UK operating 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. The Group is committed to employment policies, which follow best practice, based on equal opportunities for all employees, irrespective of sex, race, colour, disability or marital status. The Group gives full and fair consideration to applications for employment from disabled persons, having regard to their particular aptitudes and abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of disabled persons employed by the Group. If members of staff become disabled the Group continues employment, either in the same or an alternative position, with appropriate retraining being given if necessary.

The Group provides employees with information on matters of concern and interest to them on its intranet site and by other electronic means. It consults with staff when required so that their views can be taken into account when making decisions that are likely to affect their interests. Employee involvement is encouraged since achieving a common awareness of the range of legal, economic, social and financial factors affecting the Group helps to maintain good communication with staff.

Corporate Responsibility and Corporate Governance

The Group's corporate responsibility and corporate governance principles and compliance are set out in the reports on pages 34 and 45.

Financial Risk Management Policies

The Group's approach to financial risk management is 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 cash flow forecast and a forecast for covenant compliance to 30 June 2015. 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.

The Group is reliant on the ability of customers to pay debts and on the timing of new projects coming on line. In adverse trading circumstances the Board has a number of mitigating actions it could take to ensure compliance with its covenants to banks and other institutions. The Group has considerable financial resources together with long term contracts and relationships with a number of customers and suppliers across different geographic areas and industries. An analysis of the Group's borrowing facilities is disclosed in note 18 Financial liabilities-borrowings. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully in the future.

The Directors have assessed, in the light of current and anticipated economic conditions, the Group's ability to continue as a going concern. The Directors confirm that they have a reasonable expectation that the Company and the Group have adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the going concern basis for preparing the Financial Statement.

Property, Plant And Equipment

Information relating to the book value of the Group's land and freehold property is disclosed in the Financial Review on page 31 and note 12.

Donations

Charitable donations during the year amounted to £9,046 (2012: £11,882). Individual amounts of greater than £200 were donated for the following purposes: Medical equipment for kids, UNICEF, Cancer Research and Better Bankside.

No political donations were made during the year (2012: £nil).

Post Balance Sheet Event

In July 2013, the Board decided to withdraw its design group from the UAE. In the financial year to 30 June 2014, the Group anticipates that it will incur an exceptional provision of around £1.9m with a cash outflow of around £0.8m after anticipated costs associated with the orderly wind down of operations and financial settlements in respect to debtors and work in progress.

Annual General Meeting

The AGM will be held at 10 30 am on 6 December 2013. Formal notice and details of the meeting are set out on a separate circular to shareholders accompanying the Annual Report and Financial Statement.

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, each Director confirms that:

• So far as he/she is aware, there is no relevant audit information of which the Companies' auditors are unaware; and
• He/she has taken all steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

By Order of the Board

Graham R Hiscocks Company Secretary 1 November 2013

Company number: 2188844

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 2013 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 Statement of Directors' Responsibilities 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 2013 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 Matter 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.

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.

Under the Listing Rules we are required to review:

• the directors' statement, set out on page 53, in relation to going concern;
• 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 2013 and on the information in the Directors' Remuneration Report that is described as having been audited.

Simon O' Brien (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 1 November 2013

Consolidated Income Statement

for the year ended 30 June 2013

		Pre-exceptional	Exceptional items	Year ended	Pre-exceptional	Exceptional items	Year ended
	notes	items £'000	(note 5) £'000	30 June 2013 £'000	items £'000	(note 5) £000	30 June 2012 £'000
Revenue	2	66,759	-	66,759	68,840	-	68,840
Employee benefits expense	3	(41,425)	(336)	(41,761)	(42,859)	(1,287)	(44,146)
Other operating charges	4	(23,678)	(78)	(23,756)	(23,870)	1,603	(22,267)
Operating expenses		(65,103)	(414)	(65,517)	(66,729)	316	(66,413)
Earnings before interest, taxes, depreciation and
amortisation (EBITDA)		1,656	(414)	1,242	2,111	316	2,427
Depreciation of property, plant and equipment	12	(392)	-	(392)	(714)	(92)	(806)
Amortisation of other intangible assets	11	(394)	-	(394)	(596)	-	(596)
Operating profit		870	(414)	456	801	224	1,025
Finance costs	6	(165)	-	(165)	(319)	(284)	(603)
Finance income		62	-	62	108	-	108
Profit before taxation		767	(414)	353	590	(60)	530
Taxation	7	(177)	93	(84)	(583)	623	40
Profit for the financial year (see below)		590	(321)	269	7	563	570
(Loss) / profit attributable to – Owners of the parent		205	(316)	(111)	(654)	563	(91)
Profit attributable to – Non-controlling interests		385	(5)	380	661	-	661
		590	(321)	269	7	563	570
Basic (loss) / earnings per share	9			(0.4p)			(0.3p)
Diluted (loss) / earnings per share	9			(0.4p)			(0.3p)

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2013

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £' 000
Profit for the financial year (see above)	269	570
Other comprehensive (loss) / income :
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustments	(591)	(333)
Change in UK tax rate on deferred tax	4	8
Change in valuation of own shares held by Employee Benefit Trust	4	(13)
Employee Benefit Trust (loss) / profit	(4)	13
Total of items that may be reclassified subsequently to profit or loss	(587)	(325)
Other comprehensive loss for the year	(587)	(325)
Total comprehensive (loss) / income for the year	(318)	245
Total comprehensive (loss) / income attributable to:
Owners of the parent	(429)	206
Non-controlling interests	111	39
	(318)	245

The notes on pages 59 to 81 are an integral part of these Consolidated Financial Statements.

Consolidated Balance Sheet

as at 30 June 2013

	notes	2013 £'000	2012 £'000
ASSETS
Non-current assets
Goodwill	10	16,713	17,110
Other intangible assets	11	146	450
Property, plant and equipment	12	2,435	2,350
Loan and receivables	13	10	10
Deferred taxation asset	25	1,316	1,181
		20,620	21,101
Current assets
Trade and other receivables	15	32,138	32,675
Cash at bank	16	3,189	3,977
		35,327	36,652
Total assets		55,947	57,753
LIABILITIES
Current liabilities
Trade and other payables	17	(19,543)	(19,285)
Financial liabilities – borrowings	18	(829)	(1,422)
		(20,372)	(20,707)
Non-current liabilities
Financial liabilities – borrowings	18	(1,244)	(1,672)
Provisions	19	(1,545)	(1,776)
		(2,789)	(3,448)
Total liabilities		(23,161)	(24,155)
Net assets		32,786	33,598
EQUITY ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Share capital	20	3,076	3,076
Share premium reserve		11,881	11,881
Merger reserve	22	3,144	3,144
Revaluation reserve		598	594
Retained earnings		12,447	13,002
		31,146	31,697
Non-controlling interest		1,640	1,901
Total equity		32,786	33,598

The Consolidated Financial Statements on pages 55 to 81 were authorised for issue by the directors on 1 November 2013. They were signed on behalf of the directors by:-

Roger Fidgen Nicholas Taylor Chairman Chief Executive

The notes on pages 59 to 81 are an integral part of these Consolidated Financial Statements.

Consolidated Cash Flow Statement

for the year ended 30 June 2013

		Year ended	Year ended
		30 June 2013	30 June 2012
	notes	£' 000	£' 000
Cash flows from operating activities
Cash generated from operations (see below)		1,875	152
Interest paid		(165)	(600)
Interest received		62	108
Tax paid		(334)	(183)
Net cash used in operating activities		1,438	(523)
Cash flows from investing activities
Purchase of property, plant and equipment (PPE) and other intangible assets		(585)	(439)
Proceeds from sale of PPE and other intangible assets		5	11,551
Net cash from / (used in) investing activities		(580)	11,112
Cash flows from financing activities
Repayment of borrowing		(415)	(7,872)
Repayments on finance leases		(28)	(40)
Equity dividends paid-Owners of the parent	8	(122)	(62)
Equity dividends paid-Non-controlling interest	8	(372)	(904)
Net cash used in financing activities		(937)	(8,878)
Net increase / (decrease) in cash, cash equivalents and overdrafts		(79)	1,711
Cash and cash equivalents at beginning of year	24	2,998	1,411
Exchange (gains) / losses on cash and cash equivalents	24	(131)	(124)
Cash and cash equivalents at end of year	24	2,788	2,998

		Year ended	Year ended
Reconciliation of Profit for the financial year		30 June 2013	30 June 2012
to cash generated from operations	notes	£' 000	£' 000
Profit for the financial year		269	570
Taxation	7	84	(40)
Interest payable	6	165	603
Interest receivable		(62)	(108)
Amortisation of other intangible assets	11	394	596
Depreciation	12	392	806
Profit on disposal of PPE and other intangible assets	5	-	(4,116)
Changes in working capital
Decrease in trade and other receivables		499	2,826
Decrease in trade and other payables		412	(338)
Decrease in provisions		(278)	(647)
Cash generated from operations (see above)		1,875	152

The notes on pages 59 to 81 are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Changes in Equity

for the year ended 30 June 2013

					Attributable to the owners of the parent
	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Revaluation reserve £'000	Retained earnings £'000	Total £'000	Non controlling interest £'000	Total equity £'000
Balance at 1 July 2011	3,076	11,881	3,144	600	12,852	31,553	2,766	34,319
Currency translation adjustments	-	-	-	-	289	289	(622)	(333)
Change in UK tax rate on deferred taxation	-	-	-	8	-	8	-	8
Reserve transfer on disposal of Land and freehold property *	-	-	-	(19)	19	-	-	-
Deferred tax transfer on disposal of Land and freehold property*	-	-	-	5	(5)	-	-	-
Change in valuation of own shares held by Employee Benefit Trust	-	-	-	-	(13)	(13)	-	(13)
Employee Benefit Trust profit	-	-	-	-	13	13	-	13
Other comprehensive income / (loss)	-	-	-	(6)	303	297	(622)	(325)
(Loss) / profit for the financial year	-	-	-	-	(91)	(91)	661	570
Total comprehensive income	-	-	-	(6)	212	206	39	245
Dividend	-	-	-	-	(62)	(62)	(904)	(966)
Balance at 30 June 2012	3,076	11,881	3,144	594	13,002	31,697	1,901	33,598
Currency translation adjustments	-	-	-	-	(322)	(322)	(269)	(591)
Change in UK tax rate on deferred taxation	-	-	-	4	-	4	-	4
Change in valuation of own shares held by Employee Benefit Trust	-	-	-	-	4	4	-	4
Employee Benefit Trust profit	-	-	-	-	(4)	(4)	-	(4)
Other comprehensive (loss)	-	-	-	4	(322)	(318)	(269)	(587)
(Loss) / profit for the financial year	-	-	-	-	(111)	(111)	380	269
Total comprehensive (loss)	-	-	-	4	(433)	(429)	111	(318)
Dividend	-	-	-	-	(122)	(122)	(372)	(494)
Balance at 30 June 2013	3,076	11,881	3,144	598	12,447	31,146	1,640	32,786

* Further detail on the reserve and deferred tax transfers on the disposal of Land and freehold property are disclosed in note 7c to the consolidated financial statements.

The notes on pages 59 to 81 are an integral part of these Financial Statements.

Notes to the Consolidated Financial Statements

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 2013 and 30 June 2012 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, in accordance with IFRS as adopted by the EU, and in accordance with those parts of the Companies Act 2006 related to reporting under IFRS that the board expects to be applicable as at 30 June 2013. IFRS is subject to amendment or interpretation by the International Accounting Standards Board and there is an ongoing process of review and endorsement by the EU. For these reasons, it is possible that the information presented in this report may be subject to change.

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

The financial statements have been prepared on a going concern basis under the historical cost convention 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.

New and Amended Standards Adopted by the Group

a) The following standards, amendments to standards and interpretations are effective for the first time in the current financial year and have had an impact on the Group's Consolidated Financial Statements:

Amendment to IAS 1,'Presentation of financial statements', regarding other comprehensive income (effective 1 July 2012) The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

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

Amendments to existing standards

Amendment to IFRS 1,'First time adoption' on hyperinflation and fixed dates (effective 1 July 2011) (endorsed 1 January 2013) Amendment to IAS 12,'Income taxes' on deferred tax (effective 1 January 2012) (endorsed 1 January 2013)

c) 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:

New Standards

IFRS 9, 'Financial instruments' (effective 1 January 2015)

IFRS 12, 'Disclosures of interests in other entities' (effective 1 January 2013) (endorsed 1 January 2014)

IFRS 13, 'Fair value measurement' (effective 1 January 2013)

IAS 19 (revised 2011) 'Employee benefits' (effective 1 January 2013)

IAS 27 (revised 2011) 'Separate financial statements' (effective 1 January 2013) (endorsed 1 January 2014)

• IAS 28 (revised 2011) 'Associates and joint ventures' (effective 1 January 2013) (endorsed 1 January 2014)
• IFRS 10, 'Consolidated financial statements' (effective 1 January 2013) (endorsed 1 January 2014)

IFRS 11, 'Joint arrangements'(effective 1 January 2013) (endorsed 1 January 2014)

Amendments to existing standards

Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities (effective 1 January 2014) Amendments to IAS 32 on Financial instruments asset and liability offsetting (effective 1 January 2014) Amendment to IAS 36, 'Impairment of assets' on recoverable amount disclosures (effective 1 January 2014) Amendment to IFRS 1,'First time adoption' on government grants (effective 1 January 2013) Amendments to IFRS 7 on Financial instruments asset and liability offsetting (effective 1 January 2013) Annual improvements 2011 (effective 1 January 2013) Amendments to IFRS 10,11 and 12 on transition guidance (effective 1 January 2013) (endorsed 1 January 2014)

New IFRICs

IFRIC 21, 'Levies' (effective 1 January 2014)

IFRIC 20, 'Stripping costs in the production phase of a surface mine' (effective 1 January 2013)

Basis of Consolidation

The Consolidated Financial Statements consist of the financial statements 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 eliminated. 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 value 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.

Investments in subsidiaries are accounted for at cost less impairment. Cost includes direct attributable costs of investment. 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. All intra-group transactions and balances are eliminated on consolidation.

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 judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The estimates and assumptions that have the most significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are addressed in the paragraph below.

Critical Judgments

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

• Contract Accounting: Revenue recognition, the valuation of trade receivables and amounts recoverable on contracts and the assessment of the percentage of completion achieved. The Group assesses contract progress and determines the proportion of contract work completed at the balance sheet date in relation to the total contract works. This policy requires forecasts to be made on the projected outcomes of projects. These forecasts require assessments and judgments to be made on matters including changes in work scope, changes in costs and costs to completion. While the assumptions made are based on professional judgments, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reporting results;
• Insurance Claims: Provisions in respect of potential liability insurance claims require assessments and judgments to be made of the likelihood of a claim succeeding and an estimate of the quantum. While the assumptions made are based on professional judgments, subsequent events may mean that estimates calculated prove to be inaccurate, with a consequent effect on the reporting results;
• Goodwill is subject to impairment review both annually and when there are indications that the carrying value may not be recoverable. The carrying value is compared to the recoverable amount, which is the higher of value in use and fair value less costs to sell. Determining whether goodwill is impaired requires an estimation of the value in use of CGU's to which the goodwill has been allocated. The value in use calculation requires an estimate to be made of the timing and amount of future cash flows expected to arise from the CGU and the application of a suitable discount rate to calculate the present value. The discount rates used are based on the Group's weighted average cost of capital adjusted to reflect the specific economic environment of the relevant CGU (refer to note 10); and
• Deferred Tax: Deferred tax is accounted for on temporary differences using the liability method, with deferred tax liabilities being provided for in full and deferred tax assets being recognised only to the extent that it is judged probable that future taxable profit will arise against which the temporary differences can be utilised.

Segmental Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

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.

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. Variations in contract work, claims and incentive payments are included in the contract revenue to the extent that they have been agreed with the customer and are capable of being reliably measured. 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 as amounts due to customers on long term contracts.

Employee Benefits

a) Pension Obligations

The Group maintains a number of defined contribution schemes, including a stakeholder pension scheme, which are 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. When awards are approved by the Board, 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 shareholders' 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

Exceptional items are those that the directors consider are of such unusual size or nature that they are required to be separately disclosed to allow the user of the financial statements to understand the underlying performance of the Group. They are disclosed within their relevant business segment within note 2, Segmental Information and note 5, Exceptional Items. They typically include restructuring costs, property provisions and certain work in progress and trade receivable provisions.

Finance Costs

Interest expense is recognised in the consolidated income statement as it is accrued.

Goodwill

Goodwill recognised under UK GAAP prior to 1 July 2004 (and subsequent to 1 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 1 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 which is performed annually or more frequently if events or changes in circumstances indicate a potential impairment. 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%

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. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. 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

Financial assets and liabilities are recognised in the Group's Consolidated Balance Sheet when the Group becomes a party to the contractual provisions of the investment. The Group's financial assets and liabilities are recorded at fair value or 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 invoice discounting facilities (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 Consolidated 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 the Consolidated Balance Sheet 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 profit or loss or 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. Interim dividends are recognised when paid.

Financial Risk Management

The Board reviews and agrees policies for managing financial risks. These have remained unchanged throughout the year. The Group's finance team is responsible for managing investment and funding requirements including banking and cash flow monitoring. It seeks to ensure that adequate liquidity exists at all times in order to meet its cash requirements.

The Group strategy is to finance its operations through a mixture of cash generated from operations and where necessary, equity finance and borrowings by way of bank facilities and working capital finance.

The Group's financial instruments comprise borrowings, cash and various items, such as trade receivables and trade payables that arise from its operations. The main purpose of these financial instruments is to finance the Group's operations. The Group also has overdraft facilities in place to optimise the use of its resources. The Group does not trade in financial instruments or derivatives.

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 financial instruments are described below.

Liquidity Risk

Liquidity risk is the risk that the Group cannot meet its obligations if suitable sources of funding for the Group's business activities are not 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 4 which indicates a minimal credit risk.

The Group had net funds of £1.1m at 30 June 2013 comprising £3.2m of cash less £2.1m of debt.

Foreign Currency Risk

The Group has exposure to currency risk on business transactions where revenues and costs are in different currencies, and on translation of assets and liabilities from local currency into sterling. Revenues and costs in the same currency are matched to form natural hedges wherever possible. The Group would also implement hedging procedures or purchase currency hedges where a material exposure is 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.

The Group's exposure to market risk for changes in interest rates relates primarily to the Group's bank loan, overdraft and sales financing facility debt obligations. Bank interest is charged on a floating rate basis.

Credit Risk

Credit checks are performed on all potential customers. Accounts receivable balances are monitored on an ongoing basis. There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 3% (2012: 3%) of total receivables balances at 30 June 2013.

2 Segmental Reporting

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 before exceptional items as disclosed in the Consolidated Income Statement. Revenue is reported and assessed on a consistent basis with revenue reported in the Consolidated Income Statement.

		Energy,		International
Building	Civil and	environment		multi
services	transportation	and design	Structures	disciplinary*	Unallocated	Total
£'000	£'000	£'000	£'000	£'000	£'000	£'000
5,685	29,195	8,059	15,593	17,335	-	75,867
(267)	(3,616)	(804)	(3,626)	(795)	-	(9,108)
5,418	25,579	7,255	11,967	16,540	-	66,759
246	(137)	547	1,158	(158)	-	1,656
(36)	(166)	(57)	(67)	(168)	-	(494)
210	(303)	490	1,091	(326)	-	1,162
(36)	(204)	-	-	(52)	-	(292)
(22)	(178)	(12)	(8)	(194)	-	(414)
152	(685)	478	1,083	(572)	-	456
						(103)
						-
						353
						(84)
						269
						380
						(111)

			Energy,		International
	Building	Civil and	environment		multi
30 June 2012	services	transportation	and design	Structures	disciplinary*	Unallocated	Total
Consolidated Income Statement	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue – total	6,106	26,358	7,300	12,585	23,123	-	75,472
Revenue – internal	(185)	(1,220)	(837)	(1,946)	(2,444)	-	(6,632)
Revenue	5,921	25,138	6,463	10,639	20,679	-	68,840
EBITDA pre-exceptional items	125	16	303	1,241	426	-	2,111
Depreciation and amortisation on
computer software	(68)	(248)	(86)	(119)	(327)	-	(848)
Operating profit / (loss)
pre-exceptional items and amortisation on
acquired intangible assets	57	(232)	217	1,122	99	-	1,263
Amortisation on acquired intangible assets	(36)	(274)	-	-	(152)	-	(462)
Allocated exceptional items	(450)	(1,637)	(211)	(117)	(1,477)	-	(3,892)
Exceptional item – profit on sale and	-	-	-	-	-	4,116	4,116
leaseback
Operating profit / (loss)
post-exceptional items	(429)	(2,143)	6	1,005	(1,530)	4,116	1,025
Net finance costs pre- exceptional items							(211)
Exceptional finance costs							(284)
Profit before taxation							530
Taxation							40
Profit for the financial year							570
Profit attributable to non-controlling interests							661
Loss attributable to the owners of the parent							(91)

*The international multi-disciplinary business segment consists primarily of the Building Services and Structures disciplines.

A segmental analysis of net finance costs has not been disclosed as the directors are of the opinion that its components cannot be meaningfully analysed across regions and classes of business. Internal revenue is work done on behalf of fellow group undertakings on an arm's length basis. External revenue reported to the Board is measured in a manner consistent with that in the Consolidated Income Statement.

2 Segmental Reporting (Continued)

			Energy,		International
	Building	Civil and	environment		multi
30 June 2012	services	transportation	and design	Structures	disciplinary	Unallocated	Total
Consolidated Balance Sheet	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Goodwill	680	8,846	965	-	6,222	-	16,713
Other segment assets	3,607	12,116	513	19,709	(983)	2,741	37,703
Total segment assets	4,287	20,962	1,478	19,709	5,239	2,741	54,416
Unallocated assets
Current tax assets							215
Deferred tax assets							1,316
Total assets							55,947
Segment liabilities	(1,257)	(6,890)	(1,687)	(8,447)	(6,106)	4,203	(20,184)
Unallocated liabilities
Financial liabilities							(1,925)
Current tax liabilities							(1,052)
Total liabilities							(23,161)
Capital expenditure	1	12	26	-	143	403	585
			Energy,		International
	Building	Civil and	environment		multi
30 June 2012	services	transportation	and design	Structures	disciplinary	Unallocated	Total
Consolidated Balance Sheet (restated)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Goodwill	680	8,846	965	-	6,619	-	17,110
Other segment assets	3,653	10,972	(139)	16,113	1,616	7,093	39,308
Total segment assets	4,333	19,818	826	16,113	8,235	7,093	56,418
Unallocated assets
Current tax assets							154
Deferred tax assets							1,181
Total assets							57,753
Segment liabilities	(1,376)	(4,536)	(1,499)	(5,812)	(7,512)	699	(20,036)
Unallocated liabilities
Financial liabilities							(1,261)
Current tax liabilities							(2,860)
Total liabilities							(24,157)
Capital expenditure	1	24	32	-	160	222	439

Prior year comparatives at 30 June 2012 have been restated to be consistent with the current year treatment of intercompany balances.

Geographical Segmental Analysis	Rest of
	UK	Europe	the World	Group	Total
30 June 2013	£'000	£'000	£'000	£'000	£'000
External revenue – by client location	50,219	2,325	14,215	-	66,759
Segment assets – by location of asset	46,437	(2.489)	7,727	2,741	54,416
Capital expenditure	39	31	111	404	585
			Rest of
	UK	Europe	the World	Group	Total
30 June 2012 (restated)	£'000	£'000	£'000	£'000	£'000
External revenue – by client location	48,161	2,403	18,276	-	68,840
Segment assets – by location of asset	41,089	(1,324)	9,560	7,093	56,418
Capital expenditure	57	24	136	222	439

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

Prior year comparatives at 30 June 2012 have been restated to be consistent with the current year treatment of intercompany balances.

3 Employee Benefits Expense

Year ended 30 June 2013	£'000	Year ended 30 June 2012 £'000
Staff costs including Executive Directors remuneration amounted to:
Wages and salaries	36,342	37,519
Termination benefits - including exceptional items of £336,000 (2012: £1,287,000)	427	1,328
Social security costs	3,160	3,334
Pension costs	1,832	1,965
	41,761	44,146
The average monthly number of employees including executive directors during the year were as follows :
	Number	Number
Technical	697	743
Non-technical	140	171
	837	914

The average monthly number of temporary and contract staff during the year was 127 (2012: 60). Pensions contributions outstanding at 30 June 2013 were £142,945 (2012: £159,553).

4 Other Operating Charges

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'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	95	98
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	145
-other services pursuant to legislation	20	27
Operating lease rentals
- property	2,408	2,981
- plant and equipment	390	645
Gain on foreign exchange	(3)	(19)
Profit on disposal of property, plant and equipment	-	(4,149)
Rents receivable	(24)	(58)

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 2013 £'000	Year ended 30 June 2012 £'000
Employee benefits expense
Other restructuring costs	(336)	(1,287)
Other operating charges
Profit on sale and leaseback of Land and freehold property	-	4,116
Office closure costs	(66)	-
Property provisions and accruals	54	(1,035)
Work in progress and trade receivables provisions	(66)	(1,478)
	(414)	316
Depreciation of property, plant and equipment
Depreciation of PPE in closed offices	-	(92)
Finance costs
Mortgage early repayment charge	-	(284)
Taxation	93	623
Total exceptional items	(321)	563

5 Exceptional Items (Continued)

Other restructuring costs: Relates mainly to redundancy costs resulting from closure of the Chinese operation and restructuring within the UK. The 2012 costs mainly arose from restructuring of the Building Services and Civil and Transportation businesses.

Profit on sale and leaseback of Land and freehold property: In the year to 30 June 2012, the Group disposed of its London head office building, Pickfords Wharf, through a sale and leaseback agreement. The property was sold for £11,914,000 and realised a profit of £4,116,000 before tax and after transaction costs of £457,000.

Office closure costs: Primarily costs associated with the closure of the Chinese office.

Property provisions and accruals: Surplus provisions for office closure made in the year to 30 June 2012 have been written back to profit in the current year following favourable settlements for office dilapidation costs.

Work in progress and trade receivables provisions: Due to the closure of the Chinese operation and the restructuring in the UK, the Group has made provision against £66,000 (2012: £1,478,000) of work in progress and trade receivable balances.

Taxation: The taxation credit of £93,000 (2012: £623,000 credit) is due to the tax deductibility of the exceptional items.

6 Finance Costs

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'000
Interest payable on bank loans and invoice discounting facility	122	270
Interest payable on hire purchase contracts	-	3
Other interest payable	43	44
Discount on provisions	-	2
Interest payable pre-exceptional items	165	319
Exceptional item - mortgage early repayment charge (see note 5)	-	284
Interest payable post-exceptional items	165	603

7 Taxation

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

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'000
United Kingdom
Corporation tax at 23.75% (2012: 25.5%)	-	(22)
Adjustments in respect of prior years	(33)	4
	(33)	(18)
Foreign tax
Corporation taxes	255	375
Adjustments in respect of prior years	-	(61)
Total current tax	222	296
United Kingdom
Origination and reversal of temporary differences	67	(610)
Adjustments in respect of prior years	(205)	274
Total deferred tax	(138)	(336)
Taxation	84	(40)

7 Taxation (Continued)

b) Factors Affecting Taxation for the Year

The following table reconciles the expected corporation tax charge, using the UK corporation tax rate for 2013 of 23.75% (2012: 25.5%) to the reported tax charge. The reconciling items represent, other than the impact of tax rate differentials and changes, non-taxable income or nondeductible 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 2013 £'000	Year ended 30 June 2012 £'000
Profit before taxation	353	530
Taxation on profit at standard UK rate of 23.75% (2012: 25.5%)	84	135
Effects of:
Expenses not deductible for tax purposes	-	(688)
Adjustments in respect of prior years	(238)	217
Adjustments in respect of foreign tax rates	96	83
Capital transactions	-	233
Non-taxable	(27)	(334)
Losses not utilised	157	314
Change in tax rate	12	-
Total taxation	84	(40)

The Finance Act 2012 included legislation to reduce the main rate of UK Corporate Tax from 24% to 23% from 1 April 2013. In addition, a further reduction to the UK corporate tax rate was announced in the Finance Act 2013 reducing the rate to 21% from 1 April 2014, refer to note 25.

c) Deferred Taxation Credited to Equity

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'000
Property, plant and equipment	-	8

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

8 Dividends

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'000
Dividends charged to equity in the year
Final dividend paid in January 2013 of 0.2p (2012: 0.1p) per share	61	31
Interim dividend paid in April 2013 of 0.2p (2012: 0.1p) per share	61	31
Total dividend paid in year of 0.4p (2012: 0.2p) per share	122	62
Final dividend proposed for payment in January 2014 of 0.3p (2013: 0.2p) per share	92	62

A dividend of £372,000 (2012: £904,427) was paid to the non-controlling interest during the year.

An interim dividend of 0.2p per share was paid on 19 April 2013. Reflecting its confidence in the outlook for the Group, the Board recommends to shareholders a final dividend of 0.3p per share (2012: 0.2p). If approved by shareholders at the Annual General Meeting to be held on 6 December 2013, the shares will become ex-dividend on 11 December 2013 and the final dividend will be paid on 10 January 2014 to shareholders on the register at close of business on 13 December 2013.

The Employee Benefit Trust has waived its entitlement to dividends which has reduced the 2013 interim dividend paid by £586 (2012: £368) and the 2012 final dividend paid by £686 (2011: £368).

9 (Loss) / Earnings per Share
		2013			2012
		Weighted			Weighted
		average	2013		average	2012
	2013	number	Per share	2012	number	Per share
	Loss	of shares	amount	Loss	of shares	amount
	£'000	(thousands)	(pence)	£'000	(thousands)	(pence)
Basic (loss) / earnings per share:
(Loss) / earnings attributed to owners of the parent	(111)	30,567	(0.4)	(91)	30,553	(0.3)
Effect of dilutive share schemes	-	-	-	-	-	-
Diluted (loss) / earnings per share	(111)	30,567	(0.4)	(91)	30,553	(0.3)

The basic loss per share has been calculated on the loss attributable to the owners of the parent and based on a weighted average of 30,567,407 (2012: 30,552,824) shares in issue and ranking for dividend during the year.

The diluted (loss) per share takes account of unexercised share options potentially convertible into new shares. The calculation is based on the loss attributable to the owners of the parent and a weighted average of 30,567,407 (2012: 30,552,824) shares during the year.

Adjusted earnings per share before amortisation of acquired intangible assets and exceptional items is 1.4p (2012: loss of 1.0p) as set out below.

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Items attributable to owners of the parent
Loss after taxation	(111)	(91)
Amortisation on acquired intangibles after taxation	208	334
Exceptional items after taxation	316	(563)
Adjusted profit / (loss) after tax	413	(320)
Adjusted earnings / (loss) per share	1.4p	(1.0p)
10 Goodwill		Group
		£'000
Cost
1 July 2011		17,687
Exchange rate adjustments		(83)
1 July 2012		17,604
Exchange rate adjustments		(397)
30 June 2013		17,207

Impairment

30 June 2012

1 July 2011, 1 July 2012 and 30 June 2013	494
Net book amount
30 June 2013	16,713

Goodwill is not amortised but is tested for impairment in accordance with IAS 36 'Impairment of assets' at least annually or more frequently if events or changes in circumstances indicate a potential impairment.

Goodwill is allocated to the Group's cash-generating units (CGUs) in order to carry out impairment tests. A summary of goodwill allocation by CGU or group of CGU's at the operating segment level is included in note 2. Goodwill of £8.8m (2012: £8.8m) allocated to the Civil and transportation operating segment includes £6.6m attributable to Waterman Aspen Limited ("Aspen") and £2.2m attributable to Waterman Transport & Development Limited. Goodwill of £6.2m (2012: £6.6m) allocated to the International multi-disciplinary operating segment includes £1.2m arising on the acquisition of Moylan Consulting Engineers Ltd ("Moylan") and £4.9m attributable to the acquisition of the Group's Australian businesses.

The impairment test involves comparing the carrying value of the CGU to which the goodwill has been allocated to their recoverable amount. The recoverable amount of all CGU's has been determined based on value in use calculations. An impairment loss is recognised immediately the carrying value of those assets exceeds their recoverable amount.

Value in use calculations

The value in use calculations use cash flow projections based on the following financial year's budget as approved by the Board and strategic plans of the relevant CGU's for the remaining four years. The key assumptions in the budget and strategic plans relate to revenue and profit margins and are based on actual results from previous years, existing committed and contracted workload, management expectations of market developments and future workload demand, and pricing in each market or country of operation. The projections do not include the impact of future restructuring projects to which the Group is not yet committed.

17,110

10 Goodwill (Continued)

Growth rates are based on the economic environment of the country in which the CGU operates. As required by IAS36, cash flows beyond the five year period are extrapolated based on the long term average growth rate for the primary country in which the CGU operates. The growth rates are derived from the IMF World Economic Outlook published GDP growth rates.

The cash flows have been discounted using CGU specific pre-tax discount rates. The discount rates have been calculated based on the Group's weighted average (pre-tax real) cost of capital using the capital asset pricing model to determine the cost of equity and risks specific to the CGU. The discount rates are revised annually using updated market information.

The excess of the value in use to the goodwill carrying values for each CGU gives the level of headroom in each CGU.

Key Assumptions

The growth rate and discount rate assumptions used for the internal value in use calculations are as follows:

	Group	Group
	30 June 2013	30 June 2012
Average revenue growth rate over the first five years	3.0% - 20.0%	1.6% - 11.3%
Post five year growth rate	1.97% - 3.18%	2.0% - 2.25%
Weighted average pre-tax real cost of capital (discount rate)	9.0% - 11.1%	9.8% - 12.0%

This range of assumptions has been used for the analysis of each CGU or group of CGUs within the Group's operating segments.

Sensitivity Analysis

Sensitivity analysis has been performed on the goodwill in relation to each CGU by changing the key assumptions applicable to each CGU.

Given the lower headroom derived by the value in use calculations, more detailed sensitivity analysis has been performed upon the Moylan CGU. The assumption to which the calculation is more sensitive is the pre-tax discount rate. Specific sensitivity analysis with regards to this assumption shows that the rate would need to increase from 9.0% to 11.2% before any impairment would be triggered. For the other CGU's, the analysis has indicated that no reasonably possible changes in the individual key assumption would cause the carrying amount of the goodwill in the business to exceed its recoverable amount.

Conclusion

Based on these internal valuations, the recoverable value of goodwill as at 30 June 2013 requires no impairment.

11 Other Intangible Assets

		Customer
	Computer software	relationships	Order book	Total
	£'000	£'000	£'000	£'000
Cost
1 July 2011	2,398	2,797	204	5,399
Additions	89	-	-	89
Disposals	(32)	-	-	(32)
Exchange rate adjustments	(25)	(15)	-	(40)
1 July 2012	2,430	2,782	204	5,416
Additions	92	-	-	92
Disposals	(215)	-	-	(215)
Exchange rate adjustments	(1)	(12)	-	(13)
30 June 2013	2,306	2,770	204	5,280
Accumulated Amortisation
1 July 2011	2,194	2,033	204	4,431
Charge for the year	134	462	-	596
Disposals	(32)	-	-	(32)
Exchange rate adjustments	(16)	(13)	-	(29)
1 July 2012	2,280	2,482	204	4,966
Charge for the year	102	292	-	394
Disposals	(213)	-	-	(213)
Exchange rate adjustments	(2)	(11)	-	(13)
30 June 2013	2,167	2,763	204	5,134
Net book amount
30 June 2013	139	7	-	146
30 June 2012	150	300	-	450

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
1 July 2011	9,249	11,808	21,057
Additions	-	350	350
Disposals	(7,750)	(1,071)	(8,821)
Exchange rate adjustments	-	(93)	(93)
1 July 2012	1,499	10,994	12,493
Additions	-	492	492
Disposals	-	(1,984)	(1,984)
Exchange rate adjustments	-	7	7
30 June 2013	1,499	9,509	11,008
Accumulated Depreciation
1 July 2011	434	10,384	10,818
Charge for the year (including exceptional items)	28	778	806
Disposals	(409)	(977)	(1,386)
Exchange rate adjustments	-	(95)	(95)
1 July 2012	53	10,090	10,143
Charge for the year (including exceptional items)	15	377	392
Disposals	-	(1,976)	(1,976)
Exchange rate adjustments	-	14	14
30 June 2013	68	8,505	8,573
Net book amount
30 June 2013	1,431	1,004	2,435
30 June 2012	1,446	904	2,350

Included in the above are plant, equipment and motor vehicles that have been acquired under finance leases. The net book value of these assets is £nil (2012: £nil) and accumulated depreciation on these assets is £167,687 (2012: £167,687).

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 Consolidated 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 £0.7m (2012: £0.7m).

Certain Group assets have been used as security for borrowings as disclosed in note 18 to the Consolidated Financial Statements.

30 June 2013	30 June 2012
£'000	£'000
Loan and receivables at net book value 10	10

The following companies are the principal subsidiary undertakings at 30 June 2013 and all are consolidated:

		Class and
		percentage
	Country of	of ordinary
	registration /	equity and
	incorporation	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 Holdings Limited	England	100%	Intermediate holding company
Waterman International Kazakhstan o.o.o.	Kazakhstan	100%	Multi-discipline consultancy*
Waterman International Limited	England	100%	Multi-discipline consultancy*
Waterman International (London) Limited	England	100%	Multi-discipline consultancy*
Waterman Middle East Pty Limited	Australia	100%	Mechanical, electrical and structural consultancy*
Waterman Moylan Consulting Engineers Limited	Republic of Ireland	100%	Civil and structural engineering consultancy***
Waterman Structures Limited	England	100%	Structural engineering consultancy
Waterman (Tianjin) Construction Design Ltd	China	100%	Civil and structural engineering consultancy*
Waterman Transport & Development Limited	England	100%	Civil 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 a branch in Moscow, Russia.

14 Long Term Contracts

	Group	Group
	30 June 2013	30 June 2012
	£'000	£'000
Total costs incurred	102,215	85,167
Profit recognised as income (less recognised losses)	17,185	12,670
Work in progress for third parties	119,400	97,837
Invoicing on account to customers	(117,089)	(95,308)
	2,311	2,529
Of which work in progress for third parties is disclosed as:
Amounts due from customers on long term contracts (note 15)	10,963	10,243
Amounts due to customers on long term contracts (note 17)	(8,652)	(7,714)
	2,311	2,529

15 Trade and Other Receivables

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Trade receivables	21,540	21,635
Less: Provision for impairment of receivables	(3,136)	(3,481)
Trade receivables (net)	18,404	18,154
Amounts due from customers on long term contracts (note 14)	10,963	10,243
Other receivables	102	174
Current tax asset	215	154
Prepayments and accrued income	2,454	3,950
	32,138	32,675

As of 30 June 2013, gross trade receivables of £12.6m (2012: £12.4m) which were past due were considered for potential impairment. The amount provided for these balances was £3.1m (2012: £3.5m).The allocation of the provision according to the date from the issue of invoice is as follows:

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Less than 30 days	-	4
Between 30 and 60 days	7	6
Between 60 and 90 days	-	-
Between 90 and 120 days	-	-
Greater than 120 days	3,129	3,471
	3,136	3,481

As of 30 June 2013, trade receivables of £9.5m (2012: £8.9m) 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 2013 £'000	Group 30 June 2012 £'000
Less than 30 days	-	-
Between 30 and 60 days	2,392	2,522
Between 60 and 90 days	1,816	1,713
Between 90 and 120 days	1,194	1,282
Greater than 120 days	4,126	3,402
	9,528	8,919

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 2013 £'000	Group 30 June 2012 £'000
Sterling	25,320	24,910
Australian dollar	2,281	2,664
UAE dirham	1,479	1,777
Russian rouble	1,241	1,573
Euro	1,554	1,397
Polish zloty	191	176
US dollar	-	98
Indian rupee	66	78
Chinese renminbi	6	2
	32,138	32,675

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

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
At 1 July	3,481	8,385
Provision for receivables impairment	677	1,233
Receivables written off during the year as uncollectible	(1,008)	(5,259)
Unused amounts reversed/ collected	(108)	(611)
Exchange rate adjustments	94	(267)
At 30 June	3,136	3,481

The impairment is disclosed within other operating charges in the Consolidated Income Statement. The other classes within Trade and Other Receivables do not contain any impaired assets.

The Group assesses at the balance sheet date whether there is objective evidence of impairment of trade receivables. Evidence of impairment may include that a debtor or group of debtors is experiencing financial difficulty, default in payments, the probability that they will enter bankruptcy or other financial reorganisation, or where observable data indicate that there is a measurable decrease in the estimated future cash flows such as changes in arrears or economic conditions which correlate with defaults.

16 Cash and Cash Equivalents

Cash and cash equivalents include the following for the purposes of the Consolidated Cash Flow Statement:

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Cash at bank	3,189	3,977
Drawdown on invoice discounting facility	(401)	(979)
Cash and cash equivalents	2,788	2,998

The profile of the Group's Cash at bank is:

	30 June 2013 Floating rate financial assets £'000	30 June 2013 Fixed rate financial assets £'000	30 June 2013 £'000	30 June 2012 Floating rate financial assets £'000	30 June 2012 Fixed rate financial assets £'000	30 June 2012 £'000
Sterling	502	-	502	622	-	622
Australian dollar	1,255	557	1,812	1,452	779	2,231
Euro	39	309	348	245	669	914
UAE dirham	72	-	72	208	-	208
US dollar	30	-	30	(142)	-	(142)
Polish zloty	25	-	25	94	-	94
Chinese renminbi	15	-	15	30	-	30
Russian ruble	330		330	5	-	5
Indian Rupee	55	-	55	15	-	15
	2,323	866	3,189	2,529	1,448	3,977

17 Trade and Other Payables

	Group	Group
30 June 2013 £'000	30 June 2012 £'000
Trade payables	2,557	3,034
Amounts due to customers on long term contracts (note 14)	8,652	7,714
Other taxes and social security	3,406	2,860
Other payables	1,799	1,799
Accruals	3,129	3,878
	19,543	19,285

18 Financial Liabilities - Borrowings

	Group 30 June 2013	Group 30 June 2012
Current	£'000	£'000
Drawdown on invoice discounting facility	401	979
Bank loan	428	415
Finance leases	-	28
	829	1,422
Non-current
Bank loan	1,244	1,672
Finance leases	-	-
	1,244	1,672

The Group has one sterling bank loan which is repayable in 2017. This loan is at a floating interest rate of 2.75% (2012: 2.75%) above LIBOR as at 30 June 2013 and is secured by a fixed and floating charge over certain Group assets. The term loan is subject to three financial covenants which are tested half yearly.

The maturity profile of the carrying amount of the Group's non-current liabilities at 30 June 2013 was as follows:

2013	2012
Bank loans	Bank loans
£'000	£'000
Between one and two years 442	428
Between two and five years 802	1,239
In more than five years	- 5
1,244	1,672

18 Financial Liabilities - Borrowings (Continued)

All of the Group's liabilities are included in the table below. The carrying amounts of those liabilities are denominated in the following currencies:

	30 June 2013	30 June 2013		30 June 2012	30 June 2012
	Floating rate	Fixed rate		Floating rate	Fixed rate
	financial liabilities	financial liabilities	30 June 2013	financial liabilities	financial liabilities	30 June 2012
	£'000	£'000	£'000	£'000	£'0000	£'000
Trade and other payables
- Sterling	-	-	15,295	-	-	14,133
- Australian dollar	-	-	1,341	-	-	1,747
- Euro	-	-	938	-	-	1,064
- UAE dirham	-	-	777	-	-	1,004
- Russian rouble	-	-	841	-	-	934
- Polish zloty	-	-	164	-	-	209
- US dollar	-	-	107	-	-	112
- Indian rupee	-	-	58	-	-	70
- Chinese renminbi	-	-	22	-	-	12
	-	-	19,543	-	-	19,285
Bank loans and invoice discounting facility
- Sterling	2,073	-	2,073	3,066	-	3,066
- Euro	-	-	-	-	-	-
Finance lease obligations
- UAE dirham	-	-	-	-	-	-
- Euro	-	-	-	-	28	28
	2,073	-	2,073	3,066	28	3,094

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

The fair value of the financial liabilities approximates to their book values. The minimum lease payments under finance leases fall due as follows:

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Within one year	-	29
Between one and five years	-	-
	-	29
Future finance charges	-	(1)
Present value of finance lease liabilities	-	28

19 Provisions

30 June	1,367	178	1,545	1,243	533	1,776
Discount	(2)	-	(2)	2	(9)	(7)
Exchange rate adjustments	(59)	-	(59)	(224)	-	(224)
Released to the consolidated income statement	(379)	-	(379)	(812)	-	(812)
Utilised	(75)	(355)	(430)	(605)	(348)	(953)
Charged to the consolidated income statement	639	-	639	468	657	1,125
1 July	1,243	533	1,776	2,414	233	2,647
	£'000	£'000	£'000	£'000	£'000	£'000
	claims	provisions	30 June 2013	claims	provisions	30 June 2012
	insurance	Property	Group	insurance	Property	Group
	Liability			Liability

Liability insurance claim provisions reflect management's best estimate of the likely costs to be incurred by the Group from professional liability claims. Property provisions relate to rent, rates, service charge and other associated costs relating to properties that have been vacated before the end of the lease term or before a break clause can be exercised. These provisions will be carried forward until the matters to which they relate are resolved and the provisions are utilised or released as appropriate. No provision has been released or utilised for any purpose other than that for which it is established.

Further detail on property provisions are disclosed in note 5d to the Consolidated Financial Statements.

20 Share Capital

The share capital of the Company comprises ordinary shares of 10p each. No shares were issued during the current and prior year.

		Issued and fully paid
	Number	£'000
At 1 July 2012 and 30 June 2013	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.

21 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.

During the current and prior year, no options for ordinary shares were exercised and options over 213,000 ordinary shares lapsed (2012: nil). At 30 June 2013, there were no unexercised options available for exercise.

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.

In view of the low levels of profit before taxation and earnings per share in recent years, no ordinary shares in the LTIP have been awarded to executive directors and management since 14 November 2008. At 30 June 2013, no directors held conditional awards to subscribe for LTIP shares in the Company (2012: nil).

c) Share Incentive Plan

Information in relation to the cash settled Share Incentive Plan can be found in note 28 to the Consolidated Financial Statements.

22 Merger Reserve

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 (2012: £1,133,000) relating to the write off of purchased goodwill prior to the transition to IFRS.

23 Reconciliation of Net Cash Flow to Net Funds

Group	Group
30 June 2013	30 June 2012
£'000	£'000
(657)	2,690
1,021	6,930
364	9,620
(131)	(119)
233	9,501
883	(8,618)
1,116	883

24 Analysis of Net Funds / (Debt)

	Group		Other non-cash	Exchange	Group
	1 July 2012	Cash flow	changes	movements	30 June 2013
	£'000	£'000	£'000	£'000	£'000
Cash at bank	3,977	(657)	-	(131)	3,189
Drawdown on invoice discounting facility	(979)	578	-	-	(401)
Total of cash and cash equivalents	2,998	(79)	-	(131)	2,788
Current
Bank loans	(415)	415	(428)	-	(428)
Finance leases	(28)	28	-	-	-
Non-current
Bank loans	(1,672)	-	428	-	(1,244)
Finance leases	-	-	-	-	-
Total of bank loans and finance leases	(2,115)	443	-	-	(1,672)
Net funds	883	364	-	(131)	1,116

At 30 June 2013, £1.8m (2012: £2.3m) of the cash and cash equivalents were held in subsidiaries not wholly owned by the Group of which £0.8m (2012: £0.9m) was attributable to the non-controlling interests.

25 Deferred Taxation

	Group	Group
Deferred tax liability	30 June 2013 £'000	30 June 2012 £'000
At 1 July	79	56
(Credited) / Charged to the consolidated income statement	(74)	23
Exchange rate adjustments	-	-
At 30 June	5	79

Deferred tax asset	Group 30 June 2013 £'000	Group 30 June 2012 £'000
At 1 July	1,260	902
Credited to the consolidated income statement	40	359
Credited to equity	-	8
Exchange rate adjustments	21	(9)
At 30 June	1,321	1,260

A Corporation Tax rate of 23% from 1 April 2013 was substantively enacted on 3 July 2012. Accordingly deferred tax balances have been revalued to the lower rate of 23% in these financial statements. The Government has announced that it intends to further reduce the rate of Corporation Tax to 21% with effect from 1 April 2014 and 20% from 1 April 2015. As this legislation was not substantively enacted by 30 June 2013, the impact of the anticipated rate change is not reflected in the tax provisions reported in these financial statements. If the deferred tax assets of the Group at 30 June 2013 were all to reverse after April 2015 this would not have a material effect on the deferred tax balances.

25 Deferred Taxation (Continued)

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
	1 July 2012	Equity	Income	exchange	change	30 June 2013
	£'000	£'000	£'000	£'000	£'000	£'000
Property, plant and equipment	36	-	(6)	-	-	30
Other intangible assets	(79)	-	74	-	-	(5)
Provisions	341	-	(27)	21	(3)	332
Pensions	77	-	(31)	-	-	46
Losses carried forward	806	-	116	-	(9)	913
Asset	1,181	-	126	21	(12)	1,316

	Group			Foreign	Rate	Group
	1 July 2011	Equity	Income	exchange	change	30 June 2012
	£'000	£'000	£'000	£'000	£'000	£'000
Property, plant and equipment	45	8	(14)	-	(3)	36
Other intangible assets	(191)	-	110	-	2	(79)
Provisions	604	-	(248)	(9)	(6)	341
Pensions	49	-	28	-	-	77
Rolled over gains	(194)	-	194	-	-	-
Losses carried forward	533	-	278	-	(5)	806
Asset	846	8	348	(9)	(12)	1,181

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. The deferred tax assets and liabilities at 30 June 2013, without taking into consideration the offsetting balances within the same jurisdiction are £1,322,000 (2012: £1,260,000) and £4,000 (2012: £79,000) respectively. The assets and liabilities are expected to reverse in more than one year aside from assets of £338,000 (2012: £1,000) and liabilities of £4,000 (2012: £79,000) which are expected to reverse in less than one year from the balance sheet date. Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.

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 qualify 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.

26 Related Party Transactions

The directors have identified 18 (2012: 18) key management personnel whose compensation was as follows: -

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Short term benefits	2,141	2,336
Post employment benefits	245	190
	2,386	2,526

No further related party transactions are required to be disclosed for the year ended 30 June 2013.

27 Financial Commitments

There was £28,162 of capital expenditure relating to property, plant and equipment contracted but not provided for at the year end (2012: £19,412).

The Company and certain of its subsidiary undertakings cross guaranteed the bank loans of the Group at 30 June 2013. Invoice discounting facilities provided to two subsidiary undertakings are secured by a fixed and floating charge over the assets of those companies.

At 30 June 2013 the future aggregate minimum lease payments under non-cancellable operating leases are as follows: -

		Property		Plant and equipment
	Group	Group		Group
	30 June 2013	30 June 2012	30 June 2013	30 June 2012
	£'000	£'000 (restated)	£'000	£'000
Commitment expiring:
- within one year	2,030	2,129	182	428
- within two to five years	4,548	4,821	363	248
- after five years	2,471	3,250	-	-
	9,049	10,200	545	676

Prior year comparatives have been restated to include opportunities to exercise break clauses before the termination dates of various property leases.

28 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. The distribution of shares through this plan is arranged through Waterman Trustees Limited, a related company formed to administer the EBT and which held 94,442 (2012: 122,184) ordinary shares of 10p in the Company at 30 June 2013. At 30 June 2013 the market value of these shares was £45,804 (2012: £58,648). 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 2013 have been incorporated into the Group Balance Sheet as follows:

	Group 30 June 2013 £'000	Group 30 June 2012 £'000
Cash	10	12
	10	12
Represented by:
Income tax payable	2	2
Amounts due to Parent Company	132	131
Amount receivable from third party	(2)	-
Amounts payable to staff leavers	4	16
Retained deficit	(83)	(79)
Own shares at valuation	(43)	(58)
	10	12

29 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 (excluding Prepayments of £2,454,000 (2012: £3,950,000)). The carrying value of all of the Group's financial liabilities approximates to their fair value and they are classified as Other financial liabilities at amortised cost being the total of trade and other payables (excluding non financial liabilities of £3,406,000 (2012: £2,860,000)), 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 31 with the relevant accounting policies explained in note 1 to the consolidated financial statements.

a ) Foreign Currency Risk

The Group operates in a number of international territories and is exposed to foreign exchange risk primarily with respect to the Australian dollar, Euro and US dollar. Most trading activity is denominated in the relevant local functional currency thereby matching the revenue flows with the cost base. Foreign currency risk arises from a proportion of commercial transactions undertaken in currencies other than the local functional currency, from financial assets and liabilities denominated in currencies other than the local functional currency and on the Group's investments in foreign operations.

29 Financial Instruments (Continued)

Trade receivables, trade payables and bank accounts denominated in currencies other than the local functional currency arising from commercial transactions are immaterial at 30 June 2013. Inter-company funding balances in currencies other than the local functional currency are hedged where this is considered to be appropriate.

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.

At 30 June 2013, 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 £71,000 (2012: £143,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of Australian dollar denominated trade receivables.

At 30 June 2013, 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 £16,000 (2012: £15,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of Euro denominated trade receivables and borrowings.

At 30 June 2013, 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 £27,000 (2012: £133,000) higher/lower, principally as a result of foreign exchange gains/losses on translation of US dollar trade receivables.

b) Interest Rate Risk

The weighted average rate of interest on the floating rate financial liabilities at 30 June 2013 is 3.16% (2012: 2.6%) with a weighted average expiry of 4 years (2012: 5.0 years). At 30 June 2013, there were no fixed rate liabilities or finance lease obligations.

At 30 June 2013, if interest rates on UK sterling denominated borrowings had been 50 basis points higher/lower with all other variables held constant, the profit for the financial year would have been £9,000 (2012: £28,000) lower/higher mainly as a result of higher/lower interest expense on floating rate borrowings.

c) Liquidity Risk

Cash flow forecasting is performed by the operating entities of the Group and aggregated by group finance. Group finance monitors rolling forecasts of the group's liquidity requirements to ensure that it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the group does not breach borrowing limits or covenants on any of its borrowing facilities. These facilities comprise bank overdraft and invoice discounting facilities and provide short term flexibility in liquid resources. At 30 June 2013, these facilities, where all conditions precedent have been met, were £7.2m (2012: £7.2m) which expire within one year. Cash flow forecasting takes into consideration the group's debt financing plans and covenant compliance.

Surplus cash held by the operating entities, above the balance required for short term working capital management, is invested in interest bearing current accounts, time deposits and overnight money market deposits to earn interest at rates close to the prevailing local base rates. At 30 June 2013 the Group has £2.8m of cash and cash equivalents held in bank accounts (2012: £3.0m) which is immediately available for use.

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.

At 30 June 2013, the Group has net funds £1.1m (2012: £0.9m). Its return on average capital employed was 7.6% (2012: 6.1%).

30 Ultimate Controlling Party

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

31 Post Balance Sheet Event

In July 2013, the Group decided to withdraw the design group from the UAE. In the financial year to 30 June 2014, the Group anticipates that it will incur an exceptional provision of around £1.9m with a cash outflow of around £0.8m after anticipated costs associated with the orderly wind down of operations and financial settlements in respect to debtors and work in progress.

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 2013 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 Statement of Directors' Responsibilities 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 2013;
• 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 2013.

Simon O' Brien (Senior Statutory Auditor) For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 1 November 2013

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 84 and a separate independent auditors' report on page 82.

		2013	2012
Company Balance Sheet as at 30 June 2013	notes	£'000	£'000
Fixed assets
Tangible assets	36	1,325	1,204
Investments	37	19,641	19,641
		20,966	20,845
Current assets
Debtors	38	9,187	8,724
Cash at bank and in hand		-	-
		9,187	8,724
Creditors (amounts falling due within one year)	39	(4,823)	(3,435)
Net current assets		4,364	5,289
Total assets less current liabilities		25,330	26,134
Creditors (amounts falling due after more than one year)	39	(1,244)	(1,672)
Net assets		24,086	24,462
Capital and reserves
Called up share capital	41	3,076	3,076
Share premium reserve	42	11,881	11,881
Merger reserve	42	3,144	3,144
Other reserve	42	140	140
Profit and loss account	42	5,845	6,221
Total shareholders' funds	43	24,086	24,462

The Financial Statements which comprise the Company Balance Sheet and related notes were approved by the Board on 1 November 2013 and signed on its behalf by:-

Roger Fidgen Nicholas Taylor Chairman Chief Executive

The notes on pages 84 to 87 are an integral part of these Parent Company Financial Statements.

Notes to the Parent Company Financial Statements

32 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.

Employee Benefits

The Company accounting policy for employee benefits is consistent with the Group employee benefits policy as set out in note 1 to the consolidated financial statements.

Tangible Fixed Assets And Depreciation

Tangible fixed assets are stated at cost when acquired, less accumulated depreciation and when appropriate, provision for impairment. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. 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 are included in the balance sheet at cost less amounts written off, representing impairment in value.

Borrowings

The Company's accounting policy for borrowings is consistent with the Group borrowings policy as set out in note 1 to the consolidated financial statements.

Leases

The Company's accounting policy for leases is consistent with the Group leases policy as set out in note 1 to the consolidated financial statements.

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 consistent with the Group financial risk management policy as set out in note 1 to the Consolidated Financial Statements

33 (Loss) / Profit for the Year

The Company has not presented its own profit and loss account as permitted by section 408 of the Companies Act 2006. The Parent Company loss after tax of £254,000 (2012: profit of £4,687,373) is after dividends receivable from subsidiaries of £145,188 (2012: £889,000).

The auditors' remuneration for audit services to the Company was £20,000 (2012: £20,000).

34 Directors' Emoluments

	Year ended 30 June 2013 £'000	Year ended 30 June 2012 £'000
Aggregate emoluments for qualifying services	533	501
Company contributions to money purchase pension schemes	38	37
Two directors have retirement benefits accruing under money purchase pension schemes (2012: 2).
Highest paid director
Aggregate emoluments including gains on exercise of share options	255	255
Company contributions to money purchase pension scheme	23	23

35 Dividends

Dividends proposed and paid in the year are disclosed in note 8 to the Consolidated Financial Statements.

36 Tangible Assets

	Land and	Plant, equipment
	freehold property	and motor vehicles	Total
	£'000	£'000	£'000
Cost
1 July 2012	767	5,909	6,676
Additions	-	403	403
Disposals	-	-	-
30 June 2013	767	6,312	7,079
Accumulated Depreciation
1 July 2012	111	5,361	5,472
Charge for the year	8	274	282
Disposals	-	-	-
30 June 2013	119	5,635	5,754
Net book amount
30 June 2013	648	677	1,325
30 June 2012	656	548	1,204

1 July 2012 and 30 June 2013	17,778	1,863	19,641
	£'000	£'000	£'000
	undertakings	Group undertaking	Total
37 Investments	Shares in Group	Long term loan to

The Directors believe that the carrying value of the investments is supported by their underlying net assets. Further details on the Company's principal subsidiary undertakings at 30 June 2013 are disclosed in note 13 to the Consolidated Financial Statements.

38 Debtors

	Company	Company
	30 June 2013	30 June 2012
Amounts falling due within one year:	£'000	£'000
Trade debtors	-	-
Amounts owed by subsidiary undertakings	7,658	7,144
Other debtors	221	257
Corporation tax	102	-
Prepayments and accrued income	1,206	1,323
	9,187	8,724

Amounts owed by subsidiary undertakings are unsecured, interest free and repayable on demand. The Company's other debtors include £221,000 relating to deferred taxation (2012: £248,000). Further disclosure on deferred taxation is shown below:

	Company 30 June 2013	Company 30 June 2012
	£'000	£'000
The deferred tax asset comprises:
Depreciation in excess of capital allowances	157	189
Short-term timing differences	34	30
Unutilised losses carried forward	30	29
	221	248
Asset at the beginning of the year including deferred tax asset on pension accrual	248	303
Amount (charged) to profit and loss reserve	(27)	(55)
Asset at the end of the year including deferred tax asset on pension accrual	221	248

39 Creditors

	Company	Company
	30 June 2013	30 June 2012
Amounts falling due within one year:	£'000	£'000
Bank loans and overdraft	3,382	1,276
Trade creditors	590	1,028
Amounts owed to subsidiary undertakings	219	175
Other creditors	65	132
Accruals	567	824
	4,823	3,435

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

	Company	Company
	30 June 2013	30 June 2012
	Bank loans	Bank loans
Amounts falling due after more than one year:	£'000	£'000
Repayable by instalments:
Between one and two years	442	428
Between two and five years	802	1,239
Between five and ten years	-	5
	1,244	1,672

Further disclosure relating to the Company's bank loans is shown in note 18 to the Consolidated Financial Statements

40 Operating Lease Commitments

At 30 June 2013, the Company had annual commitments under non-cancellable operating leases as follows:

		Property		Plant and equipment
	30 June 2013 £'000	30 June 2012 £'000	30 June 2013 £'000	30 June 2012 £'000
Commitment expiring:
within one year	116	30	2	4
within two to five years	223	319	18	-
after five years	1,020	874	-	-
	1,359	1,223	20	4

41 Called up Share Capital

The detailed breakdown of share capital together with options and awards over the Company's shares outstanding at 30 June 2013 are set out in notes 20 and 21 to the Consolidated Financial Statements.

42 Reserves

30 June 2013	11,881	3,144	140	5,845
Dividend	-	-	-	(122)
(Loss) / profit for the year	-	-	-	(254)
1 July 2012	11,881	3,144	140	6,221
	£'000	£'000	£'000	£'000
	reserve	reserve	reserve	account
	Share premium	Merger	Other	Profit and loss

The Other non-distributable reserve of £140,000 (2012: £140,000) arose on a Group re-organisation in 2003.

43 Reconciliation of Movements in Shareholders' Funds

	Company	Company
	30 June 2013	30 June 2012
	£'000	£'000
(Loss) / profit for the year	(254)	4,687
Dividend	(122)	(62)
Net increase / (decrease) to shareholders' funds	(376)	4,625
Shareholders' funds as at 1 July	24,462	19,837
Shareholders' funds as at 30 June	24,086	24,462

44 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. 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 2013	30 June 2012
Amounts owed by related party	£'000	£'000
Waterman AHW Pty Limited	86	86

Five Year Results Summary

			Restated
	2009	2010	2011	2012	2013
	£'000 £'000		£'000	£'000	£'000
Revenue	122,401	83,244	74,097	68,840	66,759
Profit / (loss) before taxation	2,586	(5,044)	612	530	353
Profit / (loss) attributable to the owners of the parent	2,517	(5,139)	120	(91)	(111)
Basic earnings / (loss) per share	8.6p	(16.9p)	0.4p	(0.3p)	(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%	£28.50	£175.00
Internet	1.0%	£21.00	£125.00

An additional £1 PTM Levy is applicable for transactions over £10,000 and Stamp Duty applies to all purchases. All charges include a £3.50 compliance charge.

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.

Company Information and Advisers

Company Registered Office Pickfords Wharf Clink Street London SE1 9DG

Company Registration Number 2188844

Stockbrokers and Financial Advisers N+1 Singer 1 Bartholmew Lane, London EC2N 2AX

Independent 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

Financial Calendar

6 December 2013	Annual General Meeting 2013
11 December 2013	Ordinary shares quoted ex-dividend
13 December 2013	Record date for proposed final dividend
10 January 2014	Final dividend payable
February 2014	Interim results announced for the six months to 31 December 2013
April 2014	Interim dividend payable
October 2014	Preliminary announcement of results for the year to 30 June 2014
December 2014	Annual General Meeting 2014

Waterman Presence (UK)

Birmingham

Civic House, 156 Great Charles Street, Queensway, Birmingham B3 3HN t +44 121 212 7700 f +44 333 344 4501

Brentwood

Regent House, Hubert Road, Brentwood, Essex CM14 4JE t +44 1277 238 100 f +44 333 344 4501

Bristol

Merchants House, Wapping Road, Bristol BS1 4RW t +44 117 937 8200 f +44 333 344 4501

Cardiff

38 Cathedral Road, Cardiff CF11 9LL t +44 29 2038 4400 f +44 333 344 4501

Derby

Lockington Hall Business Centre, Lockington, Derby DE74 2RH t +44 1509 674567 f +44 3333 444 501

Edinburgh

2 - 4 Canning Street Lane, Edinburgh EH3 8ER t +44 131 221 7020 f +44 333 344 4501

Glasgow

Third Floor, South Suite, 8 Nelson Mandela Place Glasgow G2 1BT t +44 141 418 1900 f +44 333 344 4501

Inverness

Thistle House, Beechwood Park North Inverness IV2 3ED t: +44 1463 898023 f +44 333 344 4501

Leeds

Bradshaw House, 31 Waterloo Lane, Bramley, Leeds LS13 2JB t +44 113 256 3322 f +44 333 344 4501

Lingfield

Dippen Hall, Eastbourne Road, Blindley Heath, Lingfield RH7 6JX t +44 1342 893800 f +44 333 344 4501

London

Pickfords Wharf, Clink Street, London SE1 9DG t +44 20 7928 7888 f +44 333 344 4501

Manchester

South Central, 11 Peter Street, Manchester M2 5QR t +44 161 839 8392 f +44 333 344 4501

Nottingham

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

Perth

Broxden House, Broxden Business Park, Lamberkine Drive Perth PH1 1RA t +44 1738 449 801 f +44 3333 444 501

Sheffield

Belgrave House, 47 Bank Street, Sheffield S1 2DR t +44 114 229 8900 f +44 333 344 4501

Waterman Presence (Overseas)

Australia

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

India

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

Ireland

Marine House, Clanwilliam Place Dublin 2 t +353 1 664 8900 f +353 1 661 3618

Poland

ul. Ptasia 4a 00-138 Warsaw t +48 22 654-26-48

Russia

Bld.6, Puteyskiy tupik, Moscow 105064 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)333 344 4501 www.watermangroup.com

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